Employees are eligible for Gratuity at the end of completing a full years of service. This gratuity is calculated as 21 days of salary. Salary in this case excludes any allowances for housing or transport etc and considers only the basic salary of the employee.

Both the DIFC Law and the UAE Labour Law No. 8 of 1980 take an almost identical position on the issue of severance pay. The DIFC laws also calculate the gratuity as 21 days of basic salary. The basic salary shall not include any housing or other allowances. The only difference between the Laws is the situation where an Employee resigns voluntarily which results in a significant reduction in entitlements for the Employee under the UAE Labour Law whether he has a Limited or an Unlimited Contract.

Under the DIFC Laws, an employee does not have to pay gratuity if an employer has been terminated under Clause 59 A of the law which reads “An employer or an employee may terminate an employee’s employment for cause in circumstances where the conduct of one party warrants termination and where a reasonable employer or employee would have terminated the employment.”

Similarly, under the U.A.E laws, the employer does not have to pay gratuity to an employee whose employment has been terminated for reasons specified in Article 120 of the Labor law of UAE Federal Labour Law no. 8 of 1980 which include the following:

  1. If the worker adopts a false identity or nationality or submits forged certificate or documents;
  2. If the worker is engaged on probation and is dismissed during the probationary or on its expiry;
  3. If the worker makes a mistake resulting in substantial material loss for the employer, on condition that the latter notifies the Ministry of Labour of the incident within 48 hours of his becoming aware of its occurrence;
  4. If the worker disobeys instructions respecting industrial safety or the safety of the workplace, on condition that such instructions are in writing and have been posted up at a conspicuous place and, in the case of an illiterate worker, that he has been acquainted with them orally;
  5. If the worker does not perform his basic duties under the contract of employment and persists in violating them despite the fact that he has been the subject of a written investigation for this reason and that he has been warned that he will be dismissed if such behavior continues;
  6. If the worker reveals any secret of the establishment in which he is employed;
  7. If the worker is finally sentenced by a competent court for an offence involving honour, honesty or public morals;
  8. If the worker is found in a state of drunkenness or under the influence of a drug during working hours;
  9. If, while working, the worker assaults the employer, the responsible manager or any of his work mates;
  10. If the worker absents from his work without a valid reason for more than 20 non-consecutive days, or more than seven consecutive days, in any one year.

Article by Hassan Elhais