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Export date: Mon Apr 30 23:16:33 2012 / +0000 GMT
Payment of gratuity as per UAE Labour Law
What is the employee entitled to on the termination of his employment contract?
On the termination of the employment contract, an employee is entitled to the following: 1. A notice period, or any amount due in lieu of the notice period in the case of an unlimited contract. 2. In the case of an unlimited contract, compensation for unreasonable dismissal if the contract was terminated by the employer for unreasonable cause. 3. In the case of a limited contract, compensation equivalent to the period until the end of the contract, or three month?s wages, whichever is shorter. 4. Payments equivalent to the balance of unutilised leave or any part thereof. 5. Payments for overtime or any balance of wages due and not yet paid. 6. End of service gratuity calculated on the duration of the employment. 7. Repatriation expenses as per the Law or the employment contact, subject to the employee not being in violation or in breach of either the Law or the employment contract. What does the term end of service gratuity mean in terms of compensation?
In the case of an employment agreement for a unilimited term, an employee who completes one year or more in continuous service shall be entitled to gratuity at the end of their service. The gratuity shall be calculated as follows: (1) 21 days wages for each year of the first five years. (2) 30 days wages for each additional year on condition that the total of the gratuity does not exceed the wages of two years. How is gratuity calculated?
Gratuity is calculated on an annual basis or part thereof provided that the employee has actually completed one year of employment with the employer or more. Days of absence from work without pay are not included in calculating the length of service. However, he will be entitled to end of service gratuity for fractions of a year he spent in service provided that he has completed at least one year in continuous employment. On what basis is gratuity calculated?
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gratuity for those who are paid monthly. or if he terminated his employment to avoid such dismissal. However. the matter should be referred to the Ministry for mediation. If an employee who is employed under a contract for a limited period on the other hand chooses to resign before the end of the contract. he is entitled to the full gratuity. If there is any dispute over the payment of gratuity or the amount of gratuity payable.Konkan Times Export date: Mon Apr 30 23:16:33 2012 / +0000 GMT Without prejudice to what is stipulated by the policies of some establishments in the granting of pensions or retirement benefits to employees. Under what circumstances can an employee be deprived of his end of service gratuity? An employee may be deprived of his end of service gratuity if he has been dismissed for one of the reasons stated in Article 120 of the Law. Would a commission or payment by percentage be considered a basic wage? According to a court ruling delivered by the UAE court. gratuity for those employees under the Law is calculated thereafter on the date the Law came into force. he is not entitled to end of service gratuity unless his continuous service exceeds five years. This is without prejudice to any entitlements or payments they were entitled to under other laws or regulations applicable. weekly or daily wages is calculated according to the employee?s last received basic wage before the employment was terminated. except for allowances and bonuses.com | Page 2/4 | .ProfProjects. This wage is the basis for calculating the gratuity for the whole period of an employee?s employment. any amount payable to an employee as wages including wages paid by percentage basis.This page was exported from . If his continuous service is more than five years. Would an employee who was employed prior to the Law coming into force be entitled to gratuity? According to the UAE law. Is the amount calculated for gratuity affected if the employee resigns from employment? An employee employed under a contract for an unlimited period who resigns after a continuous service of not less than one year and not more than three years is entitled to one third of the end of service gratuity provided above. If the period of continuous service is more than three years and less than five years he is entitled to two thirds of the gratuity. Under what circumstances will an employee be entitled to gratuity if he terminates his employment contract without notice? Output as PDF file has been powered by [ Universal Post Manager ] plugin from www. employees who were working prior to the date the Law came into force will not be entitled to gratuity for the period preceding the Law. commissions. Can the employer deduct any payment from the gratuity payable to the employee? The employer may deduct any amount owed to him by the employee such as outstanding loans from the employees end of the service gratuity. or for performance will be considered as wage and will be taken into consideration in calculating gratuity.
Otherwise the employee may benefit from both unless the employee agreed or consented to the scheme in question. for certain contributions to be made by the employee and the employer to the Public Authority of Pensions and Social securities. and must specify that it will be a substitute to the gratuity rules outlined in the Law. (2) The employee was assaulted by his employer or his legal representative. the law of the country the employment is Output as PDF file has been powered by [ Universal Post Manager ] plugin from www.ProfProjects. As for the private sector. calculating the employee?s total years of service with the employer.Konkan Times Export date: Mon Apr 30 23:16:33 2012 / +0000 GMT Under Article 121 of the Law. or disability pension in the case of an employee becoming disabled and unable to work. the government shall bear 2. The Pensions & Social Services Law also provides for the amount to be paid as a pension to eligible UAE nationals on reaching the retirement age of 60. amongst other things. Where an employee has worked for an employer in two or more countries. such a scheme must be published and known to all employees. as provided for in the employment contract or in the Law. upon mutual agreement. For a person employed in the public sector these contributions are equivalent to 5% of the contributory pension salary to be paid by the employee and 15% of the contributory pension salary payable by the employer. (7) of 1999. The above applies to employees who have been continuously employed for a minimum period of one year. A new contract will then be entered into between the parties. decide upon the payment of the employee?s gratuity for the years that he has already served his employer.5% of the 15% share payable by the employer as contributions to the Authority. or. Federal Law No. The employee?s employment with the employer is still considered as a continuous period for the purpose of calculating interest. regardless of whether the contract of employment is for a fixed or unlimited term. which is beneficial to the employee. Can the employee and the employer agree to pay gratuity for the termination of the employment contract for a preceding period? The employer and the employee may.This page was exported from . an employee will be entitled to gratuity on termination without notice in either of the following circumstances: (1) The employer has failed to comply with his obligations towards the employee.com | Page 3/4 | . Is there a pensions and social security scheme in the UAE? The Pensions & Social Securities Law. If the establishment or company has a pension scheme. It must also be more beneficial to the employees than the gratuity provision of the Law. will he be entitled to gratuity? This will depend on a number of factors such as the terms of the employment contract. at the time when he resigns. It provides. is this a substitution for the payment of gratuity? If the employer has a pension scheme applicable to all the employees of the business. It further covers the amount of pension payable to beneficiaries on the demise of a secured person. concerns UAE nationals employed in both the public and private sectors.
The matter will however depend on the facts of each case as it is not covered by the Law but rather is addressed in certain judgments. the employer and the employee agree to this in writing with an understanding of all parties that the employee may forfeit his right to gratuity which is not yet due if he violates a provision of the Law. For instance. Output as PDF file has been powered by [ Universal Post Manager ] plugin from www. including end of service gratuity. it should not be assumed that if an employee is transferred to another country that the UAE law will continue to apply or that his employment contract will continue to be enforced. When does gratuity become due and payable? Gratuity will only become due and payable on the termination of an employment contract. Therefore. In any event.com | Page 4/4 | . Therefore. many multinationals which transfer their employees to another country pay the end of service benefits applicable at the time of transfer. In addition. In such cases.Konkan Times Export date: Mon Apr 30 23:16:33 2012 / +0000 GMT being conducted in and the general practice of the employer. If the governing law in the employment contact is UAE law and filed with the Ministry. In such cases therefore it is advisable to seek independent advice on the matter. This contract will take precedence over any other contract with a foreign governing law. provided that in the agreement with a third party. Are the end of service gratuity and other dues payable to the employee considered priority debts? The employee?s wages. The Law is considered as a matter of public policy and thus certain cases may be different in other jurisdictions. overtime. the law of the country the employee is transferred to may prevail and give regard (or otherwise) to the employee?s previous employment contract. then gratuity will be calculated from the commencement date of that contract. the country the employee is being transferred to may contain different regulations regarding the transfer of employees to and from other jurisdictions. and any other benefits. Can an employee mortgage or assign payment of his gratuity? It is possible to mortgage or assign payment of an employee?s gratuity to the employer or to a third party by mutual agreement.ProfProjects. are considered to be a preferential debt for which the employee shall have a lien over any movable or immovable property owned by the employer ranking second to government charges. It is also not possible to apply a foreign law to a UAE employment contract. the transfer is essentially considered as new employment for the purposes of gratuity payments. an employee?s gratuity can only be assigned subject to the employee becoming entitled to it.This page was exported from . judicial fees and family alimony payments.
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