Human Resources / 06.07.2017

Is it an end of the beginning or beginning after an end??

“Service which is rendered without joy helps neither the servant nor the served. But all the other pleasures and possessions pale into nothingness before service which is rendered in a spirit of joy”
– Mahatma Gandhi

Goodbyes are always very difficult and when it is not done in the right way, we end up in a puddle of trouble. Each one of us expects to conclude the service or rather called as the relationship with the employer in a smooth manner. Every employee must be aware about the facts of the benefits that one is entitled to; during the time of ending ones services.

If you reside and work in UAE or run your own business here, then you must make yourself beaten by the Labour Laws present here. This helps you to get familiar with your rights and secure them. Before getting into the intense part of end of service benefits, let us have an understanding of the severance payment in UAE. According to UAE laws, end of service benefits otherwise known as gratuity, is defined as the sum of money that an employer is lawfully required to pay to its employees upon the conclusion of the employment relationship, subject to the employee fulfilling certain criteria set out in UAE Labour Laws. From past 40 years it has always been an important subject for the labour rights of the employees who are entitled to receive after rendering their services to their employers for number of years. The Federal law no 8 of 1980 of UAE focuses on the provisions regarding the end of service gratuity.

So many questions pops up in the mind while calculating the gratuity for an employee -has the employee completed more than a year of its services, whether his contract is a limited contract or unlimited contract; if the employee has any debt with the employer, whether the employer has terminated the employee or the employee has resigned. Hence we have to take so many aspects into consideration in order to provide proper rights to an employee before we bid adieu.

Basis on which gratuity is calculated: Without prejudice to what is stipulated by the policies, gratuity is calculated according to the employee’s last received basic wage before the employee was terminated. The gratuity calculation depends upon two main aspects A) in case if the employee resigns and B) in case if the employer terminates the employee’s employment. The provisions relating to the end of service benefits are stipulated in Articles 132 to 141 of the UAE Federal Law no 8 of 1980. The gratuity is calculated as A) 21 days wages for each year of the first five years B) 30 days wages for each additional year on condition that the total of the gratuity does not exceed the wages of two years. Days of absence from work without pay are not taken into consideration in calculating the length of service.

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 or more with the employer. However, it is subject to certain exceptions based on the type of contract (limited or unlimited contract) and in the event the employment contract has been terminated by the employer or the employee has violated his obligations under the Law.

Gratuity Calculation:

If an employee resigns or is terminated within a period of less than one year then the employee is not entitled for any end of service gratuity. Article 132, Section 2 stipulates the End of service remuneration of the UAE Labour Law. This is applicable on both the types of contracts whether it is limited or unlimited. In order to have a clear picture, let us go through the gratuity calculation for each contract separately.

Unlimited Contract:

More than a year and less than three years of service in case of resignation: If an employee who has resigned with his service of more than a year and less than three years; is entitled for 1/3 of 21 days basic salary for each year of his service.

More than three years but less than five years in case of resignation: If an employee who has resigned with his service of more than three years and less than five years; is entitled for 2/3 of 21 days basic salary for each year of his service.

More than five years: If an employee who has resigned with his service of more than five years; is entitled for 21 days basic salary for each year of his service and 30 days basic salary for all the years worked thereafter.

More than a year and less than three years of service in case of termination: If an employee has been terminated from the employment with the service period more than a year but less than three years, then the employee is eligible for 21 days basic salary for each year worked.

More than three years and less than five years of service in case of termination: If an employee has been terminated from the employment with the service period more than three years but less than five years, then the employee is eligible for 21 days basic salary for each year worked.

More than five years: If an employee who has been terminated with his service of more than five years; is entitled for 21 days basic salary for each year of his service and 30 days basic salary for all the years worked thereafter.

Benefits of being fired: This ends your agony about whether to stay or go; the company has decided for you. Even if you have been thinking to surcease, getting fired can be traumatic; especially when it has never happened to you before. It is like getting a hard kick which affects your steady income. Suddenly you are jobless with the infamy entails. Also one needs to be mentally prepared to answer the question of the HRs as why were we fired. However, this is a better option when you need the severance pay to prop up your financial pillow. UAE Labour Laws have some provisions to provide benefits to the employee when being terminated.

  • Payments analogue to accrued but unutilised leave or any part thereof;
  • Payments for overtime or any wage due and not yet paid;
  • A notice period or payment in lieu of the notice period which is mentioned in the employment contract;
  • The compensation for disobliging dismissal if the contract was terminated by the employer for unreasonable cause (generally to a maximum of three months)
Suhasini Rajguru
Suhasini Rajguru
A Senior HR Executive at TechVista Systems, with 3 years of experience in Human Resources, Suhasini is based in Dubai and a regular contributor of TechVista Systems Blog.