Gratuity is a particular sum of money that is paid to an employee after the end of his/her employment period, that is, upon his/her leave from the job. It is paid by the employer in “gratitude” for his/her services to the team.
The amount of money to be paid in gratuity is calculated by taking the person’s services and the salary into account. Gratuity is one of the many benefits that a person gets upon his/her retirement. According to the UAE Labor Law, only the employees who have worked or offered their services steadily (without break) to a company in any way for at least one whole year are deserving of the gratuity pay, aka, “tip-money”.
However, there are certain cases under which an employer can pledge to stop paying an employee even if he did work continuously for more than one year. In spite of meeting all the criteria for receiving gratuity, an employee may be deployed of his “tip-money” under a certain few clauses. But since this is a delicate matter, it has to be discussed with a legal expert who knows the terms and conditions of this proposal clearly.
The first of these clauses which prove the employee to be undeserving of the gratuity is of course, a service period of less than one year, as the law clearly states that gratuity is only payable to the employees who have worked without a break for at least one whole year. The Head of employment of Hadef & Partners, Mr. Jamie Liddington, have told us that an employee who has been working continuously, but only for less than a year, will not receive any ESG (end-of-service gratuity) regardless of whether he previously signed an unlimited term contract or not.
Now, there are also some clauses under which the employer can avoid paying gratuity to an employee even if he has been serving continuously for more than one year. When it comes to gratuity, there are some main points of differences between the conditions applied for limited and unlimited contracts. So employees have to be careful in knowing and recognizing loopholes in the employers’ contracts before signing up for the job.
Liddington says that employees under an unlimited contract lose their rights of receiving gratuity if they resign without giving the employer a notice within a certain number of days as mentioned in the contract. This also applies to employees who work loyally for a year, but after that, leave without providing reasonable grounds for his failure to honor and work under his contractual obligations to the employee, or without any proof of any kind of assault or misbehavior from the employer’s side.
There is a list of points/activities which can deprive an employee of his/her gratuity entitlements under Article 120, which, the employees under any UAE company or organization must be aware of before signing any official contracts.
Sara Khoja, who is a partner at Clyde and Co. (a law firm) told Emirates 24/7, that any employee who fails to deliver his services according to the points in Article 120 under the Federal Labor Law 8 of 1980, is not at all qualified to receive the payment of the end-of-service gratuity money. The experts at Hadef & Partners agree to this and add another case in which the gratuity money can be withheld, and that is when an employee has been terminated after his continuous employment of more than a year due to any of the reasons mentioned under Article 88 or Article 120 of the Labor Law.