Termination Benefits for Unlimited Contracts in UAE: What You Need to Know

Terminating employment in the UAE can be a complicated process, especially if you have an unlimited contract. If you`re not familiar with the legal requirements, you could end up losing out on important termination benefits. In this article, we`ll discuss everything you need to know about termination benefits for unlimited contracts in the UAE.

What is an Unlimited Contract?

An unlimited contract is a type of employment contract that does not have a set end date. In other words, the employee can continue to work indefinitely, and the employer can terminate the contract at any time, provided they give notice and adhere to the UAE labor law.

Termination Notice Period

The UAE labor law requires employers to give their employees adequate notice of termination. For unlimited contracts, the notice period is typically 30 days. However, if you`ve been with the company for more than five years, the notice period increases to 90 days.

If the employer terminates the contract without giving notice, they are required to pay the employee an amount equivalent to the salary they would have received during the notice period. Similarly, if the employee wants to terminate the contract early, they must give the required notice period or pay the employer an amount equivalent to their salary for the notice period.

End of Service Benefits

End of service benefits, also known as gratuity, are a lump sum payment made to employees when their employment contract comes to an end. For unlimited contracts, the amount of gratuity is calculated as follows:

– 21 days` basic salary per year for the first five years of service.

– 30 days` basic salary per year for every year of service after the first five years.

For example, if you`ve worked for a company for seven years and your basic salary is AED 10,000 per month, your gratuity would be calculated as follows:

– 21 days x AED 10,000 = AED 210,000 (for the first five years)

– 30 days x AED 10,000 = AED 300,000 (for the last two years)

– AED 210,000 + AED 300,000 = AED 510,000 (total gratuity)

Severance Pay

In addition to gratuity, employees with unlimited contracts are also entitled to severance pay if they are terminated by the employer. Severance pay is calculated as follows:

– 15 days` basic salary for the first year of service.

– 30 days` basic salary for every year of service after the first year.

For example, if you`ve worked for a company for three years and your basic salary is AED 10,000 per month, your severance pay would be calculated as follows:

– 15 days x AED 10,000 = AED 150,000 (for the first year)

– 30 days x AED 10,000 = AED 300,000 (for the last two years)

– AED 150,000 + AED 300,000 = AED 450,000 (total severance pay)

In Summary

Terminating an unlimited contract in the UAE can be a complicated process, but knowing your legal rights is crucial. If you`re terminated by your employer, you`re entitled to a 30-day notice period, gratuity, and severance pay. If you terminate your contract early, you must give the required notice period or pay the employer an amount equivalent to your salary for the notice period.

It`s important to note that these benefits only apply to employees who have worked continuously for their employer for at least one year. If you`ve worked for less than a year, you may not be entitled to all of the above benefits.

If you have any questions about termination benefits for unlimited contracts in the UAE, it`s best to seek the advice of a legal professional to ensure that your rights are protected.