UAE redundancy laws: Know your rights as an employee
Facing job termination? Understand your entitlements and legal options in the UAE
Dubai: If you have just been told that you have been made redundant, what are your rights as per the UAE Labour Law? Gulf News spoke to legal experts to find out what you should know about your employment termination and what are the benefits that you are eligible to receive as per the UAE Labour Law – Federal Decree Law No. 33 of 2021 – and its executive regulations.
When can I be made redundant?
Joanna Matthews-Taylor, Partner, and Head of Employment at Baker McKenzie UAE, spoke about the circumstances in which a position can be made redundant.
“The UAE Labour Law recognises redundancy in very narrow circumstances. In this regard, the Labour Law states that the employment contract will terminate in the event of the bankruptcy or insolvency of the employer or any ‘exceptional reasons’, which prevent the continuation of a project subject to the issuance of a court ruling or statement by the authorities. However, the law does not provide detailed guidance or process in relation to restructuring and reducing headcount,” she said.
Dr Ibrahim Al Banna, CEO of Ibrahim Al Banna Advocates and Legal Consultants, also spoke about why understanding the legal framework surrounding redundancy is crucial for both employers and employees in the UAE.
“Redundancy in UAE law refers to the situation where a worker’s position becomes surplus to the requirements of the employer’s business operations, resulting in the termination of their employment. Employees who face redundancy may legally challenge such dismissals by filing an arbitrary dismissal claim if terminated without proper notice. This legal challenge can be initiated through the concerned labour department or the Court of First Instance, potentially leading to reinstatement, redundancy payment (one month's salary for each year of service), and full notice payment. UAE courts have acknowledged that cost-saving reasons for employee dismissals can be valid under Article 117 of the UAE Labour Law,” he said.
He also elaborated on previous resolutions that regulate redundancy dismissals.
“Employers must adhere to the legal principles governing redundancy. While they can legally dismiss workers made excess due to business needs, these dismissals must comply with the provisions set forth by UAE law. The Ministerial Resolution No. 279 of 2020, introduced during the COVID-19 pandemic, plays a significant role in regulating redundancy dismissals. This resolution mandates compensation equivalent to one month’s gross salary for each year of service, subject to certain conditions. It also requires employers to present a comprehensive plan detailing redundancy procedure, implementation schedules, and selection criteria for affected employees, ensuring transparency and fairness in the process,” he said.
The UAE Labour Law recognises redundancy in very narrow circumstances. In this regard, the Labour Law states that the employment contract will terminate in the event of the bankruptcy or insolvency of the employer or any ‘exceptional reasons’, which prevent the continuation of a project subject to the issuance of a court ruling or statement by the authorities. However, the law does not provide detailed guidance or process in relation to restructuring and reducing headcount.
Possible reasons for termination of work contract
Dr Al Banna also commented on how a company may end a work contract in case of redundancy, and how it is important for the reasons for termination of work contract to be clearly stated.
“While the UAE Labour Law may not explicitly define redundancy or provide a statutory procedure for it, however, under Article 117, a company may terminate for a valid reason by providing at least 30 calendar days’ notice. Regular termination typically would involve reasons such as misconduct, poor performance, or other valid grounds under Article 120 of the UAE Labour Law. Redundancy, on the other hand, is based on business needs, such as reorganisation, cost-saving measures, or economic changes, and may be considered a non-arbitrary reason for dismissal,” he said.
“When an employee’s position becomes redundant, the employer must provide the employee with written notice of the termination of their employment. The termination letter should specify the reason for such termination, which in this case would be redundancy. It should also include details about the notice period, which could help answer questions such as whether the employee will be paid in lieu of notice. Explicitly stating that the termination is due to redundancy in the termination letter is important for clarity and legal compliance. This helps avoid disputes regarding the nature of the dismissal and ensures that the process aligns with legal standards. Proper documentation and clear communication are essential in differentiating redundancy from regular termination and in safeguarding the rights of both the employer and the employee,” he added.
Employers must adhere to the legal principles governing redundancy. While they can legally dismiss workers made excess due to business needs, these dismissals must comply with the provisions set forth by UAE law.
Employee rights
According to both the experts who spoke with Gulf News, employees facing redundancy have specific rights:
Notice Period: A minimum of 30 days' notice must be provided.
End-of-Service gratuity: Employees with at least one year of service are entitled to this benefit.
Redundancy payment: In certain cases, employees may receive additional compensation.
Accrued benefits: Unused annual leave and other benefits must be paid.
Repatriation: If the employee plans to return to his or her home country, employers need to arrange for the return ticket.
ILOE Insurance: Eligible employees may claim benefits under the Involuntary Loss of Employment (ILOE) insurance scheme.
“UAE Labour Law ensures that employees made redundant are protected and compensated fairly. Employers must follow stringent guidelines to justify redundancies and ensure transparency and fairness throughout the process,” Dr Al Banna said.