Employment laws in the United Arab Emirates, also known as UAE employment law, is a complex and comprehensive set of regulations that governs various aspects of employment, including employee rights, employer obligations, and labor standards. The UAE’s employment law is primarily governed by the Federal Decree Law no. 33 of 2021 Regarding the Regulation of Employment Relationships and its amendments, the Civil Transactions Law, and the Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Employment Relations.
Severance Pay Entitlement
As per the UAE Employment Law, an employee who has completed at least one year of continuous service is entitled to severance pay at the end of their service with an employer. The severance pay is calculated on the employee’s basic salary and is paid according to the following schedule:
- 21 days of severance pay for the first five years of service
- 30 days of severance pay for each year exceeding the first five years
This means that for every year beyond the first five years of service, an employee can expect to receive an additional 9 days of severance pay.
Inclusion of Severance Pay in Employment Contract
While the UAE Employment Law does not explicitly require employers to include severance pay in the employment contract, you may still request your prospective employer to include the same. However, if your prospective employer does not agree to include details about severance pay in your employment offer letter or employment contract, you will still be entitled to receive severance pay when your employment ends, as long as you have completed at least one year of service with the company.
Legal Binding of Severance Pay Clause
If you include a severance pay clause in your employment contract, it will be legally binding as per Article 51(2) of the UAE Employment Law, which states:
“The full-time foreign employee, who completed a year or more in continuous service, shall be entitled to end-of-service benefits at the end of his service, calculated according to the basic salary as per the following:
a. A salary of (21) twenty-one days for each year of the first five years of service;
b. A salary of (30) thirty days for each year exceeding such period.”
This article outlines the UAE employment laws and severance pay entitlement, as well as the legal implications of including a severance pay clause in an employment contract.
Applicable Laws
The following laws are applicable to your situation:
- Federal Decree Law no. 33 of 2021 Regarding the Regulation of Employment Relationships and its amendments
- Cabinet Resolution No. 33 of 2021 Regarding the Regulation of Employment Relations
- Federal Law No. (5) of 1985 On the Civil Transactions Law of the United Arab Emirates
Requesting a Severance Pay Clause
If you’re considering including a ‘golden handshake’ clause in your employment contract, you can discuss this with your prospective employer and mutually agree to add it to the contract. While the UAE Employment Law does not restrict employers from offering more favourable terms, it does not guarantee that employers will agree to include a severance pay clause in your employment contract.
Benefits of Including a Severance Pay Clause
Including a severance pay clause in your employment contract can provide you with additional financial benefits and job security. However, it is essential to ensure that you understand the terms and conditions of the contract and that the clause is legally binding.
Conclusion
In conclusion, the UAE employment laws provide employees with entitlement to severance pay, which is calculated according to the basic salary. While the UAE Employment Law does not require employers to include severance pay in the employment contract, you may still request your prospective employer to include the same. If you include a severance pay clause in your employment contract, it will be legally binding, and you will be entitled to receive severance pay when your employment ends. It is essential to discuss this with your prospective employer and ensure that the clause is legally binding.
