9 Ways Your Employer Can Deny Your End of Service Benefit
The end of service benefit, or gratuity payment, is a legal entitlement for private sector workers in the UAE. It begins to accrue after the first full year of employment with a company (or private sponsor in the case of domestic workers) and is relied upon by many as a form of lump sum pension payout at the end of their term.
If you want to know how much end of service gratuity you are really owed, then head over to DubaiHires.com’s end of service custom report generator. It’s the most comprehensive gratuity calculator available. It takes into consideration all of the factors affecting your specific circumstances, including how you leave or plan to leave your job, your type of employment contract and which jurisdiction or freezone’s employment laws affect your final number.
There can be some significant differences on what you are owed, depending on where your employer is located, your profession and how the employment is terminated. For example being dismissed ‘for cause’ (read fired) in some areas, loses your legal right to your entire gratuity; yet being dismissed for the same reason in two particular freezones, would in no way affect your entitlement to the full gratuity payout. DubaiHires.com explains it all in your custom generated gratuity guide, free of charge.
When you work hard for several years it can be gut wrenching to be told that you are not due your gratuity payout but there are several legally valid reasons why an employer has the opportunity to block it. There are also important scenarios where you would actually be required to pay your employer compensation when you leave, instead. Knowing your rights, as well as those of your employer, should avoid any unpleasant surprises and help you plan any voluntary departure wisely.
“Does the UAE Labour Law’s provision on end of service gratuity apply to all private workers?”
For people working in the private sector, the applicable law for their end of service calculations and corresponding payout rules actually varies, dependent on where your employer is based:
- For mainland private sector employees and most freezones, the UAE Labor Law No.8 1980 as amended applies, particularly Chapter 2 – ‘End of Service Gratuity’.
- If your employer is based in DIFC then the DIFC Employment Law No. 2 of 2019 currently applies.
- If your employer is based in ADGM then the ADGM Employment Regulations 2015 apply.
- If you are employed in JAFZA then the The Jebel Ali Freezone Rules 2017 Seventh Edition will apply particularly Section 11.8.
- If you are defined as a domestic worker such as a maid or driver the Federal Law no. (10) of 2017 on Domestic Workers now applies (it lists all professions to which it applies at the base of that page). It contains its own end of service gratuity calculation formula under Article 26.
Government workers or those working in government institutions such as the police or armed forces have alternative arrangements.
“So if I’m employed in the private sector and work for more than a year, I definitely get some sort of end of service gratuity?”
Not necessarily, again it depends where you are employed and the circumstances leading to your departure. Many are unaware of the fact that if you are employed under a limited/renewed-limited (determined) term contract and resign within your first five years of employment, even when giving notice, you are not due any end of service gratuity, as stated under Articles 138 & 139(b) of the UAE Labour Law. (The MOHRE legal advisors confirmed a coding issue with their own online gratuity calculator’s output conflicting with the law here and say it has been flagged for correction.)
Equally if you are on an unlimited (open ended, undetermined) term employment contract and resign without giving adequate notice, no matter how many years you have worked, you are not due any gratuity payment either under Article 139(b). As mentioned the law is different elsewhere, particularly if you work in DIFC or ADGM that have their own courts and labor laws. But not to worry, this is why we built the end of service calculator at DubaiHires.com which handles all these complications and provides you with detailed explanations along the way.
“So what if I quit my fixed term contract early, do I really owe my employer money?”
Yes, unless agreed otherwise. How much though is not as clear as it could be. Article 116 of the UAE Labour law says generally the amount should not exceed one and a half month’s basic wages:
…the worker shall be bound to compensate the employer for the loss incurred thereto by reason of the rescission of the contract, provided that the amount of compensation does not exceed the wage of half a month for the period of three months, or for the remaining period of the contract, whichever is shorter, unless otherwise stipulated in the contract.
However the more recent Ministry of Labour Decree 765 of 2015 under
Article (1) I 4 says it could be more than double that, at 3 month’s gross wages:
c. Indemnify the other party to the level that was agreed to by both parties, not to exceed the equivalent of three months of gross wages. If renewal occurred before this decree enters into effect and the parties had not agreed to the amount of indemnification, this indemnification shall be the equivalent of three months of gross wages.
The MOHRE legal advisors when we asked about the difference here said they had not been updated on the issue and it would be up to the labour courts to rule on.
“So what if I am due an end of service gratuity payment and I don’t resign, how else can the employer not pay me then?”
Well this is down to how you behave at work, the longer you work for a company the more you have to potentially lose. So if you are going to be naughty do it early on. For example one too many celebratory drinks over a client lunch deal might be just the ticket your employer needs to cut back on their payment obligations to you. Here are the 9 reasons your employer can justify removing your end of service benefit payment for those under the UAE Labor Law:
- Should the worker assume false identity or nationality, or submits false certificates or documents
- Should the worker commit an error resulting in colossal material losses to the employer, provided that the Labor Department is notified of the incident within 48 hours of the knowledge of the occurrence thereof.
- Should the worker violate the instructions related to the safety at work or in the work place, provided that such instructions be written and posted in a prominent location, and that he is notified thereof should he be illiterate.
- Should the worker fail to perform his main duties in accordance with the employment contract, and fail to remedy such failure despite a written investigation on the matter and a warning that he will be dismissed in case of recidivism.
- Should he divulge any of the secrets of the establishment where he works.
- Should he be convicted in a final manner by the competent court in a crime of honor, honesty or public ethics.
- Should he be found in a state of drunkenness or under the influence of a narcotic during work hours.
- Should he assault during work, the employer, responsible manager or co-worker.
- Should he be absent without valid cause for more than twenty non-consecutive days in one year, or for more than seven consecutive days.
The above are what the UAE Labour Law allows employers to dismiss employees for without notice, but not arbitrarily, under Article 120 (excluding being sacked during probation). Basically causes that you can be fired for. Should you justifiably get dismissed for one of these reasons, you will lose your right to your end of service gratuity payout, as stipulated under Article 139a.
Once again there are exceptions, should you be sacked ‘for cause’ in, for example the DIFC freezone, with its own employment law (DIFC Law No2 2019) you are still entitled to receive your end of service gratuity up to the date of termination, under Article 63.(3)(b).
JAFZA also has some differences. Previous provisions within their employment rules offered less protection to the employee than those in the UAE Labour Law regarding gratuity. When an employee challenged this difference, the Court of Cassation ruled the JAFZA rules had precedence over the Labour Law, with the ruling benefiting the employer. An article by Hadef Partners explores the ruling here.
That ruling is at odds with Al Tamimi’s senior labour law partners’ opinion that,
“Where there is inconsistency between the applicable free zone regulations and the Labour Law, the terms most favourable to the employee prevail”
G. Barr and S. Kantaria, ‘Employment & labour law in the UAE’ (Lexology.com Oct 8th 2018) accessed 18th March 2019.
Considering their example in that paragraph actually refers to the JAFZA rules, it demonstrates the differences in understanding of how these laws might be ruled on in court.
“What about if I am caught working for another company during my annual leave, will I lose my gratuity if sacked for that?”
This comes under Article 88 of the UAE labour law:
During the annual or sick leave set forth in the present Chapter, the worker may not work for another employer. Should the employer establish such action, he shall be entitled to terminate the employment of the worker without notice and to deprive him of his wage for the duration of the leave.
Although this is termination for cause, it is not listed as one of the reasons under Article 120. Article 139a only stipulates that you will lose your entitlement to your end of service gratuity if sacked for cause under one of the reasons in the Article 120 list.
We checked this with the MOHRE legal advisors, as many law firms in the UAE are of the opinion that being sacked under Article 88 will also lose the right to an end of service gratuity payment. However the ministry’s legal advisors disagree, reasoning that Article 88 is not covered by Article 139a and as such gratuity is still due and that only wages from the leave period can be retained by the employer.
JAFZA employment rules however differ on this and clearly state it as a reason to forfeit gratuity under 11.8.4(j) and 11.8.13.
You can see that we have highlighted some of the complexities regarding end of service gratuity in this article and how calculation examples offered on the websites of local newspapers for example, do not offer a detailed enough explanation of what you might or not might not be owed.
We have covered some of the above and other queries in our EOS FAQ section. To help cut through some of the confusion head on over to the https://www.DubaiHires.com/End-of-Service-Calculator to see what you might be owed under your own particular circumstances, with your free custom generated report.
[updated 28 Aug 19]
Disclaimer: Although this article was written by a qualified (LLM) international law specialist, nothing in this article should be deemed to be, nor relied upon, as legal advice. DubaiHires.com, its owners and operators do not guarantee the accuracy of any interpretations herein or anywhere on its website, nor warrant that links will always point to the most up to date regulations or accurate translations. Always seek professional and licensed legal advice in your jurisdiction.