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UAE: Emirates' bonus for employees; will more companies follow?

Explained: What the labour law says about bonuses; how the amount is calculated, when it is paid

Published: Thu 16 May 2024, 6:00 AM

Updated: Sat 18 May 2024, 9:38 AM

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An overwhelming majority of private sector employees in the UAE haven’t received a bonus in the recent past and don’t expect to this year, a poll has found. The survey conducted on Khaleej Times’ WhatsApp channel saw about 900 respondents say they received a bonus in the last 12 months, while more than 700 expected to get one this year. In contrast, more than 6,000 respondents said they did not receive the sum and don’t believe they will in 2024.

A bonus is a sum of money added to employees’ salaries either as a reward for good performance or if the company registers good profits in a fiscal year. It’s paid over and above an employee’s monthly salary and other benefits, typically once a year. Emirates Group on Monday awarded its employees 20 weeks of their salaries as bonus as the company announced record-breaking profits.

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Despite bonuses not being mandated by the UAE labour law, it is a common practice among companies to distribute the amount annually, experts said. With the law being silent on the monetary perk, it is governed by contractual agreements and/or company policies.

“Typically, an employee's eligibility for bonuses is at the discretion of the employer, unless the employment contract explicitly specifies the entitlement, its terms, including the criteria and calculation,” Asma Siddiqui, senior associate at Dubai-based law firm BSA, told Khaleej Times. “Hence, bonus provisions, if applicable, are generally defined within employment contracts or company policies.”

Human resource consulting firm Robert Half noted in its UAE salary guide 2024 that three in 10 employees (30 per cent) reported no one in their company received a bonus in the 12 months prior to being surveyed. The company advised business leaders to be on the lookout for dissatisfied workers “as many look forward to an annual boost”.

Adding payout to job contract

Bonuses can be added to an employment contract as an additional payout to the employee beyond the monthly salary/wages.

“Generally, the employment contracts stipulating such entitlement should specify the criteria for the employee’s eligibility, such as meeting performance targets or company profitability, etc. Hence, heed should be paid to outlining the bonus amount and/or method of calculation, frequency, and any conditions for its entitlement/payment,” said Siddiqui. “Nonetheless, it's crucial to ensure that the terms are fair, compliant with the labour law, and are established through mutual consent.”

Bonus calculation

The allocation of bonuses typically occurs after the conclusion of the financial year. The payout depends on various factors.

“These include the company's overall performance, its growth compared to previous periods, achievement of budgetary targets, and individual employee performance assessments,” said Chandy Philip, chief financial officer at recruitment firm TASC. “Across industries, annual bonuses commonly range from 15 to 45 days of pay. However, the specific amount may vary depending on the nature of the industry in which the company operates.”

In its UAE salary guide 2024, recruitment agency Cooper Fitch noted that almost three-quarters of companies it surveyed (71 per cent) intend to issue annual bonuses. Most (35 per cent) said they would pay one month’s basic salary as a bonus, while 4 per cent would give four months’ pay.

“While salaries continue to play a crucial role in talent retention, factors beyond fixed remuneration — such as annual bonuses and the ability to work remotely — are playing an increasingly important role in the UAE’s job market,” Jack Khabbaz, managing partner – CEO and public sector advisory at the firm, said in the guide.

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