‘Can my employer reduce my gratuity if I break my contract early?’

If an employee is on an unlimited or fixed-term contract and quits before 5 years of service, their end-of-service dues can be reduced or forfeited

If an employee is on an unlimited contract and they resign with less than five years of service, the gratuity amount payable will reduce. Rich-Joseph Facun / The National

I have been working for a construction company since 2009. My two-year employment contract finishes in another year, but I want to resign and go home. Will my company reduce my gratuity? BA, Dubai

An end-of-service gratuity can be reduced for two main reasons. If someone is on an unlimited contract and they resign with less than five years of service, the amount payable will be lower. Also, if an employee has a fixed-term contract of employment and resigns with fewer than five years of service, the gratuity is forfeited as per Article 138 of the UAE Labour Law, which states: “Should the worker bound by an employment contract with determined term leave his work by his own choice prior to the expiry of the contract, he shall not be entitled to an end-of-service gratuity unless the duration of the service period exceeds five years.”

BA states that he has been with the same employer since 2009, so he is entitled to receive the gratuity payment in full. This will be calculated as per Article 132: “The wage of 21 days for each of the first five years of service … and the wage of 30 days for every additional year.” This is calculated on the basic salary only.

In addition, BA needs to be aware that if he resigns part way through a fixed-term contract, even after more than 10 years of service, the employer can apply a penalty for breaking the contract terms. According to Article 116: “Should the contract be rescinded by the worker … the worker shall be bound to compensate the employer for the loss incurred thereto by reason of the rescission of the contract, provided that the amount of compensation does not exceed the wage of half a month for the period of three months, or for the remaining period of the contract, whichever is shorter, unless otherwise stipulated in the contract.”

My company pays only 80 per cent of an employee's salary when they go on leave. Also, for our annual flight ticket, we are paid 80 per cent if we opt for cash. Our company has a five-day working week, with Friday and Saturday being the weekend. When an employee goes on leave on either Thursday or Sunday, their leave deduction includes the weekend. Is this right? And what is the policy for payment for leave encashment if a company did not allow an employee to use all their annual leave? MJ, Abu Dhabi

Salaries should be paid in full during leave periods, especially the basic salary and housing allowance. In some cases, travel allowances are not payable, but this should be clarified in the contract of employment.

For a flight ticket, it depends on employment terms whether it can be paid as cash or not. If a contract states that an annual ticket is payable, a cash alternative is only an entitlement if the contract or company handbook states this, or the employer agrees. If documentation states that payment in lieu of the annual flight ticket is at a rate of 80 per cent, the reduced payment would be correct. If, however, the contract simply states that a cash payment is available, it should be for the full cost of a flight.

Annual leave is often calculated on a “calendar basis”, so if the period of leave includes a weekend, those days are also counted. If a contract refers to “working days” rather than “calendar days”, Fridays and Saturdays should not be counted. This should also be clarified in a contract of employment or company handbook.

By law, all employees are entitled to annual leave and while an employer can specify when this is taken, they should not prevent anyone from taking the leave they are entitled to.

This is stated in Article 78 of the UAE Labour Law: "Should work circumstances require that the worker work during his total annual leave or a part thereof, and should the leave during which the worker worked is not carried forward to the next year, the employer must pay the worker the wage thereof, in addition to a leave allowance for the days of work, equal to his basic wage."

If an employer refuses to permit an employee to take their leave, then they have grounds to register a complaint with the Ministry of Human Resources and Emiratisation, and the same applies if salaries are being unfairly reduced. The helpline number is 800 60 and there is an online chat function on the website www.mohre.gov.ae.

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