Ask Gulf News: Are employees in the UAE entitled to annual bonuses after termination?

Question: I worked for a company for four years. My employment was terminated one month ago. I requested payment of my annual incentive bonus for the previous year, which the employer used to pay at the end of each year. However, the employer refused, claiming that the company did not make enough profit. Am I entitled to this annual incentive bonus? Please advise.

Answer: If an employer pays a bonus to employees at the end of each year without regularity in either its payment or amount, such a bonus is not considered part of the wage. Accordingly, the employer is not legally obliged to pay it.

This position is supported by the judgment of the Cassation Labour Court No. 128/2023, dated August 29, 2023, which states:

“The annual incentive that an employer grants to an employee to encourage greater effort for the employer’s benefit is considered obligatory if it is stipulated in the employment contract, included in the establishment’s internal regulations, or established by custom or practice between the parties in such a manner that the employee receives it on a permanent and stable basis for a sufficient period of time, allowing the employee to regard it as part of their wages rather than a donation from the employer. However, if the bonus (incentive) is subject to the employer’s discretion or contingent upon the employer’s will, then the employer is not obliged to provide it. In such a case, it is deemed a voluntary grant, loses its obligatory nature, and is therefore not classified as wages or included in wage calculations or subject to their provisions.”

The burden of proof rests with the employee to establish entitlement to any amounts exceeding the wage stipulated in the employment contract, whether such entitlement arises from an agreement, company policy, custom, or established practice, as outlined above.