Questions & Answers
Calculation of the EOSB after changing the contract from limited to unlimited
Hello Sir,
I am working in a company for more than 5.5 years. The first 4 years, my contract was limited and now they changed it to unlimited.
The company terminated my contract. How will the benefits be calculated and does the company need to pay 3 months' salary for termination?
Please help.
Under the UAE Labour Law, there are two main ways for an employer to legitimately terminate an unlimited term contract:
- For a 'valid' (i.e. performance related) reason on notice (the UAE Labour Law provides for a minimum notice period of 30 calendar days. However, the parties are entitled to agree on longer notice periods in the contract); or
- Summarily (without notice and end of service gratuity) for one of the 11 exhaustive gross misconduct reasons set out in Articles 88 and 120 of the UAE Labour Law.
An employee who has completed one year or more of continuous service is entitled to the end of service gratuity to be calculated as follows:
- 21 calendar days’ basic pay for each year of the first five years of service.
- 30 calendar days’ basic pay for each additional year.
Provided that the entire total remuneration does not exceed two years' pay.
Note that an employee is not entitled to the end of service gratuity where he has been terminated summarily for gross misconduct, pursuant to the provisions of the UAE Labour Law.
