Dubai worker has to compensate company for breaking terms of fixed term employment contract

Anyone who breaks the terms of a fixed term employment contract, whether employer or employee, has to compensate the other party, in accordance with Article 116 of UAE Labour Law.

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I have been working for a large company in Dubai for 11 months now as a warehouse manager although my visa says I am a "follow-up clerk". I have a two-year, limited contract and my salary is Dh8,000 monthly. I have now received a job proposition from a company in Jebel Ali Free Zone Authority (Jafza) with a monthly salary of Dh10,000, plus other benefits and would like to take that opportunity. I have also had my degree attested. I will give and serve one month's notice period and will have completed one year of service when I leave. I think I have to compensate the company by paying half of three months' gross salary. Is that right? I would like to know if I will get a ban for not completing a limited contract. Will my new employer in Jafza be able to get me a new employment visa and new work permit? PP, Dubai

Anyone who breaks the terms of a fixed term employment contract, whether employer or employee, has to compensate the other party. In accordance with Article 116 of UAE Labour Law: “ … the employee becomes liable for compensating the employer against losses incurred by him in consequence of contract termination, provided that the amount of compensation, may not exceed half a month’s pay for a period of three months or for the remaining period of contract whichever is shorter, unless the terms of the contract provide otherwise.” No end of service gratuity is payable for anyone on a fixed-term contract who resigns with fewer than five years of service. New rules regarding employment bans came into effect on January 1, and these largely apply to both limited and unlimited contracts. In the majority of cases, anyone who has completed six months of employment and provides the proper notice period to the employer should not receive a ban. These days, bans are usually given only if a person leaves employment without having given, and worked, the proper notice period or if they are of a lower skill level and have not worked for a company for a period of six months. Provided the rules are followed, PP’s new employer should not have an issue obtaining a new residency visa for him.

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

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