How much gratuity will UAE employees receive at end of service?

This is in accordance with Article 134 of the Employment Law.

Q- If an employee receives a salary solely based on a commission (although the labour contract mentions that he draws an average monthly income as well as commission), then how should his gratuity entitlement be calculated?

Answer

We assume that your query is related to employment contract of a mainland company based in UAE. An employee is entitled to severance pay (gratuity) if he has completed one or more years of continuous service with his employer. This is in accordance with Article 132 of the Federal Law No. 8 of 1980 regulating employment relations in the UAE (the 'Employment Law'), which states, "An employee who has completed a period of one or more years of continuous service shall be entitled to severance pay on the termination of his employment. The days of absence from work without pay shall not be included in calculating the period of service. The severance pay shall be calculated as follows:

1-21 days' remuneration for each year of the first 5 years of service

2-30 days' remuneration for each additional year of service provided that the aggregate amount of severance pay shall not exceed 2 years' remuneration."

However, severance pay (gratuity) in the UAE is generally calculated on the basic salary of the employee and any other allowances are not considered while calculating it. This is in accordance with Article 134 of the Employment Law, which states, "Without prejudice to what is provided for by some laws on the granting of pensions or retirement benefits to employees in some establishments, severance pay shall be calculated on the basis of the remuneration last due to the employee for those who are paid monthly, weekly or on a daily basis and on the average basis of the daily remunerations referred to in Article 57 of this law for those who are paid at a piece rates basis.

The remuneration used as a basis for the purpose of calculating severance pay shall not include what is given to the worker in kind, and housing allowance and transport and travelling allowances, overtime pay, representation allowances, cashier's allowances, children education allowances, allowances for recreational and social facilities and any other allowances or increments."

Based on the aforementioned provisions of law, we assume that the employment contract consists of a nominal basic salary for the employee whose remuneration is on commission and therefore, the severance pay (gratuity) shall be calculated on such nominal basic salary mentioned on the agreement.

Know the law

An employee who has completed a period of one or more years of continuous service shall be entitled to severance pay on the termination of his employment

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom, Singapore, 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.