Understanding Employee Loans and Disciplinary Actions in UAE Labour Law

In the UAE, employers are allowed to grant loans to their employees, but charging interest on such loans is strictly prohibited under the Labour Law. Article 25 specifies that no amount can be deducted from an employee’s wage except in certain cases, such as recovering loans granted to the employee. This recovery must comply with the maximum monthly deduction limits, require the employee’s written consent, and must not involve any interest.

Who is an Erring Employee?

An erring employee is one who violates workplace rules, fails to fulfill job responsibilities, or engages in misconduct that breaches the company’s policies. Employers have the right to take disciplinary action against such employees in accordance with Article 39 of the Labour Law.

Disciplinary Actions for Erring Employees

The following measures can be imposed on employees who commit violations:

•   Issuing a written caution to address minor misconduct.

•  Providing a formal written warning for more serious offenses.

•  Deducting up to five days' wages in a single month as a penalty.

•  Suspending the employee for up to 14 days without pay.

•  Withholding periodic raises for up to one year in organizations offering such increments.

•  Denying promotions for up to two years in workplaces with a promotion system.

•  Terminating employment while preserving the employee’s right to end-of-service gratuity.

Internal Policies and Employee Rights

Employers are not required to notify the Ministry of Labour when imposing penalties, as these actions are governed by the company’s internal policies. However, employers must create a schedule of penalties that aligns with Article 39 of the Labour Law and clearly outlines disciplinary measures.

Employees retain the right to challenge any penalties imposed by filing a labour complaint or submitting a grievance to the company’s management. This ensures a fair process and balances the interests of both employers and employees.

By adhering to these regulations, companies in the UAE can maintain a disciplined and legally compliant work environment while safeguarding employee rights.

For any enquiries or information, contact ask@tlr.ae or call us on +971 52 644 3004. Follow The Law Reporters on WhatsApp Channels