In the United Arab Emirates, end-of-service benefits (EOSB) refer to a particular set of benefits or a package conferred to the employee upon end of their services. Federal Decree No. 33/2021 regulates all labor matters in the UAE, hence employers and employees are compelled to comply with the employment regulation and standards.
The Scope of End-of-Service Benefits in UAE
When an employee’s employment contract ends, the company is required by UAE labor law to pay EOSB. The main terms cover gratuity, any outstanding earnings, encashment of unused vacation time, and reimbursements for overtime work. As per Article 51 of the UAE Labor Law:
The full-time foreign worker, who completed a year or more in continuous service, shall be entitled to end-of-service benefits at the end of his service, calculated according to the basic wage as per the following:
- A wage of (21) twenty-one days for each year of the first five years of service;
- A wage of (30) thirty days for each year exceeding such period.
The foreign worker shall be entitled to a benefit for parts of the year in proportion to the period spent at work, provided that he completed one year of continuous service. Further, the unpaid days of absence from work shall not be included in the calculation of the service term.
Employees on Full-Time Contracts: EOSB
For a specific employer, an employee in the UAE who is under contract works full-time. For such a worker in the private sector, the typical workday would be 8 hours long subject to distinction whether the employee is foreign or local, the job agreement for the purpose of EOSB may be altered.
EOSB for International Personnel
The employee’s most recent basic salary will be used to determine the ESG. Accordingly, expenses for transportation, housing, utilities, and other items won’t be taken into account. If the employee owes the employer any money, it might be taken out of their gratuity.
- All ESG entitlements must be paid out within two weeks of the contract’s termination, according to UAE labor law.
- EOSB for Personnel Working in Other Forms of Employment Workers employed under part-time contracts or any other work arrangement will have their end-of-service benefits calculated in accordance with the methods described herein.
Additional Compensation for Unfair Terminations of Employment: –
An employee who has been unfairly terminated may be eligible for additional end-of-service benefits under UAE labor law. The employees are safeguarded by this rule from wrongful terminations. Any employee who is fired unfairly has the option to seek redress through the legal system.
- Up to three months’ salary may be offered as compensation to eligible workers who have been unfairly fired. However, they must fulfill the necessary requirements.
- It is a financial benefit that an employer gives to a worker after the employment relationship has ended.
- It has a three-year maximum validity.
- The right to a gratuity payment follows the termination of a limited contract.
Seek the Expert Services of Top Employment Consultants in UAE
Essentially, it is advisable for employers to stay compliant to the UAE Labor Law and confer End of Service Benefits to employees upon end of service. Thus, employers are commended to seek the expert services of top employment consultants in the UAE. Therefore, contact us today and we shall be glad to assist you!
With a vast experience of 10 years, Jean Rodas is a specialist in managing all aspects of Payroll and HR. Within Payroll, she has comprehensive knowledge in areas such as computation of final settlement, payslips, WPS registration, salary transfers, leave trackers, and end of service benefits among others, which she has successfully carried out for clients from diverse industries.