Wednesday, May 12, 2010

How is severance payment calculated? in U.A.E

I have worked in a company for almost five years under a limited period contract which expires next month. Upon expiry, I will quit my job as I am planning to work with a new company. Last year, I had asked the company to give me four months leave without pay to take care of my son. The company approved my request and I proceeded on unpaid leave and resumed work after the leave. My first question is related to my service period. The company says that, as per the law, the unpaid leave period will not be included in the calculation of the total service period. The total service period will be calculated less than five years at the end of the current employment contract. The second question is, do I need a No Objection Certificate to transfer my sponsorship? The company has no intention in giving me such certificate
Article no. 132 of the Federal Labour Law No. 8 of 1980 states the following: A worker 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 is calculated as follows:
1. Twenty-one days’ remuneration for each year of the first five years of service.
2. Thirty days remuneration for each additional year of service provided that the aggregate amounts of service pay shall not exceed two year’s remuneration.
As for a No Objection Certificate (NOC) to transfer the sponsorship, the questioner does not require such certificate as per the Labour Law since he has completed more than three years in service.
Questions answered by Advocate Mohammad Ebrahim Al Shaiba of Al Bahar Advocates and Legal Consultants for Gulf news
Related Articles U.A.E. LABOUR LAW- FEDERAL LAW NO. (8) OF 1980
SECTION (2) END OF SERVICE REMUNERATION
ARTICLE (132)*
The employee who has completed one year or more in the continuous service, is entitled to the end of service remuneration at the end of his service. Days of absence from work without pay are not included in computing the period of service, and the remuneration is to be calculated as follows :-
1. Twenty one day's pay for each year of the first five years of service.
2. Thirty days pay for each additional year.
Provided that the entire total remuneration shall not exceed two year's pay.
ARTICLE (133)
The employee shall be entitled to end of service remuneration in respect of fractions of the year payable pro rata to the time actually worked provided that he has completed one year of continuous service.
ARTICLE (134)
"Without prejudice to the provisions of some laws regarding the granting of pensions and gratuities to employees of some establishments, the end of service gratuity shall be computed on the basis of last wage which the employee was entitled to, in respect of those drawing their salary per month, week or day, and on the basis of average daily wage stipulated in Article (57) in respect of those drawing their wages on piece work basis. The wage which is considered as basis for computation of the end of service gratuity shall not include anything given to the labourer in kind, housing allowance, transport allowance, travel allowance, overtime allowance, representation allowance, cashier's allowance, children education allowance, recreation and social services allowance or any other allowances".
ARTICLE (135)
The employer may deduct any amounts due to him from the employee's end of service remuneration.
ARTICLE (136)
In fulfillment of the provisions of Article (132), cases of employment preceding the effective date of this Law shall not be considered as cases entitling the employee to end of service gratuity. Without prejudice to rights acquired by the employee under any repealed labour law or contracts of employment, agreements, by-laws or regulations of the establishment. In the event of his death, the employee's gratuity shall be paid to his legal heirs.
ARTICLE (137)
If an employee under a contract with unlimited period has left his work at his own option after a continuous service of not less than one year and not more than three years, he shall be entitled to one third of the end of service gratuity provided for in the previous Article.
If the period of his continued service is more than 3 years and less than 5 years he becomes entitled to 2/3 of the said gratuity, but if his continued service exceeds 5 years, he becomes entitled to the entire gratuity.
ARTICLE (138)
If an employee under a contract with limited period leaves his work at his own option before the end of the contract period he shall not be entitled to end of service gratuity unless the period of his continuous service exceeds five years.
ARTICLE (139)
The employee shall be fully deprived of the end of service gratuity in any of the following cases:
a. if he is dismissed from service for any reason in accordance with Article (120) of this Law or if he leaves his work to avoid dismissal in accordance with the provisions of this Article.
b. If he leaves his work willingly and without notice in cases other than those enumerated in Article (121) under this law with respect to unlimited period contracts or before he completes five years of continuous service with respect to limited period contracts.
ARTICLE (140)
In any establishment where a saving fund is raised for employees and if the regulations of such fund provide that payments made by the employer to the fund for the account of employee is a legal commitment against the end of service gratuity, the amount of savings or benefits due hereunder shall be paid whichever is greater. If the fund regulations have no provisions that amounts paid by employers is a legal commitment for the end of service gratuity, the employee shall collect amount due to him from the saving fund in addition to the legal gratuity.
ARTICLE (141)
In any establishment where a pension or security schemes or similar schemes are maintained, the employee who is entitled to retirement pension may select either this latter or the prescribed gratuity or whichever from both thus is more favourable to him.

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