Salary cuts imposed due to the Covid-19 outbreak will not affect end of service gratuities for workers, officials confirmed.
The Ministry of Human Resources and Emiratisation said employees who lost pay and were subsequently dismissed during the pandemic would have financial settlements based on their contracts prior to any reduction.
Employees who have completed at least one year of service in an organisation are entitled to an end-of-service gratuity, according to UAE labour law.
The amount is calculated based on the number of days worked while the days of absence from work without pay will not be included.
Employees should be compensated with 21 days of pay for each of their first five years of service and 30 days for every additional year. The maximum gratuity should not exceed two full years' pay.
The ministry introduced new legislation in March setting out the rights of employers and employees during the pandemic.
The authority said the measures - including temporary and permanent reductions in salaries and issuing unpaid leave - must be agreed upon by employers and non-Emirati employees alike.
In the case of a permanent salary reduction, the employer must obtain the ministry's approval.
“If employers are facing difficult times, then it is important to consult with employees and ensure that they are on board and fully understand the rationale behind why they are looking to take such measures,” said Shiraz Sethi, regional managing partner and co-head of employment at law firm DWF Middle East, at the time.
The Ministry has said end of service gratuity will be calculated based on the employee’s last pay before the salary reduction.
The confirmation came after the authority responded to an inquiry sent by an employee who was laid off after one month after a 30 per cent pay cut was implemented.
In April, a senior judge said that UAE companies must continue to pay staff their housing allowance if they are made redundant.
Abdulla Al Nuaimi, head of the Abu Dhabi Labour Court, reiterated that federal legislation brought in late last month guaranteed workers their rent would be covered if they lost their jobs.
The ruling is designed to prevent tenants facing an uncertain financial future being evicted by their landlords.