May 30, 2018

Are UAE employees entitled to service benefits if company goes bankrupt?

Pursuant to your query, you are entitled for end of service benefits which includes gratuity, leave salary and other entitlements even though your company is declared bankrupt. This is in accordance to Article 713(1) of Federal Law No. 18 of 1993  related to Commercial Transactions Law of the UAE, which states: "After obtaining the permission from the judge of bankruptcy, the trustee in bankruptcy, 10 ten days from the adjudication of bankruptcy has been issued, may pay the wages and salaries of the workers and employees that fall due before the adjudication of bankruptcy has been issued, for a period of 30 days, from the money of the bankruptcy held at his disposal, regardless of any other debt. However, if the trustee of the bankruptcy has no sufficient money for payment of such debts, the first money that comes into the bankruptcy shall be used for payment, regardless of any other debts that have priority in the list of liens."
Further, the money payable to the employee or his beneficiaries shall get priority for payment on employer's movable or immovable properties. This is in accordance with Article 4 of the Federal Law No. 8 of 1980 regulating Employment Relations in the UAE (the 'Employment Law'). It states: "Any amounts of money payable to an employee or his beneficiaries under this Law shall constitute a first charge on all the employer's movable and immovable property and shall be paid immediately after any legal expenses, sums due to the public treasury and sharia's alimony awarded under Islamic law to the wife and children."
Based on the aforementioned provisions of laws and considering the tenure of your employment service, your employer is obliged to pay you the severance pay as laid down in Article 132 of 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:
> 21 days' remuneration of each year of the first 5 years of service
> 30 days remuneration of each additional year of service provided that the aggregate amount of severance pay shall not exceed 2 year's remuneration"

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