‘Should end-of-service benefits include the full notice period?’

Under the UAE Labour Law, redundant employees should be paid all benefits to the end of the one-month notice period

In case of redundancy, an employee's visa cancellation papers should include a calculation of end-of-service benefits until that date and no earlier. Silvia Razgova / The National

I would like your help in understanding the UAE Labour Law on redundancy. Several employees are being made redundant at my company. In such cases, the human resources department issues a letter and tells employees that it is their last working day. They pay the employee one month’s salary as notice in the final settlement but the gratuity and annual leave are only calculated to the day they are made redundant.

For example, if they issue a redundancy letter on November 1, an employee's final gratuity and annual leave is calculated only until that date. I feel they should calculate gratuity and annual leave until December 1. Could you clarify this, please? SN, Dubai

I understand that the contract of employment specifies a notice period of one month, the minimum required under the Labour Law. This means that the employer needs to give one month’s notice for termination, with a valid reason, although they can pay the salary due for the month at once and request that the employee does not return to work. Even if actual work ceases immediately, all benefits are payable for the full notice period.

In this case, it means that not only is the salary payable but also all benefits for a further month (until December 1). This includes annual leave days and calculation of end-of-service gratuity. The visa should not be cancelled until the end of the notice period and the cancellation papers should include a calculation of benefits as of that date and no earlier.

In addition, any employees on a Dubai visa should also have continuous medical insurance for a period of 30 days after visa cancellation in accordance with Dubai Health Authority rules.

I have been living and working in Abu Dhabi since August 2019. I may lose my job due to Covid-19 issues. I will probably return to the UK as things don't look good in my industry. My question is about UK tax if I return. I have been away from the UK for more than a year now, so does that mean I don't have to pay tax? Or do I need to stay in the UAE until the end of this year to avoid paying tax? I have spoken to a few friends but am confused. JS, Abu Dhabi

The UK has strict rules regarding liability for income tax and Her Majesty’s Revenue and Customs is the government entity that oversees and manages all issues relating to UK taxation. JS will not be exempt from paying UK income tax on his overseas income if he returns to the country at the end of 2020. An individual must spend a full tax year out of the UK to be considered a UK non-resident to be exempted from income tax on their overseas income.

A UK tax year is from April 6 to April 5, so JS would need to be UK non-resident for tax purposes until April 2021 to have an exemption. Anyone who is deemed to be a UK resident is subject to UK income tax on their worldwide income.

Various criteria apply in accordance with the Statutory Residency Test, which came into effect in 2013 and specifies the number of days in a tax year that anyone can spend in the UK to retain their non-resident status. This will vary between 45 and 183 days, depending on individual circumstances. Partial tax years outside the UK, even if there is a full tax year out, may also be taxable but that depends on various other conditions. Tax can be complicated and it is worth obtaining professional advice.

An individual must spend a full tax year out of the UK to be considered a UK non-resident to be exempted from income tax on their overseas income

My employment contract ends soon and it is not going to be renewed. I will leave the UAE and return home, but hope to come back when I can get more work here. I want to keep my bank account open. I don't have any debts. Is it essential to have a job with a visa to have a bank account or is it okay to keep my account as it is? DF, Dubai

It is not mandatory to have a residency visa to have a bank account in the UAE, but it is a requirement to show a valid visa upon request. Account holders are also expected to provide a copy of their visa upon renewal. In many cases, it is part of the terms and conditions of an account to be a resident. That said, many banks will permit non-residents to have a basic account without any credit facilities. This can be a simple current account or a savings account and an ATM card is usually available.

Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with more than 25 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