Abu Dhabi, UAEWednesday 5 August 2020

Will my reduced salary affect my gratuity payment?

Employee's salary has been reduced in recent months but employer must still pay end of service benefits in full

The Dubai resident was on an unlimited employment contract and working for a mainland company in the emirate. Photo: Getty Images
The Dubai resident was on an unlimited employment contract and working for a mainland company in the emirate. Photo: Getty Images

My company has terminated me and I have agreed to leave and return home as flights are now starting. They have financial problems which means that all staff had to agree to a reduced salary from the start of April and as I don’t think they will continue operating I want to leave now before things get worse for them. I have been an employee for nearly four years and have not taken any holiday this year but my last day will be on 20th August. As my salary for the past four months has been only 30 per cent of what it was before can you tell me what I am entitled to as my end of service gratuity. I have only spoken to my line manager and he says it will be lower as I am leaving after just four years and also the reduced income we all have but that doesn’t seem fair after all this time. KN, Abu Dhabi

KN has confirmed that he is on an unlimited contract and the company is a retail business so UAE Labour Law will apply in full. While Ministerial Resolution No.279 of 2020 permitted employers to reduce salaries of employees if they were adversely affected by issues related to coronavirus, with the agreement of the employee, this was designed to be a temporary measure and most of the reductions will be for a specified period of time.

The Resolution itself made no reference to the end of service gratuity but it is understood that where a salary reduction is a temporary measure, the calculation should be based on the usual basic salary, not the reduced figure. This opinion has been supported by several leading legal practices in the UAE. Where a salary reduction is deemed permanent, and supported by a change to the contract of employment that is approved and lodged with the Ministry of Human Resources and Emiratisation (MoHRE), the gratuity can be calculated on the lower salary or employers can agree to ring-fence previous entitlement so that the employee is not unfairly disadvantaged.

KN has advised that the salary reduction was to be for a period of six months, per the agreement signed, so his gratuity should be based on the previous full salary.

As no annual leave has been taken, any days that have accrued should be paid to him in lieu as part of the final salary calculation with all other payments that are due.

When an employee is terminated, as opposed to choosing to leave employment, there is no reduction in the gratuity payment that is due.

I would like to clarify my understanding of how recruitment agencies work. I contacted one such agency and was asked to pay Dh2,000 upfront, as well as my first salary after starting a job. Is this legal? What if the recruitment agency chooses to harass the candidate in this regard for money and where can a complaint be lodged? Will the candidate get any penalty in this situation? AA, Dubai

Any recruitment agency that is operating in the UAE and asks candidates for payment is breaking the law. I have not heard of a recruiter asking for payment of the first month’s salary after finding someone a job but that is also illegal.

The Ministry of Human Resources and Emiratisation has stated on many occasions that this practice is illegal and over the years has closed and prosecuted several companies for this kind of fraudulent practice. Anyone who is aware of companies operating in this illegal manner can report them to the ministry by calling its helpline number 800 60, or through its online chat function via mohre.gov.ae

I would encourage anyone to report any recruiters who ask for money upfront, especially if they are hassling people for money in this way. There will be no problems for anyone who reports recruiters acting illegally, and they will be doing other job seekers a favour.

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: July 25, 2020 12:02 PM

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