End Of Service Benefits (EoSB or ESBs) is a specified monetary payment paid by the organization to the employee upon employment termination. It is also referred to as severance pay or gratuity pay. This payment is made only if the employee served the organization for more than one year, and the termination was not due to wrongful conduct. In the UAE, there is a legal obligation under the UAE Labour Law for all companies to provide an EoSB to their employees. There are various articles in the UAE Federal Labour Law defining the rules of EoSB.
If the employee quits the company before completing one year, he/she will not be entitled to any severance pay. However, an employee who completes more than one year of continuous service shall be eligible to EoSB at the end of his employment. The final amount of severance pay is calculated on the last basic pay which the employee was entitled to. Other allowances like transportation, housing, utilities, etc. are not included in the calculation.
These benefits are given to the employees to appreciate their hard work and commitment to the organization. As per the law, the final amount of severance pay must not exceed the total wages of two years. Even though this law has been in practice for the last few decades, it has certain challenges for employers. For the organizations in the Gulf, mostly with expatriate staff, retention is one of the biggest challenges.
The calculation of EoSB depends on the employee’s type of contract and the reason to end the contract. The number of days considered to calculate the final payment may vary if the employee resigns, versus if he/she is terminated. Under the UAE labour law, two types of employment contracts are there; The Limited Contract and The Unlimited Contract.
The Limited Contract – These are time-specific contracts and ends once the stated time duration lapses. The employee works for the company for a specific time period.
The Unlimited Contract – There is no end date in these contracts. With one-month to three-month official notice (depending on the organization), employees can terminate, or quit from the contract.
Procedure to get your EoSB
As per the UAE labour law, the employer must make immediate payment of EoSB to the employee upon termination of the contract, except for the cases where the termination is due to gross misconduct.
Conflict arises when the employers deny paying the due EoSB to the terminated employee. In such matters, an employee can file a direct complaint at the Labour Office and then follow the legal proceedings in the Labour Court. Each case situation is unique. The solution that worked for one employee might not be fruitful to another. You must take legal opinion from an attorney on legal matters and conflict resolution.
When you file your EoSB case in Labour Court, it is crucial to have evidence that strengthens your position for dispute resolution. Your case becomes stronger if you possess the necessary documents leading to your termination. You must keep a record of all important events at work like memos, performance reviews, salary increments or deduction, etc.
Procedure to get your EoSB if you are out of the UAE
With the ongoing Covid-19 crisis, you might have lost your job due to several reasons such as the business closed its operations or the company laid-off several employees. This might result in contract termination. Another possible reason for the discontinuation of your employment contract might be that if you were outside and could not return to the UAE due to travel limitations.
Irrespective of the reason for the termination of your contract, if you have served the company for more than one year, you are eligible for EoSB, even if you are not in the UAE. Below are some steps to claim your severance pay if you are out of the country.
- You can make a written request to your employer to credit your end-of-service benefit amount to your bank outside the UAE. You need to make sure that the settlement amount and the respective bank details must be mentioned in your request.
- Your communication with the employer must be very clear. You must comply with all the necessary documents and formalities.
- You must also close your UAE bank account. If there is no activity in your bank account with respect to credit, debit, or any other financial transactions, for at least 12 months, your account may become dormant.
- In some cases, the employer may transfer your gratuity pay to your UAE bank account registered for your salary credit. In such cases, you can withdraw the amount if you plan to return to the UAE. If not, you may send a written request to your original bank to credit the balance in the bank account of your home country.
- If your ex-employer refuses to settle the gratuity pay, you can file a complaint with the Labour Office, and then in a Labour Court. You may seek advice from legal consultants for conflict resolution.
The UAE is a famous destination choice for multinational corporations. There are various types of employment rules that may be unanticipated or unknown. For many companies, end-of-service benefits pose a problem and could become worse with time. But, if both government and businesses act hand in hand, the process might become very smooth. Taking proactive measures and setting the right procedures may be beneficial for businesses in the long-run. It will also be fruitful for the employee’s future.