The UAE has recently updated its employment legislation by forcing the new Federal Decree-Law no. 33 which highlights changes in major employment aspects including end of service benefits, final settlement, employment contract, and much more.
The new UAE labor law has been active since 2nd February 2022 with full effect. The objectives of this new law have been designed to create a more active and dynamic labor market for the present decade by increasing the number of talented and knowledgeable employees in the labor market. A sharp focus has been laid on the rights of employees in the private sector of UAE this time.
Several changes that have been made in the labor law of UAE aim to discuss the concerns of the employees and the employers in a frequently developing system of recruitment and employment in the UAE. Furthermore, this new labor law is intended to develop adults in the UAE that are more hardworking and sensible along with making the recruitment process more flexible in the labor market. The new labor law discusses almost all aspects of employment and the labor market, however, this article will only focus on the aspect of new end of service benefits in UAE and final settlement formalities.
What is End of Service Benefits?
One of the most important rights of the employee towards his employer is the benefits at the end of his/her service. These benefits need to be paid by the employer to the employee at the end of the contract or service whether the employee is national or foreign. These due benefits need to be paid in accordance with the UAE labor law in the UAE.
What is Final Settlement?
Final settlement is the procedure by which calculation of all the payable dues is done for an employee who is retiring, resigning, or is being fired by the company. It includes the calculation of all payable dues such as remaining salary, extra pay, tax deduction, or any other type of deduction. It can also include end-of-service benefits in UAE calculation. The calculation is not only limited to payables but also includes deductibles. Anything that needs to be paid or needs to be deducted from the pay is included in the final settlement.
Final Settlement & End of Service Benefits for Full-Time Employees
A major portion of employees in any company belongs to the full-time category. The new labor law has laid great significance on the benefits that should be given to the full-time employees at the end of the service. Regarding these benefits, the following points are important to note;
- First of all, the new labor law requires the employers to provide the national full-time employees of the company with benefits at the end of their service. If it includes their pension then it should be according to the legislation in the UAE that regulates pensions of the employees while maintaining social security in the UAE critically.
- The new labor law requires the employers to provide benefits to the foreign employees that have worked full time for at least a year in the company. If the foreign employee has worked for several years, the benefits should include the wages of 21 days for every year up to the first five years. After the first five years, every succeeding year requires wages of 30 days to be given as benefits to the foreign employee at the of service.
- If a foreign employee has only worked regularly for a year, then the employer needs to provide the employee with benefits for different parts of the year proportional to one whole year.
- While calculating these benefits, the employer needs to exclude days in which the employee has been absent from work. These days are already unpaid.
- The employer should calculate the benefits of the employee in accordance with the very last entitled wage without ignoring the retirement benefits and pension regulation legislations. The calculation should be with respect to different payment schedules such as per day payment, weekly payment, monthly payment, etc.
- The new labor law requires the employer to provide foreign employees with these benefits, however, these benefits should not exceed the amount that the foreign employee earned within two years of service.
- From all the benefits that need to be given to an employee, the employer can deduct any payable amount on part of the employee if it is under any judgment or law. This process should also be done in accordance with the legislation.
- All the rules and regulations about benefits given at the end of service have been listed in the new labor law, however, the Ministry has a right to introduce any new scheme at any time which would be in accordance with the present labor law.
Do Employees Working in Other Work Patterns Get End of Service Benefits UAE?
Yes, it is mandatory for employers to provide employees working in different work patterns, other than full time, with benefits at the end of service. These benefits, as per Law no. 33, can be anything that is preset in the employment contract and is accepted by both parties.
The purpose of these benefits should be the enhancement of the attractiveness and efficiency of the labor market of UAE in the eyes of both national and foreign workers.
Is There Any Deadline for the Employer to Pay Employee’s Entitlements?
According to the Federal Decree-Law no. 33, it is mandatory for the employer to provide the employee with all payable dues including benefits, final settlements, etc, within 14 days after their contract has ended. The new labor law gives a two-week deadline for all these formalities. The payable dues can include remaining wages, benefits, and other entitlements that shall be paid to the employee fairly.
What If the Employer Refuses to Pay Benefits?
In case of any dispute between the employee and the employer, the Ministry is responsible to address the issue and declare its decision. If the case is not settled by the Ministry, it is forwarded to the competent court where the case is handled under the UAE law.
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