Salesmen are cheering following a ruling from Dubai's highest court saying commissions and bonuses have to be included in calculations of end-of-service benefits.
'Always Be Closing' reaps greater reward
Salesmen across the UAE were given another reason to "Always Be Closing" by Dubai's highest court in a ruling that will encourage employers to include commission income in executives' end-of-service benefits calculation.
The case involved an employee of a media and advertising company in Dubai who went to the Court of First Instance after his severance was calculated without considering his commission income.
Commission forms the majority of most sales workers' pay.
The courts initially rejected his argument, but it was upheld on appeal and eventually reached the Court of Cassation, the emirate's highest court.
Lawyers say the Dubai Court of Cassation judgment clears up a grey area in the UAE's federal labour laws that allowed some companies to pay employees only a fraction of their legally mandated severance, known across the Gulf as a gratuity.
"Most sales people get their basic salary and are incentivised to go out and sell," said Neil Crossley, the head of employment, pensions and benefits in the Middle East for DLA Piper, an international law firm.
"Those types of arrangements make up a big part of people's pay that the Court of Cassation is impressing should be included in the end-of-service gratuity."
Under laws in force since 1980, all companies in the UAE must give employees 21 calendar days' worth of remuneration per year worked when they leave, plus additional severance for partial years of work. People who work for a company for more than five years are entitled to 30 calendar days of compensation for each year worked.
While the Court of Cassation decision broadens the types of pay to be included in the benefits calculation, lawyers say it does not go so far as to include allowances for housing, education and other expenses. UAE law explicitly excludes such allowances - a common feature of expatriates' contracts that many consider an integral part of their salaries - in the gratuity calculation.
"Article 134 [of the labour law] is very clear that end-of-service benefits are based on remuneration, and that does not include housing allowance, travelling allowance, education fees, overtime pay, allowances for recreation and social facilities," said Sara Khoja, a senior associate at Clyde & Co in Dubai who specialises in employment law. "I would be really surprised if this judgment was going against that."
The UAE operates under civil law, which means other courts are not required to follow the precedent established by the Court of Cassation's judgment.
Lawyers say, however, that cassation court judgments do provide important guidance.
The recent decision in Dubai follows several other rulings in Dubai and Abu Dhabi that have reinforced that bonus and commission pay should be included in the severance calculation. Guidance from the courts has suggested companies should average out past commission and bonus pay when calculating benefits, lawyers say.
"This Dubai Cassation Court judgment is not the first of its kind," said Reema Ashraf, an associate at Hadef and Partners in Dubai.
Courts in Abu Dhabi and Dubai have issued similar judgments in the recent past, she said, marking a trend where the legal system was trying to refine the 30-year-old labour law to cope with increasingly complex employment arrangements.
"The UAE labour law came into force in 1980 and was drafted to cater to the simple relationship between labourer and the construction companies," Ms Ashraf said. "It wasn't drafted with any of these complex employment relationships in mind whereby salaries are marked by commission payments or bonuses."