Introduction to End of Employment Entitlements

Ludmila Yamalova:  Hello.  Welcome to Lawgical with LYLAW.  This is Ludmila.  In the United Arab Emirates, otherwise known as the U.A.E., the rights of employees are covered by a federal law which was introduced in 1980 and is often referred to as the U.A.E. labor law.  Importantly, the U.A.E. labor law applies to all relationships of employment in the U.A.E. across the emirates.  In other words, it also includes Dubai, Abu Dhabi, and all of the other emirates of the United Arab Emirates.  Similarly, it applies equally to all the free zones.  In other words, all employment relationships are subject to the same laws and regulations across the country, with one exception being the companies and employees that are based in the Dubai International Financial Centre, otherwise known as the DIFC.

Today’s segment will focus on the employment entitlements at the end of the employment relationship.  In the U.A.E., in relevant terms, the employment entitlements that an employee may be entitled to at the end of an employment relationship includes the following:  The notice period, end-of-service entitlements or end of service, arbitrary dismissal, bonuses and commissions, ticket repatriation, and unpaid vacation.  This is a general list and perhaps the comprehensive list of all the employment entitlements an employee in the best-case scenario can anticipate receiving.

1. The number one requirement or the number one entitlement refers to what is called the notice payment or notice compensation. In the U.A.E., the minimum notice compensation is one month’s notice.  That is the default notice provided for by law.  Some companies may offer or may request an employee to give a longer notice.  In that case, in the event the company wants to terminate an employee early or the employee wants to resign, the parties owe either serving that notice or compensation of the value of that notice, instead of actually working.  In other words, if there is a 3-month notice in the contract, and the company wants to terminate an employee immediately, they have to pay out the value of the 3 months of notice.  That is the notice component of employment entitlements.
2. Then there is entitlement to unpaid bonuses and commissions.
3. Then there is the leave salary or holiday salary. That refers to holidays or leave that had not yet been taken as of the termination of employment.
4. Then there is a requirement of a repatriation ticket. That’s in the event an employee leaves the country after the end of that employment.  In some cases, if a contract provides for it, companies are obligated to pay for the employee’s repatriation cost to their home country.
5. One specific requirement or entitlement that is very particular to the U.A.E. is what is often referred to as the end-of-service entitlement or end-of-service benefit, or EOS. This is the equivalent of a pension payment or a pension scheme for employees.  It’s calculated in general terms on the basis of what’s often referred to as basic salary.  Its entitlement arises after one year of uninterrupted service.  In particular, the EOS is calculated as 21 days of basic salary for every year of service for the first five years of service.  After that, it’s 30 days of basic salary for every additional year of service.

With regard to what is considered to be basic salary, much depends on how it is structured in the underlying employment contract.  In the U.A.E., it is very common that a monthly salary is broken down into a basic salary and allowances.  The general rule is that the breakdown is about 60% and 40%, with 60% being the basic salary and 40% being various other allowances.  If a contract is structured that way, 60% of the monthly salary is used as the basic salary for the purposes of calculating end of service.  With regard to the list of entitlement of the end of service benefits at the end of an employment relationship, there is also a factor as to whether the employers is terminating that employment or the employee is voluntarily resigning.  Some of these benefits vary depending on whether it’s a termination or a resignation.  For example, if an employee is being terminated, then he or she is entitled to this full list of entitlements such as the end of service, the notice, the bonus and commissions, ticket repatriation, unpaid leave, and there is one more entitlement which is called the arbitrary dismissal.

6. Arbitrary dismissal. That is in the event the company terminates an employee prematurely without good cause.  It may also be required to compensate an employee for an additional up to three months of full salary for arbitrarily dismissing that employee.  That is in the event a company terminates an employee.

If an employee resigns, however, some of these entitlements are no longer applicable, for example, the arbitrary dismissal.  It does not exist because obviously it’s the decision of the employee to resign and not for the company to terminate, therefore there is no arbitrary termination.

Equally so, the entitlement to the end-of-service benefits depends on whether the employee’s contract is limited or unlimited.  If it is a limited contract and the employee resigns, then her or she walks away from the full payment of that end of service.  If the contract is unlimited, then the employee will lose two thirds of that end of service if he or she resigns between year one and three, and between the year three and five the employee loses one third of the end of service, and after year five it does not matter whether the employee is being terminated or resigns.

To sum up, the full list, the most comprehensive list of all of the end-of-service entitlements includes the following:

1. End of service or EOS.
2. Compensation for notice.
3. Arbitrary dismissal.
4. Unpaid bonuses and commissions.
5. Repatriation costs.
6. Tickets
7. Unpaid holidays.