‘Will switching to a limited-term contract affect my gratuity?’

The change of contract does not affect the period of service or payment of gratuity in any way

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Question: I have been working for the same company since late 2019. In September 2022 — right before I hit the three-year anniversary — they switched me from an unlimited to a limited-term contract, in line with UAE labour law.

The company has said that when resigning, employees will receive two gratuity payments — one from the first contract and another from the new limited contract.

For personal reasons, I will be resigning soon. However, this means that I won’t complete a year under the limited contract.

Is the company required to pay me gratuity for these months? I have been working here for more than three years and I hope the new labour law won’t limit my gratuity.

Can you please advise? AS, Dubai

Watch: New UAE labour laws come into effect

New UAE labour laws come into effect

New UAE labour laws come into effect
New UAE labour laws come into effect

Answer: The employer has done the right thing in amending the contract to a limited one, as that is a requirement of the new labour law.

The original deadline to do this was February 2, but it has now been extended to December 31.

What the employer has misunderstood is that this change of contract does not affect the period of service in any way.

The end-of-service gratuity should be calculated as continuous service from the date AS first started working for the company.

Under the new labour law, all employees will be on limited-term contracts but there is no penalty for leaving employment before the end of the stated term.

Accordingly, AS is entitled to payment of an end-of-service gratuity calculated from the start of employment until her final day.

Article 51, which covers end-of-service benefits for full-time workers, in the new law states: “The full-time foreign worker, who completed a year or more in continuous service, shall be entitled to end-of-service benefits at the end of his service, calculated according to the basic wage as per the following: a. A wage of 21 days for each year of the first five years of service; b. A wage of 30 days for each year exceeding such period.”

To clarify, this is one payment for the full period, calculated using the final basic salary.

If any employer states that they will make two payments, they have misunderstood the law.

The employee can point out the error. If the employer persists with an incorrect calculation, the employee can register a case against them with the Ministry of Human Resources and Emiratisation.

Q: I have a small business and want to take on a few people to do just a few hours’ work each week.

These women are sponsored by their husbands. Do I have to do anything else and pay fees for someone who will work for just four or five hours each week? TO, Abu Dhabi

A: While it is possible to employ someone without providing them with a visa, assuming they are sponsored by a spouse or parent, there are further requirements.

If the visa states “housewife not allowed to work”, the husband must provide a “letter of no objection”, known as an NoC.

In addition, and in all cases where anyone is undertaking any paid employment, the employer must provide them with a contract of employment and a work permit. It is illegal to work without a work permit.

Q: I left Dubai in 2008 with unpaid debts. However, I am interested in working in Dubai again and paying off my debt as soon as possible.

I saw that there is a new law and a repayment plan that was implemented in 2020 that will allow me to repay my debt over a structured period.

Is this true? Or will I encounter a problem when I arrive in the UAE? RA, South Africa

A: While there are provisions in the law to come to an arrangement with a bank through the courts, it is not as simple as suggested.

If someone has unpaid debts, it is likely that there is an outstanding police case and that would lead to detention at immigration on entering the UAE.

RA will need to contact the General Directorate of Residency and Foreigner Affairs.

The easiest way is to call the Amer division. The telephone number from outside the country is +971 4313 9999. They will be able to confirm if there is a travel ban.

If someone has unpaid debts, it is likely that there is an outstanding police case
Keren Bobker, senior partner, Holborn Assets

Assuming there is a travel ban, RA will need to contact the bank(s) with which she has debts and discuss a payment plan that would lead to the bank cancelling the police case.

It is likely that she will need to make a lump sum payment and make further repayments before they will do so.

If a debt is outstanding for 15 years, it could be significantly higher as interest will have been added, especially if there have been no payments over the years.

Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with more than 30 years’ experience. Contact her at keren@holbornassets.com. Follow her on Twitter at @FinancialUAE

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

Updated: March 27, 2023, 10:45 AM

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