'What is my gratuity if I quit my job less than a year after starting?'

The Dubai resident was on a limited-term contract and believes their employer short-changed them

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

I have been working in Dubai for less than a full year but decided to hand in my resignation. I have received my last salary but I believe my employer has given me the short end of the stick. I was wondering what a 45-day "leave encashment" for a salary of Dh15,000 per month should be as I think I am owed money by them. Other than this payment, am I entitled to any other funds?  It was a limited-term contract. SA, Dubai

The term “leave encashment” refers to days of annual leave that have accrued but have not been taken, so are paid in lieu. It is unlikely that anyone has annual leave of 45 days and I doubt that this figure is correct. Any days of annual leave that are owed should be paid as part of the final settlement but in this case, a penalty is payable because SA is breaking a fixed-term contract of employment.

This is per Article 116 of UAE Labour Law: “Should the contract be rescinded by the worker… the worker shall be bound to compensate the employer for the loss incurred thereto by reason of the rescission of the contract, provided that the amount of compensation does not exceed the wage of half a month for the period of three months, or for the remaining period of the contract, whichever is shorter, unless otherwise stipulated in the contract.”

Half a month for three months is roughly equivalent to 45 days of salary and this would make more sense. This means that SA would be due to pay a penalty of about Dh22,500. This would be reduced by the amount due for the annual leave that is owed.

As SA has worked for less than a full year, no end-of-service gratuity is payable and, indeed, is forfeited by any employee on a limited contract who resigns with fewer than five years of service.

I am an American citizen and I know the rules are different for us and that we are never fully exempt from United States taxes when living in the UAE. I am on quite a low income as I travelled with my husband, who isn't a US citizen. I am only working part-time, so my income must be well below the limit that I know we have as non-resident US citizens. Do you know if I still have to file an annual tax return, even though there will be nothing to pay? BK, Abu Dhabi

You are eligible for the Foreign Earned Income Exclusion (FEIE) on income of up to $105,900 a year before US income tax is payable.

Regardless of where you are living, being a United States citizen means that you must file an annual tax return with the Inland Revenue Service (IRS) if your earnings are more than $12,200 (Dh44,804) a year, from any source, for people aged up to 65 years. That is for the tax year 2019, which you file in 2020.

You are eligible for the Foreign Earned Income Exclusion (FEIE) on income of up to $105,900 a year before US income tax is payable but if you do not file the required return, you may not receive this exempt allowance. I understand that if you fail to file a return and claim the exclusion, there is a risk that the IRS may discover you are not filing returns and disallow the exclusion when you do file. Note that the exclusion only applies to income earned outside of the US, no matter where you reside.

I have been offered a part-time job at a hospital. I was informed I am not entitled to any end-of-service benefits once I finish the contract. Is that correct according to the law?  TK, Abu Dhabi

It is assumed that this is a private hospital and subject to UAE Labour Law or equivalent if in a healthcare free zone. UAE Labour Law makes no specific provision for part-time employment, so the standard rules apply to all employees and this means that a part-time employee is entitled to the same benefits as a full-time employee. An end-of-service gratuity is based on the final salary. While a part-time employee will be on a lower salary than a full-time one, they are still entitled to a commensurate benefit. This applies to both limited and unlimited salaries, so whoever has told TK that no gratuity is payable is incorrect.

For someone on a limited-term contract, they forfeit the gratuity if they resigned with fewer than five years of service but are still entitled to a payment if they complete a two-year contract, regardless of whether they are a full or part-time employee.

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