Final salary will be applicable to end of service gratuity

UAE employer is not permitted to change the terms of a contract of employment without the agreement of the employee.

You have stated in previous columns that the UAE Labour Law requires the gratuity to be paid based on the final salary. In my company, the monthly pay cheque, comprising both the salary and allowances for a number of us was cut by varying percentages. This happened a year or so ago. In addition the percentage of our monthly pay cheque marked as “salary” was later cut by typically 10 per cent. How does the Labour Law deal with such a scenario where an end of service gratuity is to be paid? WS, Dubai

The law is quite clear in that the end of service gratuity is based on the final basic salary payable, but you have another issue here as the employer is not permitted to change the terms of a contract of employment without the agreement of the employee. If the salary reductions were not agreed by you then you may have a case with the Ministry of Labour. Make sure you have full records of all changes.

I have worked continuously for over seven years, with the same government employer based out of Abu Dhabi. After three years with the company I was promoted and received a new contract. The base rate on the new contract, which has been valid for the last four years, is Dh6,000 a month lower than my first and original contract. I was never paid a gratuity for the first three years. I have heard that is illegal to reduce a base rate if working continuously with the same employer. Is this correct? JD, Abu Dhabi

According to UAE Labour law, an employer cannot alter the terms of a contract and must have the employee’s agreement to do so. In this case it appears that a new contract was issued so the employee was aware of the changes and having accepted the altered salary level for four years, he will be deemed to have accepted the revised terms. As Mr D remained with his employer, it is correct that no gratuity was paid out as his service did not cease. If he leaves now, it will be calculated using his current basic salary.

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

The advice provided in our columns does not constitute legal advice and is provided for information only. Readers are encouraged to seek appropriate independent legal advice

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Published: December 5, 2014 04:00 AM


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