Severance/Service Payment Calculation


Article no. 132 of the Federal Labour Law No. 8 of 1980 states the following: A worker who has completed a period of one or more years of continuous service shall be entitled to severance pay on the termination of his employment. The days of absence from work without pay shall not be included in calculating the period of service. The severance pay is calculated as follows:
 
1. Twenty-one days' remuneration for each year of the first five years of service.

2. Thirty days remuneration for each additional year of service provided that the aggregate amounts of service pay shall not exceed two year's remuneration.

Return Ticket: entitled if he/she is not changing visa inside the UAE.

Q: I recruited a Nepalese as a cleaner on a contract of unlimited duration. I spent Dh4,500 in November 2017 to get him a two-wheeler driving licence. The employee now wants to resign from employment and join another company. Can I recover the driving licence money?

A: It is assumed that you gave a loan to your employee for the purpose of obtaining a driving licence and such a loan is documented between you and your employee. If such is the case, you may recover this money back from your employee. This is in accordance with Article 135 of the Federal Law No. 8 of 1980 regulating Employment Relations in the UAE. It states, "An employer may deduct any amounts owed to him by an employee from the latter's severance pay."

Know the law

An employer may recover a documented loan back from the employee. Amount owed to the employee can be deducted from his severance pay.

----------------------------------------------------------------------------------------------
Below is the original text of the UAE Federal Labour Law with the section on gratuity payments. Articles 132, 137, and 138 refer specifically to the calculation of gratuity.

Federal Law No 8, For 1980, On Regulation of Labour Relations
Chapter VII:
Termination and Severance Pay
Section II:
Severance Pay


Article 132

A worker who has completed one or more years of continuous service shall be entitled to severance pay at the end of his employment. The days of absence from work without pay shall not be included in calculating the period of service. The severance pay shall be calculated as follows:

21 days' wage for each of the first five years of service.
30 days' wage for each additional year of service provided always that the aggregate amount of severance pay should not exceed two year's wage.
Article 133

A worker shall be entitled to severance pay for any fraction of a year he actually served, provided that he has completed one year of continuous service.

Article 134

Without prejudice to the provisions of laws that grant pensions or retirement benefits to employees in certain firms, severance pay shall be calculated on the basis of the wage last due for monthly, weekly and daily paid workers, and on the basis of the average daily wage referred to in Article 57 hereof for those paid on piecemeal. The wage used as a basis for calculating severance pay shall not include whatever is given to the worker in kind, housing allowance, transport allowance, travel allowance, overtime pay, representation allowance, cashier's allowances, children education allowance, allowances for recreational and social facilities, and any other bonuses or allowances.

Article 135

An employer may deduct any amounts owed to him by a worker from the latter's severance pay.

Article 136

For the purposes of Article 132, no severance pay shall accrue for the employment cases that preceded the enforcement of this Law except where the worker is a National. This, however, shall be without prejudice to any rights acquired by the worker under the repealed labour laws, the employment contract, or under any agreement, regulations or work rules of the firm. In the event of the worker's death, his severance pay shall be paid to his legal heirs.

Article 137

Where a worker under an indefinite term contract abandons his work at his own initiative after a continuous service of not less than one year and not more than three years, he shall be entitled to one-third of the severance pay provided for in the preceding article. Such a worker shall be entitled to two thirds of the said severance pay if his continuous service exceeds three years up to five years, and to the full severance pay if it exceeds five years.

Article 138

Where a worker under a definite term contract abandons his employment at his own initiative before the expiry of his contract period, he shall not be entitled to severance pay unless his continuous period of service exceeds five years.

Article 139

A worker shall forfeit entitlement to his entire severance pay in any of the following two cases:

If he is dismissed from service for any of the reasons specified in Article 120 hereof or if he abandons his employment in order to avoid being dismissed in accordance with that Article.
If he abandons his employment of his own accord, otherwise than in either of the two cases specified in Article 121 hereof, without notice (in the case of indefinite term contracts) or before completing five years of continuous service (in case of definite term contracts).
Article 140

Where a firm has a provident fund for the workers and the rules of the fund stipulate that whatever the employer pays into the fund for the worker's account is in discharge of his legal obligation in respect of severance pay, the worker shall be paid the savings balance in his account or the severance pay due under the Law, whichever is the greater. Where the rules of the fund do not stipulate that the amounts paid by the employer are in discharge of his legal obligation toward the severance pay, the worker shall receive whatever is due to him in the provident fund in addition to the statutory severance pay.

Article 141

Where a firm has a retirement, insurance or a similar scheme, a worker who is entitled to a retirement pension may opt for treatment under the said pension or severance pay or under the pension or insurance scheme, whichever is more advantageous to him.

Abscond Reporting
Annual Leave
Air Ticket to Home Country-UAE Labour Law
Arbitrary Termination
Article 120 of UAE Labour Law
Article 121 of UAE Labour Law
Article 127 of UAE Labour Law
Ban-1 Year
Cancellation
Clearance Letter from Employee While he is in Service
Changing Employment Visa and Dependents Visa without exit
Bank Guarantee Refund
Death Compensation-Labour Law
Designations
Disciplinary Action-Labour Law
Emergency Leave
Employment Ban
Employment visa during Ban Period
Employment visa Renew
Employment rules
Employment Visa
End of Labour Relationship Between Employer and Employee
End of Service-Gratuity
E-Signature Card
Good Conduct Certificate for UAE Visa
Gratuity
Haj Leave
Labour Card Fine Calculator
Labour Card New
Labour Card Renew
Labour Contract
Labour Contract Amendment
Labour Contract FAQs
Labour Contract New (After Entry)
Labour Dispute
Labour Establishment Card
Labour Establishment Card Amendment
Labour Fees Information
Labour Guarantee Refund
Labour Inspection for Quota Approval
Labour Law
Labour PRO Card
Limited Contract
Lost Labour Card
Maternity Leave
Non-competition clause
Notice Period
Occupational Disease
Offer Letter
Overtime
Part-time Work Permit
Payment of Wages-UAE Labour Law
Probation Period
PRO Card Labour
Profession Change
Professions
Reducing Salary in Labour Contract (Labour Law)
Reasons of Visa Rejection
Resignation-Labour Law
Salary increment
Sick Leave
Student Work Permit
Temporary Work Permit
Temporary Work Permit for Employee having Labour Dispute
Tasheel Centers-Dubai
Tasheel Centers-Abu Dhabi
Termination-Contract
Unpaid Salary
Visa Ban in UAE
Visa Cancellation
Visa Rejection Reasons
Visa Transfer
Work Permit
Work Permit Fees Structure
Work Permit for relative Sponsored Ladies

 

Gratuity

Labour Dispute