There have been a number of modifications made to the laws that govern relationships between employers and employees in the private sector as a result of the UAE’s implementation of the new labor law, Federal Decree-Law No. 33 of 2021, which took effect in February of this year. How will the new Labour Law affect an employee’s gratuity once it becomes operative?
What is the biggest change in gratuity calculation with the new law?
One of the most important things for employees to remember is that the new law will convert all contracts to a limited form with a three-year restriction, as opposed to the prior law’s two separate systems of computing gratuity for limited and unlimited contracts. Companies have until February 2, 2023, to make these modifications to the employment contracts of their staff members.
For limited and unlimited contracts, the earlier law used a distinct gratuity calculation method. The new Labour Law limits all contracts, so gratuities are based on 21 days of basic pay for each year of service completed, up to a maximum of five years. Gratuity is calculated on 30 days for each additional year after five years of service. As a result, gratuity is computed on 21 days for the first five years and 30 days for each additional year of service.
Therefore, this computation differs from the old rule, which divided gratuity for unlimited contracts into three categories: Years 1 to 3, Years 4 to 5, and Years 6 and Beyond.
Additionally, the calculation under the previous Labour Law differed depending on whether the individual resigned from their position or was fired.
The new law makes the calculation of gratuities more understandable to employees. It makes it simple for workers to compute it and guarantees that their employers are paying them legally.
If one resigns when one still has the old, unlimited contract, how will the gratuity be calculated?
What happens to the gratuity of those who would still be employed under an unlimited contract under the previous Labour Law but quit after the new law took effect?
The new law’s articles will be applied to any resignation or termination that occurs after it takes effect or that already occurred.
The old law’s provisions will be applied to any resignation or termination that occurred prior to the new law’s implementation but the case for gratuity that was filed following the new law’s implementation.
New gratuity-related legislation for flexible work patterns
The new Labour Law’s inclusion of gratuity estimates for various work patterns is another significant shift.
To promote work-life balance, the new Labour Law has provided a variety of employment arrangements, including temporary, part-time, and flexible work contracts. You can therefore select the kind of employment agreement that best suits you, and you will be eligible to collect gratuity at the conclusion of the service.
The gratuity will be determined in accordance with their employment contracts and at the same rate as a full-time employee. A full-time worker is defined as someone who works for 48 hours a week, eight hours per day. A worker who is not employed full-time will also have his or her gratuity determined based on the number of hours they put in according to this criteria.
The end-of-service benefits given to employees who work in part-time or job-sharing work arrangements are determined by Article 52 of the UAE Labour Law and Article 30 (1) of the law’s implementing regulations as follows:
The proportion on which the end-of-service benefit should be calculated is equal to the number of working hours specified in the employment contract per year [for the part-time employee] divided by the number of working hours specified in the full-time contract per year multiplied by 100. The value of the end-of-service benefit owed for the full-time employment contract should then be multiplied by this percentage.
Also Read: UAE Labour Law 2022: A complete guide
