Unjust or inequitable termination represents a prevalent form of injustice that can be inflicted upon an employee, occurring when an employer terminates an employee or pressures them to resign without valid grounds.
By Article 113 of the UAE, the termination of an employment contract must occur through mutual consent between both parties and under one of the following three conditions:
1. If both parties agree to terminate the contract, provided that the worker’s consent is in written form.
2. If the specified term of the contract expires, unless the contract is explicitly or implicitly extended according to the provisions outlined here.
3. If a party involved in an employment contract with an indefinite term seeks termination, provided they adhere to the provisions concerning notification and acceptable grounds for non-arbitrary contract termination, as outlined here.
When an employee believes they have faced an unfair dismissal or that their manager has violated the terms of Article 120, they have the right to file a complaint directly with the Ministry of Human Resources and Emiratisation (MOHRE). MOHRE is responsible for investigating such complaints and may also facilitate negotiations between the employee and the employer to reach a compromise.
If MOHRE fails to resolve the matter amicably, it will escalate the dispute to the appropriate court. If, after a comprehensive evaluation of all facts and relevant legislation, the court determines that the employee was dismissed arbitrarily, the employer will be mandated to provide the employee with a suitable compensation amount.
The compensation will be determined based on factors such as the nature of the work, the duration of the employee’s service, the manner of dismissal, and its impact on the employee. The compensation cannot exceed three times the employee’s basic salary, inclusive of all bonuses, including the end-of-service bonus if it has not already been disbursed.
Financial Entitlements Following Resignation in the UAE
As per labor regulations, an employee in the UAE is entitled to various financial benefits upon resignation. Let’s delve into each of these entitlements:
1. End-of-Service Benefit or Bonus
When an employee resigns voluntarily and without any external pressure within the first year of employment, they forfeit their right to an End of Service Benefit, as per UAE Labor Law.
Employees who have completed more than one year with a company or establishment are eligible for an end-of-service benefit calculated in proportion to their length of employment. This benefit is based on the employee’s basic salary, excluding allowances for items like housing, transportation, food, and travel.
If there are any outstanding amounts owed by the employee to the employer, these can be deducted from the end-of-service benefit.
2. Calculation of the End-of-Service Benefit or Bonus
The calculation of the end-of-service benefit depends on the type of employment contract between the worker and the employer. In the UAE, there are two primary types of contracts: fixed-term contracts and indefinite contracts.
Fixed-Term or Limited Contract
For employees with more than one year of tenure, the end-of-service benefit is determined as follows:
The minimum calculation period for the end-of-service benefit is one year.
Employees with over 1 year but less than 5 years of service will receive 21 days’ worth of end-of-service benefits for each year of employment.
Employees with over 5 years of service will receive 30 days’ worth of End of Service Benefit for each year of employment after the initial five years.
Indefinite/ Unlimited Contract
The calculation of the End of Service Benefit under an indefinite/unlimited contract depends on the party terminating the contract.
If the employer terminates the contract, the End of Service Benefit is computed as follows:
The minimum calculation period for the End of Service Benefit is one year.
You may be interested in Unjust Dismissal in the United Arab Emirates: Employee Compensation for Arbitrary Termination
For employees with over 1 year but less than 5 years of service, the End of Service Benefit is 21 days’ worth for each year of employment.
For employees with over 5 years of service, the End of Service Benefit is 30 days’ worth for each year of employment after the initial five years, provided that the total benefit does not exceed two years’ salary.
In case of contract termination by the employee, the remuneration is determined as follows:
– The minimum period for commencing the calculation of the End of Service Benefit is one year.
– If the employee’s tenure with the employer is over 1 year but less than 3 years, they will be entitled to one-third of their 21-day basic salary for each year of employment as part of the End of Service Benefit.
– If the employee has worked with the employer for a period ranging from 3 to 5 years, they will receive two-thirds of their 21-day basic salary for each year of employment as part of the End of Service Benefit.
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– Employees with more than 5 years of service with the employer, will receive 21 days of salary for each year of employment beyond the initial five years as part of the End of Service Benefit.
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