Abu Dhabi, UAESaturday 4 April 2020

'Can we cut salaries to cope with the drop in business from coronavirus?'

The sports coaching company has seen its income drop after many activities and events were cancelled to help contain the outbreak​​​​​​​​​​​​​​​​​​​​​

Many sporting activities and events have been cancelled as a precautionary measure to contain the spread of the coronavirus. Sarah Dea / The National
Many sporting activities and events have been cancelled as a precautionary measure to contain the spread of the coronavirus. Sarah Dea / The National

I own and run a small sports coaching company with six staff. We are having a tough time as our income has reduced in recent weeks due to fears over the coronavirus outbreak, the closure of nurseries and schools for a month, and the cancellation of many activities and events in the UAE. This has put the company in a poor financial position and we will struggle to pay bills and salaries as we have little capital. We are considering cutting the salaries of some employees by 50 per cent for a period of time as we just cannot afford to pay them at the moment. We don’t have any work for them but would prefer not to make them redundant, not least as I don’t have the money to pay visa cancellation costs and gratuity. I want to do this properly and not break any laws, so can you advise how I can do this legally? FC, Abu Dhabi

This unfortunate situation is having an effect on multiple areas of business. Despite this, no employer is permitted to reduce the salary of an employee without their full agreement, in writing and signed by both parties. Employers cannot arbitrarily change contract terms without an employee’s agreement. However, assuming the employee is able to manage on a reduced income and understands the reasons why, they may agree to this in preference to redundancy.

Not all employees can manage on a reduced income, however, even for a short period, so this must be taken into consideration. If both parties are in agreement, the action would be permitted under UAE Labour Law. Another option is to give staff the option of extended unpaid leave. There may be people who would welcome this, but it must also be properly agreed in writing.

I have a life policy that I took out when I lived in the UK before moving to Dubai two years ago. I would like to know if this policy will still cover me when living here. I have spoken to an adviser at my bank who says it isn’t valid and wants to sell me another but I am not sure that he is right and want to check as the policy he is offering me is much more expensive. SW, Dubai

If the policy is for life cover (death benefits) only, and was taken out when you were resident in the UK and had no intention to move abroad at that time, then the plan should remain valid provided the premiums are paid by direct debit from a UK bank account. You should notify the company of your current address but this is just a formality. There are only problems with UK policies that include critical illness cover and so any plans that include critical illness need to be checked with the insurance company each time. I recommend obtaining written confirmation.

If your plan is for life cover only, it should still be valid and will not require replacing. You may still wish to review the cover, but should do so with an adviser who understands how plans work and is not solely out to sell you a policy.

My company pays for an annual flight for all of our employees each year. One of our employees is leaving the UAE permanently to Australia, his home country. However, as we just paid for his flight ticket in December, is it mandatory for us to pay again? He has resigned after being with the company for close to six years, but the cost is high and a bit much after we only recently paid for a return ticket. VC, Abu Dhabi

It is not uncommon for employers to pay for an annual flight, or include a flight ticket allowance but this has never been a legal requirement under UAE Labour Law. It has been a matter of practice although fewer employers pay this than in the past.

There are cases where an employer is expected to pay for a flight ticket when an employee leaves service and this is as set out in Article 131. This states in part: “The employer shall, upon the termination of the contract, bear the expenses of repatriation of the worker to the location from which he is hired, or to any other location agreed upon between the parties. Should the worker, upon the termination of the contract, be employed by another employer, the latter shall be liable for the repatriation expenses of the worker upon the end of his service."

The article also states: "Should the reason of the termination of the contract be attributable to the worker, the latter shall be repatriated at his own expense should he have the means therefore.”

In this situation, as the employee is leaving of his own volition, the employer is not responsible for the flight to Australia.

Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with more than 25 years’ experience. Contact her at keren@holbornassets.com. Follow her on Twitter at @FinancialUAE

The advice provided in our columns does not constitute legal advice and is provided for information only

Updated: March 14, 2020 10:44 AM

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