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Abu Dhabi, UAETuesday 20 November 2018

UAE company may charge compensation on worker who breaks fixed contract terms

If someone leaves employment part-way through a limited employment contract, they will be charged compensation for breaking the contract in accordance with UAE Labour Law Article 116.

I am on a one-year limited contract with the UAE division of an international company. I have served six-and-a-half months and handed in my resignation this week. My employer is claiming half a month’s salary for three months as compensation. Although I passed six months, I never had a review or signed any document recognising that my probation had finished. What is my position in regards to paying the compensation? EB, Abu Dhabi

Once a person has been with a company for a period of six months or more, unless advised to the contrary, by which I mean they are asked to leave, they will be considered a permanent employee. I have seen the relevant sections of the contract and although the wording is not clear, everything appears in order. If someone leaves employment part-way through a limited employment contract, they will be charged compensation for breaking the contract in accordance with UAE Labour Law Article 116. It states: “If the contract has been terminated on part of the employee … the employee becomes liable for compensating the employer against losses incurred by him in consequence of contract termination, provided that the amount of compensation, may not exceed half a month’s pay for a period of three months or for the remaining period of contract whichever is shorter, unless the terms of the contract provide otherwise.” The wording on the contract is poor as it seems to imply that the employee is being asked to pay for visa costs, but the breaking of fixed contract terms is what it is actually being referred to and so the compensation amount is payable for leaving service before the end of the one-year contract term.

Keren Bobker is an independent financial adviser with Holborn Assets in Dubai, with over 20 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. Readers are encouraged to seek appropriate independent legal advice.

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