KHALEEJ TIMES, Sunday, Jan 23, 2022 | Jamada Al-Aakhirah 20, 1443
New UAE labour law: How to calculate gratuity if you're leaving your job after Feb 2
Emirates:
With the new labour law
coming into effect on February 2, the old gratuity calculation scheme shall
apply to private sector employees under unlimited contracts until their
contracts are renewed to limited within the coming year, legal experts have
said.
Article 68 of the new labour law stipulates that the law enforcement grants
employers one year to change employment contracts from unlimited to limited.
Until then, employees under unlimited contracts will have their end of service
gratuity calculated per the scheme mentioned in the old Labour Law No. 8 of
1980. The provisions of the new labour law shall apply to their renewed limited
contracts moving forward.
Mohamed Gamal Tawfik, legal adviser at Kaden Boriss Legal Consulting, said the
end of service gratuity for full-time employees in the private sector has not
changed under the new labour law, except for those under unlimited contracts.
Similar to the old law, Article 51 of the new labour law stipulates that an
employee who has completed one year or more of continuous service is entitled to
end of service gratuity of 21 calendar days’ basic pay for each year of the
first five years of service; and 30 calendar days’ basic pay for each subsequent
year of service, provided that the entire total remuneration does not exceed two
years pay.
For employees under unlimited contracts, Article 137 of the old labour law says
that those who choose to resign before the end of the contract will be entitled
to a 2/3 reduction of gratuity if the period of their service is between one to
three years; 1/3 reduction if the period of service is between three to five
years; and no reduction if the period of service exceeds five years.
“The new labour law shall apply to all existing labour contracts entered into
under the existing law. Therefore, the employer can calculate the gratuity in
accordance with the old law, and subsequently following the new provisions,”
said Tawfik.
Abdulla Ziad Galadari, senior partner at Galadari Advocates and Legal
Consultants, noted that employees whose contracts are due for renewal after
February 2 will have their contracts renewed to limited in accordance with the
new law.
The removal of unlimited contracts from the UAE's workplace is aimed at
simplifying and unifying end of service benefits and other entitlements
irrespective of the type of employment contract and whether employees left an
employer upon resignation or termination.
Under the new labour law, contracts are to be renewed for a maximum of three
years.
Gratuity for foreign employees in federal government
The new unified work regulations published under Federal Decree-Law No. 47 of
2021 aligned the end of service benefits of full-time foreign employees working
in the federal government to that of the private sector starting from February
2.
Tawfik stressed that old provisions of the Human Resources Law in Federal
Government will apply to contracts issued before February 2, 2022.
"Employers have been given a year to amend contracts as per the new unified
regulations. Until the contacts are amended, employers can follow the old scheme
for calculating end of service benefits for foreign employees in the federal
government."
This means that foreign employees in the federal government resigning before
their contracts are renewed or amended will be entitled to end of service
benefits stated as per the old law in which they are entitled to a one-month
basic salary per year for the first five years of service; one-and-a-half-month
basic salary per year for the second five years of service; and two-month basic
salary per year for any year afterwards, calculated on the basis of the last
five-year average.
Galadari stressed that these provisions are applicable only to foreign workers,
as national workers are regulated through legislation regulating pensions and
social security in the UAE.