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End-Of-Service benefits- Can it be denied?

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Staff Writer, TLR

Published on July 14, 2023, 17:41:00


service, UAE, gratuity, termination

Employees in the UAE are entitled to a range of end-of-service perks under the UAE Labour Law. These perks are given as a symbol of gratitude for the employee's hard work and commitment to the organisation. After the employment contract is terminated, End of Service Benefits are paid on an accumulated basis for the time served. 

End-of-service benefits are a statutory monetary entitlement that employees must receive from their employers when their employment contract is terminated and they are eligible.
When an employee's employment contract in the UAE expires, he or she is entitled to the following gratuity benefits. Here are the most important provisions for private-sector employees in the UAE's end-of-service benefits.

Employees who have been fired unfairly might file a complaint with the judicial system. Their gratuity is decided in the following manner: -
• Employees who meet the eligibility requirements may be paid up to three months' salary.
• Unless the contract specifies otherwise, the compensation amount for limited contracts shall not exceed the entire three-month salary or the amount due for the remaining contractual period, whichever is shorter.

Gratuity is the most important portion of the end-of-service rewards in the UAE. Gratuity is a monetary compensation paid by the employer to the employee at the end of the service period.
Previously, gratuity was calculated based on the type of contract, such as restricted compared to limitless contracts. However, as a result of recent labour law amendments, all employment contracts must now be transformed into limited contracts with a three-year validity period.

Employees in the UAE are eligible for gratuity compensation after the end of a limited contract. Following is the formula for calculating the amount:
• If the term of service is less than one year, there is no eligibility for gratuity compensation.
• For service of more than one year but less than five years, the entire gratuity compensation would be equivalent to 21 days of salary each year of service. For instance, if you worked for a company for four years, your gratuity would equal 21 days’ wage multiplied by four.
• Employees who have worked for more than 5 years will get a gratuity of 30 days’ salary for each year worked beyond the 5-year mark.
However, certain requirements need to be fulfilled before the gratuity & end of service benefits can be availed: -
• In the UAE, an employee is eligible for gratuity compensation after completing 12 months of continuous service with the company.
• When assessing the length of service, leave without pay is not taken into account.
• Regardless of the form of employment contract, the total gratuity pay-out will not exceed the employee's two-year wage.
• Employees whose unlimited contracts are dismissed before they are converted to limited contracts are eligible for gratuity compensation based on the old law.

It is mandatory for the company under which the employee is working to provide end-of-service benefits. Even if an employee is terminated for gross misbehaviour as described in article 120 of the UAE gratuity law, the employee is entitled to immediate payment of their end-of-service gratuity upon termination. The new labour law's modifications to the gratuity regulations have strengthened this entitlement even more. According to the new rule: -
• An employee's end-of-service benefits must be paid within 14 days of their termination.
• Employees cannot be fired without paying end-of-service benefits (EOSB).
• When an employee's job is ended due to his or her death, the deceased's benefits must be paid to the deceased's family after body repatriation fees are deducted (where applicable).
• The employer cannot reduce or deduct the gratuity amount depending on the employee's contract type and/or resignation date unless the law allows it.

In many cases, ex-employers refuse to pay the employee's due end-of-service benefits, resulting in a dispute. The easiest method to deal with the problem is to register a complaint with the Labour Office right away and then take legal action in the Labour Court.
When you go to the Labour Court to resolve a dispute over your end-of-service benefits, it's critical to have proof to back up your claim. If you have documented everything that led to your dismissal, your post-termination rights are more likely to be upheld.

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