If a worker bound by a limited period contract leaves his work before the expiry of his contract period he shall not be entitled to severance pay.
It is understood that you have been working on a limited period contract for an advertising company in the UAE and now you wish to leave your current employment for a new job at a free-zone company where you are being offered a higher salary. It is further assumed that your employment is subject to provisions of the Federal Law No 8 of 1980 on Labour Relations (the “Labour Law”).
Pursuant to your question, it is advised that you may be liable to compensate your employer in the event you repudiate your contract with your employer, in accordance with Article 116 of the Labour Law which states: “Where a contract is revoked by the worker for reasons other than those specified in article (121), he shall be required to compensate the employer for any prejudice the latter sustains as a result, provided that the amount of compensation shall not exceed half the worker’s remuneration for three months or the residual period of the contract whichever is shorter unless the contract contains a provision to the contrary.”
Further to the above mentioned provision of the Labour Law, you may have to compensate your employer for an amount which shall not exceed your one and a half month’s salary. Apart from this you shall not be entitled to your cost of repatriation, since you are revoking the employment contract of your own accord. However, you may be entitled to leave salaries for those years in which you have not availed your annual leave.
It may be further advised that you shall not be subject to a ban which will restrict you from taking up employment with a new employer incorporated in a free zone in the United Arab Emirates as employment visa for free zone entities are not issued from the Ministry of Labour.
Subsequently, as you are currently working on a limited period contract, you may not be entitled to receive your gratuity or severance pay if you revoke your contract before its due date of expiry, as per the provisions of Article 138 of the Labour Law which states: “Where a worker who is bound by a contract for a limited period leaves his work of his own accord before the expiry of his contract period, he shall not be entitled to severance pay unless his continuous period of service exceeds five years.”
However, you shall be entitled to receive your gratuity if you complete your current contract period. The amount of gratuity that you shall be entitled to, will be calculated in accordance with the provisions of Article 132 of the Labour Law which states: “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 shall be calculated as follows:
1) 21 days’ remuneration for each year of the first 5 years of service.
2) 20 days’ remuneration for each additional year of service provided that the aggregate amount of severance pay shall not exceed 2 year’s remuneration.”
Pursuant to the above mentioned provision of the Labour Law, your gratuity or severance pay shall be calculated on your basic salary only. Thus, your gratuity shall be calculated as follows: (21 days basic salary) x (number of years of service)
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