Employees are entitled to gratuity once they complete one year of continu
I have a question about the calculation of gratuity on an unlimited contract. My employer calculates gratuity differently for employees who resign and for employees who are terminated. If the employee resigns, gratuity is calculated as seven days per year for the first three years, and 21 days per year after that. If the employer terminates, gratuity is calculated as between two and 21 days of each completed year.
Is this a legal practice?
Pursuant to your questions, your employer should calculate gratuity payable to the employees in accordance with the Federal Law No.8 of 1980 regulating Employment Relations in the UAE (the 'Employment Law'). If an employee is entitled to gratuity as per the Employment Law, then the employer should follow the provision of Employment Law. Employees are entitled to gratuity once they complete one year of continuous service, provided they fulfill the criteria 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:
(1)21 days' remuneration for each year of the first five years of service.
(2)30 days' remuneration for each additional year of service provided that the aggregate amount of severance pay shall not exceed two year's remuneration."
Further, Article 137 of the Employment Law states: "Where an employee, who is bound by a contract of unlimited duration leaves his work of his own accord after continuous service of not less than one year and not more than three years, he shall be entitled to one-third of the severance pay provided for in the preceding article; where the continuous period of service exceeds three years but does not exceed five years, he shall be entitled to two-third of such severance pay; where the continuous period of service exceeds five years, he shall be entitled to the full severance pay."
Further, Article 138 of the Employment Law states: "Where an employee who is bound by a contract for a limited period leaves his work of his own accord before the expiry of his contract period, he shall not be entitled to severance pay unless his continuous period of service exceeds five years."
Further, Article 139 of the Employment Law states where an employee is not entitled for gratuity payment. It reads as "an employee shall forfeit all entitlements to severance pay in any of the following two cases:
(a)If he is dismissed from service for any of the reasons specified in Article 120 of this Law or if he leaves his work in order to avoid being dismissed in accordance with that Article;
(b)If he leaves his work of his own accord and without notice, otherwise than in either of cases specified in Article 121 of this Law (in the case of contract of unlimited duration) or before completing five years of continuous service (in case of contracts for a limited period)."
KNOW THE LAW
When an employee, who is bound by a contract for a limited period, leaves his work of his own accord before the expiry of his contract period, he shall not be entitled to severance pay unless his continuous period of service exceeds five years.
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