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UAE jobs: Can new employee ask to add severance clause to contract?

KT reader wants to know if he can ask employer to specify an amount of money he gets if the company suddenly shuts down

Question: I work in a company in Dubai and earn a decent salary. A start-up company has offered me a job that would require me to run that company. I am very keen to accept the job offer, but I wish to understand what my rights would be if the company suddenly shuts down. Additionally, can I get a clause added to the contract to specify a severance amount if the company is to shut down?

Answer: In the UAE, a foreign employee who has completed at least one year of continuous service is entitled to end-of-service benefits at the end of his service.

The amount of these benefits is calculated on the basic salary of an employee. This is in accordance with Article 51(2) of the Federal Decree Law no. 33 of 2021 Regarding the Regulation of Employment Relationships and its amendments, which provides for the end of service benefits.

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“The full-time foreign employee, who completed a year or more in continuous service, shall be entitled to end-of-service benefits at the end of his service, calculated according to the basic salary as per the following:

a. A salary of (21) twenty-one days for each year of the first five years of service.

b. A salary of (30) thirty days for each year exceeding such period.

Furthermore, Article 8 of the Employment Law read with Article 10 (1) of the Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Employment Relations, states general terms and conditions which may be included in an employment contract to be executed between an employer and an employee.

An employer may be penalised if it closes its operations without paying its employees’ entitlements including end-of-service benefits. This is under Article 60 (1)(d) Federal Decree-Law no. (9) of 2024 Revising Some provisions of Federal Decree-Law no. (33) OF 2021 Concerning Labour Relations, which states, “1. Individuals who commit the following violations shall be fined a minimum of Dh100,000 and a maximum of Dh1,000,000.

- (d). Closure or discontinuation of an establishment without following the appropriate procedures for settling workers’ dues is a violation of this law, the Implementing Regulation, and the Resolutions issued to implement it.”

Under the aforementioned provisions of law, you should be entitled to the end-of-service benefits only after the completion of one year of continuous employment.

Furthermore, the relationship between an employer and employee is governed by the employment contract, the provisions of the Employment Law, Cabinet Resolution No. 1 of 2022 and its subsequent amendment and ministerial resolutions. Therefore, your end-of-service benefits and other employment entitlements are protected by the provisions of the Employment Law and its subsequent ministerial resolutions, and it is not mandatory to mention the same in your employment contract.

However, for your comfort, you may mutually agree with your employer to add an appropriate clause in the employment contract relating to your end-of-service benefits.

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm on: www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.

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