‘What happens to my end-of-service dues if the company I work for is sold?’

Employees must ask for clarification in writing if a change of ownership is announced

When there is a change in company ownership, the liability for the accrued end-of-service gratuity depends on the structure of the sale of the business. AFP

There is talk that my employer will sell the company to a competitor. I would like to know what happens to the gratuity that has built up if the company is acquired? Does the current employer have to pay out the gratuity at sale or does the new owner take it on? Staff have concerns. HT, Abu Dhabi

The liability for the accrued end-of-service gratuity depends on the structure of the sale of the business. If the new company is not taking over employee contracts, then the existing employer is liable to pay wages in full and also end-of-service gratuities.

The provisions of the UAE Labour Law as per Article 126 states: “Should a change occur in the form of the establishment or the legal headquarters thereof, the employment contracts valid at the time of the change shall remain valid between the new employer and the workers of the establishment. The employment shall continue and the original and new employer shall be jointly liable for a period of six months for the execution of the obligations arising from the employment contracts during the period preceding the change. Upon the lapse of the said period, the new employer shall solely bear such liability.”

The buyer of the business should ensure that the purchase price takes into account any such liabilities that the company has accrued as at the date of acquisition. In most cases, a contract of employment will remain in force and the relevant employee’s service will be considered continuous. It would be wise for any employee in this situation to ask for clarification in writing if a change of ownership is announced.

I am a Dubai residence visa holder. I sponsored my wife and paid for her medical insurance. She has a new job now and will be sponsored by her employer in Abu Dhabi. I would like to know if the insurance policy I took out will still be active after her visa is transferred. GA, Dubai

Medical insurance is mandatory for UAE residents on both Dubai and Abu Dhabi visas, but the rules and requirements are different. As GA’s wife will be sponsored by her employer in Abu Dhabi, the employer is legally obliged to provide her with medical insurance, which must comply with the requirements of the Department of Health Abu Dhabi. It is generally permissible to have two health insurance plans in place, provided a claim is only made from one plan each time. This is not uncommon if someone wants a higher level of cover than the company policy provides, but it can be an issue in a case like this.

Plans set up in Dubai will comply with the emirate’s rules and are different from those in Abu Dhabi. An Abu Dhabi resident cannot usually set up or use a Dubai health insurance plan, according to the Dubai Health Authority rules. In this situation, assuming they wish to continue with the Dubai plan in addition to the mandatory Abu Dhabi cover, GA will need to contact the insurance company to see if they will continue to insure his wife if she has an Abu Dhabi residence visa.

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