I have resigned from a company where I was employed on a limited contract. I only worked for one year and five months, and my contract was for two years. I know I will have to pay a penalty of 45 days. I've read in your column that the 45-day salary payment would be based on my basic salary, but the company also wants to include my allowances. KH, Dubai
It disappoints me that companies want to have things all their own way. End-of-service benefits are calculated using a basic salary so companies will often try to keep that low. This basic salary must then also be used when calculating penalties payable, such as for breaking a fixed-term contract. The latest version of the UAE Labour Law, as available from the Ministry of Human Resources and Emiratisation, formerly the Ministry of Labour, states in Article 116: “… 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.” This is the clarified wording as amended by Federal Law No 12 dated October 12, 1986. The previous wording referred to “pay” but the revised wording makes it clear that the actual salary, the wages payable, is to be used for the purpose of the calculation of the penalty, not the full package of benefits. I presume that KH’s employer is using the old wording.
Keren Bobker is an independent financial adviser with Holborn Assets in Dubai, with over 20 years’ experience. Contact her at keren@holbornassets.com. Follow her on Twitter at @FinancialUAE.
The advice provided in our columns does not constitute legal advice and is provided for information only.
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