UAE jobs: Can bonuses be included in employment contracts?

Payment of bonuses becomes mandatory if the same is mentioned in the employment contract



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Ashish Mehta

Published: Sun 20 Nov 2022, 6:00 AM

Last updated: Sun 20 Nov 2022, 3:06 PM

Question: I am considering taking up a job in the UAE. Are bonuses common in the country? What about gratuity? Can I get these aspects added to my employment contract?

Response: Pursuant to your queries, it is assumed that you have received a full-time employment offer from an entity based in the mainland of UAE. Therefore, the provisions of Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations (the ‘Employment Law’) and those of Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree Law No. 33 of 2021 Regarding the Regulation of Employment Relations (the 'Cabinet Resolution No. 1 of 2022') are applicable.

An employer, at its discretion, may award bonuses to its employees. The Employment Law is silent on mandatory bonus payments. However, an employer may include bonuses as one of the benefits in the salary payable to an employee in the employment contract. It can also be specified separately.

Payment of bonuses becomes mandatory if the same is mentioned in the employment contract. Therefore, you may request your employer to include it.

Article 14(4) of Cabinet Resolution No. 1 of 2022 mentions that any employer in the UAE which employs more than 50 employees needs to have regulations related to promotions and rewards. However, the said provision of law is not clear whether the term ‘rewards’ can be specifically interpreted as bonus or any other rewards.

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An employer may grant its employees with facilities and/or monetary benefits which are more beneficial to the latter even though the same is not mentioned in the Employment Law. This is in accordance with Article 65 (3) and (4) of the Employment Law, which states: “3. Any condition which is contrary to the provisions of this Decree-Law, even if preceded its entry into force, shall be null and void, unless it is more beneficial to the employee. Any release, conciliation or waiver of any rights of the employee hereunder shall be null and void to the extent that it conflicts with its provisions.

4. The employer may establish and put in place organisational bylaws and programmes in the Establishment that would be more beneficial to the employee than those prescribed in this Decree-Law and its Executive Regulations. In the event of conflict between such programmes and bylaws and the provisions of this Decree-Law, conditions that are more beneficial to the employee shall apply."

The Employment Law includes provisions of severance pay (gratuity) payable to an employee if he/she completes one year of continuous service. This is in accordance with Article 51(2) of the Employment Law, which states: "A foreign full-time employee who completes one or more years in the continuous service is entitled to a severance pay, which is calculated on the basis of the basic salary as follows:

a. 21 working days of salary for each of the first five years of service.

b. 30 working days of salary for each subsequent year of service.”

Usually, the MOHRE format of the employment contract may not include the clauses related to severance pay. However, it includes the general clause related to applicability of the provisions of Employment Law. Therefore, on this basis, you are entitled to severance pay (gratuity) provided you have completed more than one year of continuous service with your employer.

Legal View:

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm on: www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.


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