Can UAE worker receive end of service gratuity and company-paid pension?

Keren Bobker explains as an Abu Dhabi worker queries the laws on final payments.

I am one of a few staff who is in an international, company-paid pension scheme. At the time we were hired all of us in the pension scheme signed a disclaimer and had a clause included in our employment contracts saying that we were not eligible for the end of service gratuity as we had chosen the pension scheme instead. However, based on a case from years back, I have heard that despite having signed the disclaimer we will still be entitled to an end of service payment, even though the company says we are not. As we have all been here more than seven years, it amounts to a large sum that we do not want to miss out on if we are entitled. MF, Abu Dhabi

This issue is covered in UAE Labour Law. An employer may offer a savings scheme as an alternative to the end of service gratuity, but the employees must not be disadvantaged in any way. As a minimum the employee must receive an amount of money, either as a payment, or as a benefit in an agreed savings plan based on the employer contributions only. Article 140 states: “ 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”. This means that the specific wording of the employment contract is relevant, as it must make clear whether the savings scheme is an alternative or an additional benefit. In most cases, employers will refer to Article 141 in a contract which states: “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.” MF must check the specific wording in the contract to clarity entitlement.

Keren Bobker is an independent financial adviser with Holborn Assets in Dubai, with over 20 years’ experience. Contact her at [e-mail]. Follow her on Twitter at @FinancialUAE.

The advice provided in our columns does not constitute legal advice and is provided for information only.

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