Dennis Brand from HBJ Gateley Wareing looks at some points to consider when preparing contracts of employment.
With an optimistic view to the future, it might be worth addressing some points to be considered when preparing a contract of employment. Federal Law No. (8) of 1980 (as amended) (the ‘Labour Law’), save for certain exceptions, is the law which governs all employment in the UAE (the exceptions being those persons employed by government departments, agencies or companies, members of the armed forces and police, and agricultural workers and domestic servants employed in private residences.
Contrary to popular belief, only nationals of the UAE have an inherent right to work in the UAE. Where a position becomes vacant or is created that can be performed by a national of the UAE, then in the event that a national is available a work permit will not be granted to a foreigner in respect of that position.
Where a UAE national is not available but a national of another Arab country is, then that person will have priority over a national of any other country. Therefore anyone who is seeking to recruit persons to be employed should, when making offers of employment, be mindful of this provision.
UAE residents will all have signed the government Labour Contract, a printed form in English and Arabic containing the basic information of the terms of employment. However, in order to deal with company-specific terms, some companies will, in addition, issue a separate contract of employment.
A limited contract can be for any period, but cannot exceed four years. However, it can be renewed for the same or shorter periods on more than one occasion. Where a limited contract is renewed, then all the periods are added together for the purposes of calculating a worker’s total period of service, which is important as it affects an employee’s entitlement to gratuity or severance pay.
An unlimited contract means exactly that – an employee is engaged on the basis that their employment will continue without limit of time until notice of termination is given by one party to the other. The government form of Labour Contract can be adapted for both a limited as well as an unlimited contract.
It is quite normal that the employee will serve a period of probation, which can be up to six months. Where a period of probation has been completed successfully, it is counted towards the employee’s period of service.
Those who have been designated an annual or a monthly salary should be paid at monthly intervals; all other employees are to be paid at least once every two weeks. The labour law requires that the maximum hours of work are eight hours a day or forty-eight hours a week. There are certain industries such as hotels where it is permissible to exceed this limit.
Where the number of hours worked are in excess of the maximum, then this is treated as overtime payable at the same rate as the normal hours worked, plus a 25% supplement. Where the additional hours are worked between the hours of 21:00 and 04:00, then the supplement payable is 50% of the normal rate
Where an employee is required to work at the weekend, they are entitled to a day off in lieu or payment at the normal rate, plus a supplement of 50%. However, overtime provisions do not apply to those holding responsible managerial or supervisory positions.
The labour law states that every worker is entitled to ten official (public) holidays with full pay each year. Where an employee is required to work on these, they will be entitled to a day off in lieu or payment on the same basis as working a weekend.
Many companies, particularly those of foreign ownership, will offer a number of days leave commensurate with an employee’s position in the company or years or service. Typically this can be 21 days leave per year rising to a maximum of 25 days; such a practice is contrary to the labour law which states clearly that every employee is entitled to 30 days leave a year. Some companies interpret this provision as 30 calendar days a year; the calculation should be based on working days.
Where allowances are included as part of an employee’s package, they should be stated as such, although there is now a trend towards offering all-inclusive salaries. This is perfectly acceptable, but where calculation is made for the purposes of gratuity or severance pay, if allowances are rolled up as salary, it will be that greater figure on which the gratuity or the severance pay is calculated.
Where a bonus is given, performance-based or otherwise, if it is intended that the bonus be discretionary – that is, it is a matter for the employer whether the employee receives a bonus or not – it should be made clear in the contract of employment that it is a matter for the employer’s discretion. If this is not done, then in the event of a dispute, the labour court may determine that the employee could be entitled to the bonus as a contractual right.
Where in the terms of employment a company’s disciplinary or grievance policies and procedures are referred to – for example, an employees’ handbook – then specific mention must be made in the contract of employment and a copy provided to the employee.