UAE Gratuity Law: How is it calculated in accordance with the latest law?
When expatriate workers end their job in the United Arab Emirates, they are entitled to a gratuity due to the end of their services. Typically, the first five years of services will assure a lesser amount than the years following. Now, the UAE Gratuity Law is changing the way it is calculated.
In this article, we will give you the newest information about the UAE Gratuity Law, how it is calculated, and everything about the new Labour Law. From what was established prior, to everything new that is coming new. This is a significant change from the way we know working so far. Let us take a look at everything we will be discussing:
- What is an end-of-service gratuity?
- How is the calculation of gratuity made now?
- What are the changes regarding Gratuity in the new law?
- Which are the current forms of employment contracts?
- Which are the new types of Leaves?
- What are the other changes made in the labour law?
- How can we provide you with more information about this topic?
1. What is an end-of-service gratuity?
This is a benefit payment. Whenever an employee resigns from their work, they will receive this benefit. It applies to contract to end as well. It is a global benefit; however, we will be focusing on the United Arab Emirates Gratuity Law.
Although the end of service is a benefit payable after an employee terminates their work, there is a condition. The employees need to have been working for at least one year to be eligible to obtain this benefit.
The end of service benefit is granted by law, which means that employers are in no position to waive it or diminish it. They must operate according to UAE Gratuity Law and cannot change the conditions in the employment contract.
Regarding this topic, it is important to know that there is a new Gratuity Law in the UAE, in 2021 the Federal Decree-Law No. 47 was announced. This new law is changing many parts of work-life in the UAE. Since February 2022, it is applicable throughout the territory.
2. How is the calculation of gratuity made now?
According to the new law, the end of service gratuity benefits bases the amount on the employee’s basic pay. Any foreign worker or employee who completes at least one full-time work year gets the incentive.
For the first five years, they will get twenty-one calendar days for each year. After that, they will obtain thirty days for each extra year. To calculate the amount per day, you must multiply the basic monthly salary by the 12 months of the year, and then divide the result by 365.
Then, you need to know the number of days worked since the hire date as of the ending date. Dividing that number by 365 will give us the number of years. Now, all you have to do is multiply the first result, basic salary per day, by 21 for the first five years, and by 30 for the years above that.
Since this could be very confusing, you can always take the option of hiring legal assistance with Connect Legal. We have a team of experts in UAE Labour Law for Gratuity that will help you calculate your end-of-service benefit.
3. What are the changes regarding Gratuity in the new law?
Although the calculations of gratuity remain without changes, there are a few changes that apply due to the new law. For instance, employers cannot terminate their employees without assuring an end-of-service payment.
The new gratuity law in the UAE in 2021 specifically states that all employers must pay end of service benefits within the first 14 days following the end of employment. Additionally, it is very clear now that employers cannot deduct or reduce the gratuity amount, no matter contract type, or resignation date.
In case of an employee living in accommodation pay, they have 30 days to vacate the renting place. This period of days starts from the end of the contract to vacate it. Apart from this, gratuity law now states that the employee can choose the payment currency for their end-of-service benefits.
Unlike the previous law, the new gratuity law in the UAE 2021 does not contemplate a reduction for the end of service if the worker resigns. Moreover, in case of the misfortunate death of an employee, their family will be the ones receiving the entitlements. Where is applicable, the body repatriation costs will be deducted.
4. Which are the current forms of employment contracts?
Following the new UAE Labour Law for gratuity‘s release, new requirements for the design of contracts are also established. All private-sector employers have to replace the existing contracts with a new employment contract.
A full-time employment contract is not the only option available for workers in the United Arab Emirates. As a matter of fact, executing contracts must have a duration of time that does not exceed three years.
In addition to this, the contracts can be renewed or extended for periods of lesser or equal duration. All the regulations for each type of contract have a place in the terms and conditions of employment contracts.
Following this topic, Connect Legal has plenty of ways to help you rebuild your current contracts to state what the law requires nowadays. Labour Law is one of our specialties, and we are happy to contribute in any way you need.
4.1 Full-time employment contract
It is when an employer hires employees on full working days and hours. They also must have a single employer, for the daily working shifts.
4.2 Part-time work
These employees can be working under more than one employment contract. Each one of them must have different specific working hours and days.
4.3 Temporary employment contract
In this case, the contract ends after a number of hours. The limit depends on the requirements of the project.
4.4 Flexible employment contract
This refers to work in which the working days and hours depend on the number of operational needs. Employees can work various times throughout the week or day, always depending on the requirements and circumstances of the job.
5. Which are the new types of Leaves?
The new Gratuity Law in the UAE 2021 comes along with new types of leaves as well. Under the new legislation, employees can take advantage of new special leaves. There is also a lot more about leave salary calculation in the UAE.
5.1 A five-day mourning leave
All employees are able to ask for this leave in the case of the death of a wife or a spouse. As the UAE Labour Law for Gratuity explains, this mourning leave is paid as a regular working day.
5.2 A three-day mourning leave
As well as the previous one, this one is also in the event of death. However, this is in the case of a father, mother, sons, sister, brother, grandmother, grandfather, or grandchildren. The leave starts on the day they passed away.
5.3 A five-day parental leave
This leave can be used intermittently or continuously. Its purpose is to allow the parent to spend time with their family. Any employee parenting a kid within six months of age is able to opt for this leave.
We also assist in regards to Family Law. This can help you to make important decisions involving the family. In Connect Legal, we offer support in multiple areas related to family cases.
5.4 A ten-day study leave
Unlike the ones we have mentioned this far, this will only be given to those employees that have been working for the same contract for a minimum of two years. It will allow students to study for an upcoming test.
They must be studying in a state-approved educational facility.
5.5 Maternity leave
The new rules allow women more time for maternity leave. Now they have 45 days for full pay leave and the following 15 days on half-paid. Also, they can take 45 more days of unpaid leave. This last one requires supporting documents about the child or mother’s illness.
5.6 National duty leave
In the case of national service, UAE nationals that are working in private companies can have a full-time leave. They must present proof of service.
You can also learn more about how the federal government rules and protects employment relationships, to help you understand what the employment issues in the UAE are.
6. What are the other changes made in the labour law?
The UAE Gratuity Law and new Labour Law highlight different ways in which the law is conceiving employees’ rights.
6.1 Discrimination, harassment, bullying, and forced labour
The new law reinforces the concept of equal opportunities. Forbids any type of discrimination, assault, and harassment. Including coercion or threats in the workplace from anyone and to anyone.
Workers should not work against their will, nor under any type of threat of penalty. Adding up to this, the new law strictly prohibits any form of sexual harassment, verbal, physical, or psychological violence.
6.2 Equality of payment for men and women
Furthermore, the equality non-discrimination policy includes the women’s right to have the same payment as men for the same work. All provision in regards to worker employment applies to any working woman. Law is now granting women the same wage as men if they provide a work identical or of equal value to any other.
6.3 Non-competition clause
The previous legislation prohibits any employee from working with an employer that competes with the former business they were working for. In contrast, the new UAE Gratuity Law and Labour Law makes the employer responsible to set a Non-Compete Agreement in their contracts.
Any employer who wants to safeguard its business or commercial interests can do so. However, it is no longer mandatory by the law. Additionally, the non-competition period shall not exceed two years after the contract expires.
If you are interested in learning what the legal services for businesses are, you must read this article and be sure that your company is protected.
6.4 Different types of work permits
There is a standard permit, for employments bringing overseas workers into the United Arab Emirates. Moreover, there is a work permit to transfer an ex-pat worker between establishments. Along with this, there is a work permit for those living in the country with their relatives’, on their residence.
At this time, there is a permit for employees with a temporary work model, called a temporary work permit. Subsequently, a project work permit is given to those who intend to recruit overseas employees for a fixed-period project.
For students from 15 years old, and youngsters aged between 15 and 18, there are two permits. Firstly, the training and employment permit, for ministry-registered companies to train and employ UAE Students. Secondly, the juvenile work permit, giving the same permit until the majority of age.
Apart from this, there is a special permit for those individuals who work independently, called the self-employment permit. Finally, you can check how COVID-19 is affecting Labour Law and the UAE Gratuity Law.
6.5. Employees can stay longer in the country after termination
In contrast to the previous law, which limited the days an employee could stay in the country to 30 days, they are now able to stay for 180 days. After the termination of employment, individuals are now to stay for more days without incurring overstay fines.
In addition to this, it is now illegal for employers to withhold employees’ documents, as well as force them to leave the country at the end of their working contract. Employees need to pay close attention to all regulations, to avoid visa cancellations.
7. How can we provide you with more information about this topic?
As we can see, there are a lot of beneficial changes following the new Labour Law and Gratuity Law in the UAE. All those changes reflect how the government has been paying special attention to the business area, to improve each day.
Please, take into consideration that we are giving you the major changes only. In addition to this, we can provide you with Commercial Property assistance. Make your dream company come true with these perfect places to rent. We are ready to walk you through all the details.
Would you like to contact Connect Legal to know more about UAE Gratuity Law and the changes in the labour law? Visit our official website or send us an email at [email protected] with all your questions.
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