Dubai Raj (PERSONAL FINANCE)
28 December 2009 DUBAI – Abu Dhabi and Dubai are where people elect to come to live due to the benefits of tax free living, diversity of life and year long sun.
What one needs to understand about coming to work here is that, despite your circumstances, the reason why you should be employed here is because you bring skills to the table and that is what you are being compensated for.Having said this, if you are willing to take a certain salary, you can work away with minimal skills.
There is clear evidence that the increasing expat population in the UAE is fuelling demand for Western-style remuneration practices, reflecting the growing importance of benefits, long-term incentives and lifestyle products. The traditional focus here has been on basic salaries and cash allowances, but we are now experiencing an increased interest in other benefits, such as supplemental pension plans.
Source: Mercer’s Middle East Survey 2007-2008.
Currently, under the UAE Labour Law, employees are entitled to a lump sum, payable at the end of service, known as Terminal Gratuity, that falls due only when an employee leaves service.
There are essentially three elements of severance pay under the Labour Law:
* An end-of-service gratuity; Outstanding holiday pay; The costs of repatriation.
- Under Article 132, an employee is entitled to an end-of-service gratuity only if he or she has completed at least one year of continuous employment. In this case, the employer is obliged to pay the equivalent of 21 days’ wages for each of the first five years of employment, and 30 days’ wages for each additional year, provided that the total amount is no more than two years’ wages. Gratuities are calculated from the basic wage, excluding all allowances. Most companies apply a minimum service length of 12 months. Benefits are usually payable as a lump sum and are funded locally (in 50 per cent of cases) or through an offshore vehicle. In practice, employees in the free zones, such as the Jebel Ali Free Zone and the Dubai Airport Free Zone, are subject to the rules and regulations of the free zone concerned and maintain their own employment contracts. However, the Law will still apply and the provisions in the employment contract must be in accordance with the Law. Moreover, it should be noted that free zone employees are sponsored by the relevant free zones and not by
their employers.Since there is no real retirement system per se, the labour law states that an end of service benefit must be paid after a year of service.
Usually you are covered for being brought here and returning home, by means of an airline ticket. Above this, some companies pay for extra elements, including shipping of items, and tickets for the families. Obviously, if you do not return home after you finish your job, then this is not applicable. Since gratuity is calculated on an annual basis or part thereof provided that the employee has actually completed one year of employment with the employer or more, days of absence from work without pay are not included in calculating the length of service.
However, he will be entitled to end of service gratuity for fractions of a year he spent in service provided that he has completed at least one year in continuous employment.
Each and every employer within the UAE is required by law to pay service related severance gratuities to their employees, and the longer the employee has worked for a particular business the bigger the end of service gratuity payment will be.
Consequently, employers are seeking to establish structures that will assist them in meeting these end-of-service liabilities as they fall due. Because of the way in which international retirement benefits schemes legislation works, the Isle of Man is one jurisdiction that is able to give UAE employers the ability to fund for end of service benefits in a flexible, secure and tax neutral manner in a fully regulated environment
It is quite common for companies to have three or six-month probation periods written into employment contracts. Some companies may delay the residency process illegally until the probation period is up, which can make settling in difficult — no residency means then you cannot sponsor family members, buy a car or even get a bank loan.
You may also not be eligible for sick leave or annual leave during your probation period. Trade unions do not exist here. In case of a dispute between employer and employee, the Ministry of Labour and Social Affairs will initially act as an adjudicator, in an effort to resolve matters. If a party wishes to appeal any such decision it can take its case to court. Strikes and lock outs are forbidden.