Ask the law: How is your gratuity calculated
Days of absence from work without pay shall not be included in period of service
Question: I’m an owner of a company and currently have a case pending against me filed by an employee claiming overdue salary payments for the past six months plus end of service payments. I have paid him all his salaries in cash but have no proof or anything in writing. How do I prove this in a court of law?
Answer: The labour law obliges the employer to prove before court that he has paid salaries to the employee. In this case the employer must ask the labour court to ask the employee to swear on oath if he received his salary or not. If the employee swears that he hasn’t received his salary the court will rule in his favour.
Question: Is commission included in end of service benefits and how is it calculated?
Answer: As per article 132 of the UAE Labour Law Federal Law No.8 of 1980, a worker “having spent one year or more in continuous service shall be entitled to end of service gratuity upon the termination of his service. The days of absence from work without pay shall not be included in the calculation of the period of service, and the gratuity shall be calculated as follows:
- Wage of 21 days for each of the first five years of service.
- Wage of 30 days for every additional year provided the aggregate amount of severance doesn’t exceed two years’ remuneration.
End of service should be calculated according to Article 134 as amended by Federal Law No.12 1986, which states; ‘Without prejudice to provisions of certain laws on pensions and retirement benefits granted by some companies, end of service gratuity shall be calculated on the basis of the last wage due to monthly, weekly and daily-paid workers, and on the basis of the average daily wage set forth in Article 57 for workers getting paid by piece. The wage used as a basis for calculating end of service gratuity won’t include payments made to the worker in reimbursements, allowances or bonuses. Based on that any employee is entitled to end of service gratuity in the event of termination, provided they qualify as per length of service and weren’t summarily dismissed.
Pay for the purposes of end of service gratuity is generally accepted as an employee’s ‘basic pay’ excluding allowances provided the contract differentiates between the two.
A Court of Cassation ruling in 2015 stated that gratuity should be basic salary plus commissions and bonuses that are fixed or guaranteed. This could raise the obligation of employers. To limit that liability it is advisable to put performance indicators that if not met means bonuses aren’t payable.