The Abu Dhabi Labor Court recently issued a significant verdict in favor of a long-serving employee, mandating a private firm to settle an end-of-service gratuity payment totaling AED 93,600. The case involved a worker who had dedicated over three decades to the company, highlighting the strong legal framework in place to protect employee rights within the emirate. The worker had filed a lawsuit after the company failed to provide the full benefits owed upon the termination of his service, which spanned 31 years and six months.
This ruling carries substantial weight for the expatriate community in the UAE, serving as a vital educational moment regarding financial planning and legal rights. Many expats spend large portions of their careers in the Emirates, often assuming their gratuity will continue to accrue indefinitely without a ceiling. However, this case clarifies a critical stipulation in the labor law: the end-of-service gratuity for foreign workers is capped at the equivalent of two years’ worth of total wages.
Understanding this cap is essential for long-term residents to manage their retirement expectations realistically. It ensures that expats are not caught off-guard financially after decades of service, emphasizing the need to be fully aware of how benefits are calculated under the current legislation.
Court’s Findings
According to a report from Emarat Al Youm, the dispute began when the employee lodged a claim requesting AED 97,175, stating he had been on an unlimited contract since 1994. His basic monthly salary was recorded at AED 3,900, with a gross salary of AED 7,800. The company’s management submitted documents for the court’s review, seeking a judgment on the matter.
In its detailed reasoning, the court referenced the UAE’s labor regulations, which dictate that foreign employees working full-time are entitled to gratuity after one year of continuous service. The calculation is based on 21 days of basic pay for each of the first five years, and 30 days of basic pay for every subsequent year.
However, the court noted a specific limitation in the law:
- The total gratuity amount must not exceed the value of two years’ salary.
- Based on the worker’s tenure, the mathematical calculation of his gratuity actually amounted to AED 116,350.
- Due to the legal cap, the payable amount was reduced to match the two-year salary limit of AED 93,600.
The court ordered the company to pay this adjusted amount immediately, along with covering legal fees and expenses.
Employers are reminded of their responsibility to strictly follow UAE labor laws, which clearly outline the entitlements of employees regardless of their length of service. It is important for companies to not only value the dedication and loyalty of long-serving staff, but also to ensure that all legal obligations are met promptly and transparently. Adhering to these regulations upholds trust in the workplace and helps protect both parties from legal disputes or reputational harm.
Article 51 of UAE Labour Law
For reference, please check article 51 of the UAE Labour Law which talks about End-of-Service gratuity for full-time workers and its provisions:
