This page contains information on provisions and calculations for end-of-service benefits under limited and unlimited contracts for foreign workers in the United Arab Emirates. In the event of termination of an employment contract of indefinite duration by the employer, the employee is entitled to an indemnity of 21 days` basic salary for each year of employment during the first five years. From the sixth year of employment, he receives 30 days of basic salary. Severance pay is limited to a maximum of 2 annual base salaries. If the employee has been working for the employer for less than a year, he or she is not entitled to severance pay. If the employee owes money to the employer, the employer can deduct the amount of the employee`s tip. If the employee has set the start and end dates of the contract in his profile, it is said that the employee will receive a payment for the end of the service based on the calculations of the limited contract. If the employee has not set the start and end dates of the contract in their profile, the system recognizes them as an employee with an open-ended contract. The employee is entitled to a tip for the portion of a year served, provided that he or she completes one year of uninterrupted service. The remuneration at the end of service is calculated on the basis of the last salary to which the employee was entitled, namely the basic salary. Therefore, no allowance such as housing, subsidies, ancillary costs, furniture, etc. is taken into account.

In case of termination of a permanent contract by the employer, the calculation is as follows: If an employee has served for more than 1 year but less than 5 years, he is entitled to a full tip based on 21 daily wages for each year of work. Tipping means any payment in excess of the nominal monetary value in the form of cash, travel, entertainment, gifts, meals, accommodation, loans, subscriptions, advances, cash deposits, services, employment or contracts of any kind. When calculating the transfer allowance, a distinction must be made between a fixed-term contract and an employment contract of indefinite duration. While employment contracts of indefinite duration are concluded for an indefinite period (with a notice period of at least 1 month to a maximum of 3 months), fixed-term employment contracts can be concluded for a maximum period of 2 years. Many employers in the Middle East are required by law to pay an EOSG, especially to foreign workers at the end of their contract, whether they are of retirement age or not. If the employee has already been dismissed, the tip can be added to the “Tip at end of service” page. To add it, the employee must have set the termination date in their profile. In this case, after the expiry of the fixed-term employment contract, the employee receives a severance pay of AED 13,808.22 at the end of service for a period of employment of 2 years. However, if the employee terminates his fixed-term employment contract before the expiry of the fixed-term employment contract, he generally does not receive any severance pay. The United Arab Emirates has included a legally guaranteed severance package (end-of-service bonus) in its labour law.

This right to severance pay is subject to the Labour Act (Federal Act of the United Arab Emirates No. 8 of 1980) and must be paid by the employer to the employee upon termination of the employment relationship. The amount of the end-of-service tip depends on the type of employment relationship (cdD or cdi), the circumstances in which the employment relationship was terminated (termination by the employer or employee), the duration of the employment relationship and the respective “basic remuneration”. An employee who has spent one year or more on uninterrupted duty is entitled to remuneration at the end of his or her period of service. Days of absence from work without pay are not included in the calculation of the period of service, and remuneration is calculated as follows: remuneration at the end of service is a benefit payment for employees when they withdraw from their work or when their employment contract ends. This payment is practiced in some countries such as the United Arab Emirates, Saudi Arabia, Qatar and so on. If an employee has served less than 1 year, he or she is not entitled to a tip. Termination before the end of the agreed term of the fixed-term employment relationship generally constitutes a breach of contract. Therefore, there is no need to pay an end-of-service tip. However, compensation may be claimed for breach of contract (early termination).

This compensation may be agreed individually between the parties at the time of conclusion of the contract. The amount may not exceed 3 months` salary with dismissal by the employer and with dismissal by the employee 1.5 months` salary. What employment contract is there? Fixed-term or indefinite employment contract The tax base for the end-of-service tip is the employee`s salary, the basic salary. This is a basic salary that is indicated as a “basic salary” in the official standard employment contract of the respective authorities (free zones) or the basic salary that the employee received last. If an employee terminates his employment contract of indefinite duration himself, he is entitled to severance pay even if the employment contract lasted more than 1 year. In any case, the total salary may not exceed the salary of two years. If the employee resigns voluntarily before the end of a year, he is not entitled to a tip. End-of-service advice (EOSG) is traditionally discovered and is simply an actuarial calculation on the employer`s balance sheet. The Dubai International Finance Centre (DIFC) EOSG, for example, is a defined benefit calculation based on a base salary of 21 days for each of the first five years of employment and increases to 30 days of base salary for each full year of service over five years; subject to an overall ceiling of two gross annual salaries. The system calculates tips at the end of the service either by resignation or termination.

Let`s calculate the tip for the end of service of an employee who has a limited contract. Retirement provision in the Middle East is coming of age. DIFC has taken the plunge and other financial centers in the UAE and around the Gulf are expected to follow quickly, including on land. Employers outside of DIFC should look at what happens on the highway and be prepared. .