Ask the Law
Ask the Law Image Credit: Ask the Law

Question: I have been working in a private company for five years on a commission basis and without a salary which I get paid every two-three months according to the deals I clinch. When I go on leave, there is no charge. A month ago, I submitted my resignation and am currently serving the notice period. How do I calculate my end-of-service benefits and do I have the right to claim annual leave allowance?

Answer: Gratuity, as per UAE Labour Law, is payable to an employee who has completed one or more years of continuous service. He shall be entitled to get end-of-service benefits based on the type of contract (limited or unlimited), the period of service and nature of cessation of the contract (termination by the employer or resignation by the employee).

The days of absence from work without pay shall not be included in the calculation of the period of service. Gratuity is calculated on the basic salary in the last drawn wages. Other allowances such as housing allowance, transport allowance, travel allowance, overtime pay, representation allowance, cashier’s allowances, children’s education allowance, allowances for recreational and social facilities, and any other bonuses or allowances will not be considered to calculate gratuity. In any case, the entire gratuity does not exceed two years’ total pay (Article 132 and 134 of UAE Labour Law).

An employee shall be entitled to gratuity for any fraction of a year he served, provided that he has completed one year of continuous service. (Article 133 of UAE Labour Law).

An employee is not entitled to end-of-service benefits where he has been terminated due to misconduct as per the provisions of UAE Labour Law (Article 120).

The gratuity computation may vary depending upon the type of contract, the period of service, nature of cessation of the contract etc. (Articles 137 & 138). So if a worker under an indefinite term contract abandons his work at his own initiative after a continuous service of not less than one year and not more than three years, he shall be entitled to one-third of the severance pay provided for in the preceding article. Such a worker shall be entitled to two thirds of the said severance pay if his continuous service exceeds three years up to five years, and to the full severance pay if it exceeds five years. If a worker under a definite term contract abandons his employment at his own initiative before the expiry of his contract period, he shall not be entitled to severance pay unless his continuous period of service exceeds five years.

The calculation follows the formula under:

1. Basic salary ÷ 30 = Daily wage.

2. Daily wage x 21 = 1 year gratuity figure (Or x30 if applicable.)

3. 1 year gratuity figure x years of service = Total gratuity owed.

So if the basic salary is mentioned in the contract or it is increased or reduced by any other written form between the two parties of the contract, then the above shall be considered for the calculation. If there is no mention of the basic salary, then each deal can be calculated as a piecemeal so that “the daily wage of workers employed on piecemeal basis shall be calculated as an equivalent to the average wage received for actual days of work during the six months preceding the termination of his service” as per Article 57 of the UAE Labour Law and the same above formula shall be followed for calculation.

As for the accrued annual leave days, the employee’s right to get this allowances is for the last two years if the worker is dismissed or leaves his job after the period of notice prescribed by law. Such payment shall be calculated on the basis of the worker’s wage as on the date when the leave became due. It is emphasised by the Court of Dubai that, “The text in Articles 79 and 78 of the law on regulating labour relations indicates that the legislator prohibits the employment of a worker during his annual leave more than once during two consecutive years. What is required of him is that his right to a leave allowance in the event of termination of the contract is not to exceed the annual leave period that he did not obtain for the last two years.”