‘Can my employer reduce my basic salary?’

Changes made to contract terms must be agreed by employees in writing and formally submitted to the Ministry of Human Resources and Emiratisation for approval

The UAE Lab­our Law does not specify a split between basic salary and allowances, so the split is at the employer's discretion. Antonie Robertson / The National
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Question: I have been with a company for three years. My salary package consists of a basic wage plus housing and travel allowances.

At the moment, the basic salary accounts for 70 per cent of the total, but my employer wants to change that to a lower figure.

When I asked why, he said something about the law having changed and that the new labour law allows employers to make changes to salary splits as they wish.

I know this will affect my gratuity when I leave the company. Has the law changed and is there a percentage that should be the basic salary? CL, Abu Dhabi

Answer: There has been no recent change to salaries under the UAE labour law. It is also not part of the new labour law that came into effect in February 2022.

There is nothing in the UAE Lab­our Law that specifies the split between basic salary and allowances, so this is at the discretion of the company. Despite this, it is expected to be reasonable and justifiable.

New UAE labour laws come into effect

New UAE labour laws come into effect

The end-of-service gratuity is calculated on the final basic salary, so companies should not keep this artificially low to reduce their future liabilities.

The general expectation is that the basic salary should not be less than 60 per cent of the total remuneration package.

If it is less than 50 per cent, the employee would have a strong claim for unfair treatment at the Labour Court if they choose to challenge it.

There is no guarantee that a claim would be upheld. It is far better to agree to an appropriate split at the outset and make an employer aware that the individual understands the law and what can and cannot be done.

As with this particular scenario, the employer is not permitted to simply reduce a basic salary because they want to.

That would be a change of contract terms and no employer is permitted to arbitrarily reduce a salary or change any other agreed contract conditions.

Any changes, especially if worker could be disadvantaged, must be agreed by an employee in writing and formally submitted to the Ministry of Human Resources and Emiratisation for approval.

Q: My employer told me that he has cancelled my visa. He didn’t tell me he was doing this or why. I am currently on holiday in my home country.

How can I find out if this is true and if he has banned me? LR, Dubai

A: LR has provided limited information, but it is assumed that the cancellation is due to their employment ending.

Unless there has been a breach of contract or criminal activity, which I understand is not the case, the employer is required to provide notice.

This will be in accordance with the provisions of the contract of employment. In accordance with the UAE labour law, this must be a minimum of 30 days and must be provided in writing.

In addition, an employer is not permitted to terminate employment when an employee is out of the country on annual leave.

Notice of termination should only be given when an individual is in the UAE.

The employment visa should not be cancelled until the end of the notice period and all payments owed to the employee have been made. This includes any annual leave accrued but not taken, salary for the notice period and the end-of-service gratuity.

This employer has broken multiple parts of the UAE labour law.

It should be noted that an employer can be fined for this action and may have to pay compensation to the employee.

This is covered in Article 43 of the labour law: “The party who did not abide by the notice period shall pay to the other party compensation, which is called notice period allowance, even if the absence of notification does not cause damage to the other party and the compensation shall be equal to the worker’s wage for the full notice period or the remaining part thereof.”

For an individual directly sponsored by an employer or a free zone, they need to be in the country for a visa to be cancelled.

It may be that no action has been taken, but LR needs to check this before returning to the UAE.

As he has a visa issued in Dubai, he can contact the General Directorate of Residency and Foreigner Affairs – Dubai. There are multiple ways to contact them, according to their website.

If the employer has illegally cancelled the visa, LR can raise a case against them through the MoHRE at no cost.

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 or at www.financialuae.com

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

Updated: January 28, 2024, 5:00 AM