The United Arab Emirates has undergone a significant shift in its employment sector with the introduction of the Federal Decree-Law No. 33/2021 on Regulation of Labor Relations. This new legislation, which replaces the longstanding Federal Law number 8 of 1980, aims to revitalize and modernize the employment landscape in the UAE.

Aims of the New Labour Law

At the forefront, the new law endeavors to make the UAE’s employment sector more robust and competitive. By focusing on retaining and attracting the best talents, the country hopes to ensure its workforce remains driven by skills essential for the future. Furthermore, the legislation aims to create an enticing business environment for employers, ensuring that both the rights and responsibilities of employees and employers are balanced.

Scope of the Law

The new labour law is comprehensive, encompassing all employers, establishments, and workers within the private sector of the UAE. However, it specifically excludes federal and local government employees, members of the armed forces, police, security personnel, and domestic workers.

Understanding Gratuity Calculation

To decipher the gratuity calculation, it’s crucial to understand some key terms:

Basic wage: This refers to the salary stipulated in the employment contract given to the employee for their work. It excludes any allowances, commissions, or benefits in kind.

Remuneration: This encompasses the basic salary, cash allowances, commissions, and any kind benefits. Therefore, while the employee’s total salary is termed as ‘remuneration’, gratuity is calculated only on the ‘basic wage’.

Gratuity Calculation

1. Employees become eligible for gratuity after completing a full-time continuous year of service.
2. Gratuity is based solely on the basic salary, excluding other components of the remuneration.
3. For the initial five years of service, an employee receives twenty-one days of basic wage as gratuity.
4. Post the five-year mark, thirty days of basic wage is given as gratuity for each subsequent year.
5. Any unpaid leave taken by the employee will not be considered in the gratuity calculation.
6. The maximum gratuity an employee can receive is capped at two years’ remuneration.
7. Employers can make legal deductions on the total gratuity as per the new labour law’s provisions.
8. Employers must pay the gratuity within fourteen days from the end date of the employment contract.

If an employee unfortunately passes away, the employer must transfer the gratuity and other dues to the employee’s family within ten days from the death date.

With these reforms, the UAE reaffirms its commitment to ensuring a progressive, fair, and flexible employment sector. These new regulations not only provide clarity on employment relations but also cater to the changing dynamics and unique circumstances that can arise in the professional realm.