Reasons why your UAE gratuity can be withheld

The UAE labour law dictates that gratuity or end-of-service benefits are payable to employees who have completed one year or more in continuous service.

Despite meeting that criterion, there are a few clauses that can keep an employee from receiving the payment.

The first most obvious clause is less than a year of service, which is common knowledge.

“Where an employee is engaged under an unlimited term contract, no end-of-service gratuity (ESG) will be payable where the employee has been continuously employed for less than one year,” Jamie Liddington, Head of employment at Hadef & Partners, told this website.

There are other areas as well where the employer can build his case for not paying the employee despite being in service for more than one year.

It’s also important to understand some core points of difference when it comes to gratuity for those under a limited or unlimited contract, and here are the scenarios that can keep you away from getting your gratuity amount in your bank account.

According to Liddington, those under unlimited term contract may have to skip this amount if s/he “has been continuously employed for more than one year but resigns without providing the minimum period of notice required under the contract and without reasonable grounds to show that [firstly] the employer had, at the time of the resignation, failed to honour his contractual obligations to the employee or [secondly] he was assaulted by the employer or his employer’s legal representative.”

Then, there is a list under article 120, which employees should be aware of when it comes to gratuity entitlements.

Speaking to Emirates 24|7, Sara Khoja, Partner at law firm Clyde & Co says: “An employee who is terminated under article 120 of the Federal Labour Law, Law no 8 of 1980, is not entitled to end -of-service gratuity benefit or notice.”

Another scenario when the gratuity payment can be withheld is when “the employee has been continuously employed for more than one year but the employee’s employment is terminated for a reason set out under Articles 88 or 120 of the Labour Law,” states the expert at Hadef & Partners.

Khoja explains the clauses in article 120, under which gratuity will not be paid.

These include:

• Termination during probation or on its expiry.

• If the worker has adopted a false identity or nationality or submitted forged certificates or documents.

• If a worker makes a mistake causing substantial material loss to the employer provided the employer notifies the relevant labour department within 48 hours of the accident.

• If the worker disobeys instructions regarding industrial safety or the safety of the workplace provided the instructions have been issued in writing and are posted conspicuously in the workplace in a language accessible to the employee or explained to him orally.

• If the worker does not perform his basic duties under the contract and persists in violating these despite being investigated and receiving a written warning notifying him of termination in the event of repeat offences.

• If the worker reveals his employer's trade or business secrets or confidential information.

• If the worker is finally sentenced by a competent court for an offence involving honour, honesty or public morals.

• If the worker is drunk or under the influence of an illegal drug during work.

• If while working the worker assaults the employer or his manager or a colleague.

• If the worker is absent from work without a valid reason for more than 20 non-consecutive days or more than 7 consecutive days.

Those working in another company without getting set approvals from the employer can also jepoardise their gratuity.

“Article 88 concerns working for another employer (without permission) during a period of annual or sick leave,” says Liddington, and this can lead to problems for the employee.

In cases where an employee is engaged under a limited or fixed term contract, “no ESG will be payable where the employee resigns before completing five years of continuous service unless he can show that (i) the employer had, at the time of the resignation, failed to honour his contractual obligations to the employee or (ii) he was assaulted by the employer or his legal employer’s legal representative,” he explains.

As per Khoja, those engaged on an unlimited term contract may get a reduced amount if the minimum term is completed.

If an employee “resigns in the first five years of employment, the end of service gratuity entitlement is reduced to 1/3rd if the employee has between 1 and 3 years of service and to 2/3rd if the employee has between 3 and 5 years of service. The employee may resign without suffering any reduction in gratuity if he has 5 years of service or more.

“If an employee is engaged on a fixed term contract then he must complete the duration of the term in order to be entitled to gratuity. If he has 5 years or more of service then he can resign without completing the term of his fixed term contract and will still be entitled to end of service gratuity,” she adds.

The above information is relevant for UAE onshore companies and not those domiciled in the DIFC, which has a different employment law – Law No 4 of 2005 as amended.

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