According to the new law, contracts can be renewed for a maximum of three years
Legal experts say that as of February 2, the old gratuity calculation program shall apply to private-sector employees under unlimited contracts until their contracts are renewed to limited contracts within the next year.
According to Article 68 of the revised labour law, employers have one year to change employment contracts from unlimited to limited.
The end-of-service gratuity for employees with unlimited contracts will be calculated until then according to the formula in the old Labour Law 88 of 1980. Whenever they renew their limited contracts subsequently, the new labour laws will apply.
The end of service gratuity for private-sector full-time workers has not changed under the new labour law, except for those with unlimited contracts, according to Mohamed Gamal Tawfik, a lawyer at Kaden Boriss Legal Consulting.
Under Article 51 of the new labour law, an employee who has worked for a company for one year or more is entitled to a gratuity of 21 calendar days’ basic pay for each year of the first five years of service; and 30 calendar days’ basic pay for each following year of service, provided that the total remuneration does not exceed two years.
As per Article 137 of the old labour law, employees under unlimited contracts resigning before the end of their contracts would be entitled to a 2/3 reduction of gratuity if their duration of service is between one and three years; a 1/3 reduction if their duration of service is between three and five years; and no reduction if their duration exceeds five years.
In line with the new law, Abdulla Ziad Galadari, senior partner at Galadari Advocates and Legal Consultants, says that all employees whose contracts expire after February 2 will have their contracts renewed to limited.
It is the UAE government's intention to eliminate unlimited agreements from the workplace so that end-of-service benefits can be standardized and unified regardless of the type of employment contract and whether an employee leaves an employer upon resignation or termination.
The terms of a contract can be extended for a maximum of three years under the new labour law.
Gratuities for foreign employees of the federal government
From February 2, in accordance with the new unified work regulations published under Federal Decree-Law No. 47 of 2021, the end of service benefits of full-time foreign employees working in the federal government will be aligned with those of the private sector.
For contracts issued before February 2, 2022, Tawfik said that old provisions in the Human Resources Law will apply.
In accordance with the unified regulations, employers have a year to amend employment contracts. For foreign employees in the federal government, employers can continue to calculate the end of service benefits according to the old scheme until the contracts are amended.
The implication is that foreign government employees who resign before their contracts are renewed or amended will be entitled to end of service benefits as per previous law, where they will receive a basic salary for the first five years of service, one-and-a-half months for the second five years of service, and two months for any further years calculated based on the average of the last five years in service.
As Galadari pointed out, the provisions only apply to foreign workers, since nationals in the UAE are protected by laws governing pensions and social security.