The UAE Labor Law Gratuity and Unlimited Contract: What You Need to Know

The UAE Labor Law Gratuity is a term used to describe the end-of-service benefit that employees in the United Arab Emirates are entitled to upon termination of their employment contract. The amount of gratuity paid to an employee varies depending on the type of contract they have with their employer. In this article, we`ll be discussing the gratuity entitled to employees who are on unlimited contracts, as well as the key provisions of the UAE labor law governing this benefit.

What is an unlimited contract?

An unlimited contract is a type of employment contract wherein there is no fixed duration for the employment. Essentially, this means that the employer and employee are bound by the terms of the contract until either party decides to terminate it. This type of contract is commonly used for professional and managerial positions in the UAE.

What is the gratuity entitlement for employees on unlimited contracts?

Under the UAE Labor Law, employees on unlimited contracts are entitled to gratuity at the end of their service. The gratuity amount is based on the employee`s basic salary and length of service with the employer. The gratuity entitlement for employees on unlimited contracts is calculated as follows:

– For the first year of service: the employee is entitled to a gratuity payment equivalent to 21 days` basic salary.

– For each subsequent year of service: the employee is entitled to a gratuity payment equivalent to 30 days` basic salary.

For example, if an employee has been working for their employer for 4 years and their basic salary is AED 10,000, their gratuity entitlement would be calculated as follows:

(21 days` basic salary x 1 year of service) + (30 days` basic salary x 3 years of service) = AED 102,000

It is important to note that the gratuity entitlement for employees on unlimited contracts is capped at two years` basic salary. So, if an employee has been with their employer for 20 years, their gratuity entitlement would still be based on a maximum of two years` basic salary.

What other provisions of the UAE labor law should you be aware of?

Aside from the gratuity entitlement, there are several other provisions of the UAE labor law governing the employee-employer relationship, including working hours, leave entitlements, and termination procedures.

One important provision to note is that according to Article 117 of the UAE Labor Law, the employer has the right to terminate an employee`s contract without notice and without paying end-of-service gratuity if the employee has committed a serious offense. Examples of serious offenses include theft, fraud, assault, or breach of trust.

It is also worth noting that the UAE Labor Law sets out minimum requirements for the terms and conditions of contracts of employment. Employers are not allowed to offer contracts that are less favorable than what is stipulated in the law. Therefore, it is important for employees to familiarize themselves with the provisions of the law to ensure that their rights are protected.

In conclusion, if you are an employee on an unlimited contract in the UAE, it is important to understand your entitlements under the UAE Labor Law Gratuity. Knowing your gratuity entitlement, as well as other key provisions of the law related to your employment, will help ensure that you are treated fairly and receive the compensation you are entitled to upon termination of your contract.