UAE Employees Right to Bonuses: Is it mandated by Law?

Questions surrounding employees' payments and similar labour law questions might be all the more relevant in the backdrop of the uncertainty that comes with COVID-19 pandemic. Hence, this post explores the applicable labour laws applicable to UAE and how these laws address the question of bonuses. At this point, a survey by the recruitment agency Cooper Fitch has predicted that prospects of salary hikes maybe fewer this year, as the economy recovers from the pandemic.

The relevant laws here maybe the Federal Law No. 8 of 1980 of the UAE and the DIFC Employment Law No. 4 of 2005. However, both of these laws do not contain a mandate to payment of bonuses. Furthermore, the definition of Wage under UAE Labour Code specifically excludes "bonuses" [UAE 224/2012, dated 13/10/2012].

Hence, employees' right to receive bonus payments can safely be considered as a discretionary power for employers, unless the employment contract strictly mentions the payment of bonuses along with the basis on which the bonus is calculated. However, there could be exceptions to the same, if such bonuses are customary to be paid. This conclusion springs from the definition of "Wage" under Article 1 of the Labour Law which defines:

"Whatever is given to the worker in return for his service by virtue of an employment contract, whether in cash or in rem, on a yearly, monthly, weekly, daily, hourly, piece basis or in accordance with the production or on a commission basis.

The wage shall include the cost-of-living allowance and every grant conferred upon the worker in recognition of his honesty or efficiency should such sums be set in the employment contracts or the by-laws of the establishment or be customarily granted so as the workers deem such grants as part of the wage and not a donation."

Hence, although bonuses are excluded from the definition of "wage", the law mandates payment of what's customarily given. However, in other cases, there is no right to claim bonuses, as they remain solely the discretion of the employers in the absence of any legal provisions to that effect. Employee, however, has the right to claim bonuses if the provision for the same has been included in his employment contract.