‘Can my employer pay my gratuity in instalments?’

The UAE resident’s employer has breached multiple articles of the Labour Law after making him redundant

The gratuity should be paid at the time of visa cancellation and in situations where a company is not able to do this, there needs to be a written agreement signed by both parties that is legally bindShow more

My contract is due to end in October this year, but the company has already taken my car, asked me to stop work and find another job. However, I have had no success. The company has now taken employees' signatures for labour card cancellation and told us to buy an airplane ticket to go back home. The employer claims they will send us the gratuity payment in instalments. What should I do? HK

There are a number of points to be addressed here and it is understood that this is a mainland employer, so the UAE Labour Law applies in full.

HK states that his contract is due to end in October, so it is a fixed-term contract and conditions apply for ending employment before the end date of the contract.

Article 115 of the Labour Law states: "Should the employment contract be of a determined term, and the employer rescind the same… he shall be bound to compensate the worker for the damage incurred thereto, provided that the compensation amount does not exceed in any case the total wage due for the period of three months or for the remaining period of the contract, whichever is shorter, unless otherwise stipulated in the contract." This means that the employer needs to make an additional payment by way of compensation for ending the employment early.

If an employee receives benefits as part of their employment, these should be available until the date the employment ends and not be withdrawn sooner.

It is standard practice to ask employees to sign what are commonly known as cancellation papers when employment ends. This document states that all monies owed have been paid to the employee and is required for visa cancellation. Accordingly, no one should sign this if they have not been paid what is owed, as doing so weakens any case against the employer.

The gratuity should be paid at the time of visa cancellation and in situations where a company is unable to do this, there needs to be a written agreement signed by both parties that is legally binding on the employer.

I do not recommend accepting late payments, especially by way of a verbal agreement, when leaving the country as it would be very hard to follow up if the company does not pay what is owed.

The issue of a flight to a home country is covered in Article 131 of the Labour Law: "The employer shall, upon the termination of the contract, bear the expenses of repatriation of the worker to the location from which he is hired, or to any other location agreed upon between the parties. Should the worker, upon the termination of the contract, be employed by another employer, the latter shall be liable for the repatriation expenses of the worker upon the end of his service."

As the employer terminated the contract and HK will leave the UAE, the cost of a flight is the responsibility of the employer.

It appears that this employer has breached multiple articles of the UAE Labour Law and HK has strong grounds to bring a case against them. He can seek further advice from the Ministry of Human Resources and Emiratisation via their call centre (800 60) or through its online chat function at www.mohre.gov.ae.

We have an office in Sharjah Free Zone and provide software implementation services to customers in Saudi Arabia. Can you tell me what the VAT is in this case and how we calculate it? SI, Sharjah

VAT in accounting is a specialist topic and I asked Lisa Martin, a qualified accountant and owner of The Counting House FZE, for her opinion on this situation.

She said: “It is not clear from the question whether the company is registered for VAT in the UAE and Saudi Arabia or just in the UAE. The special VAT treatment for intra-GCC VAT supplies has not yet been implemented as not all GCC countries have introduced VAT. Until that time, supplies to other GCC countries are treated in exactly the same way as supplies to any country outside the GCC. In the meantime, the company needs to follow the rules of export of goods and services set out in the Decree Law and Executive regulations. In order to reclaim Saudi Arabian input VAT, a business needs to be registered for VAT in Saudi Arabia and be submitting KSA VAT returns. You cannot net off Saudi Arabian input VAT against UAE output VAT as part of your UAE VAT returns.”

I recommend that people with such queries take professional advice from an accountant as making mistakes can lead to substantial financial penalties.

Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with more than 25 years’ experience. Contact her at [e-mail]. Follow her on Twitter at @FinancialUAE

The advice provided in our columns does not constitute legal advice and is provided for information only