labour law

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June 25, 2020

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End of service benefits - will they be impacted by Corona salary cuts?

If your company was negatively affected by Covid-19 and you negotiated a temporary salary cut, how does that affect your gratuity? And what happens if you go on to lose your job while drawing the reduced salary?

A Gulf News reader raised the question "if someone has been made redundant and is on temporary salary reduction, should their final pay-out be based on their regular salary or the revised temporary version?"

Gulf News spoke with Dr. Hassan Elhais, legal consultant of Dubai-based Al Rowaad Advocates and Legal Consultancy who spoke about the recent resolution by the Ministry of Human Resources and Emiratisation which provided guidelines to companies on how they can deal with worker contracts if they have been negatively affected by Covid-19.

As per Article 3/4 and 3/5 of the Ministerial Resolution No. 279 of 2020 regarding the stability of employment in private sector companies during the period of applying precautionary measures to contain the spread of the novel coronavirus. The employer and the employee may agree to either reduce the wages temporarily during the period referred to or reduce the wages permanently" he said.

Further Article 5 of the aforesaid resolution provides that in the event of temporary reduction of wages, the employers are obligated to conclude a temporary additional appendix to the labour contract provided it expires as per its expiration term. If the temporary wage reduction has to continue then such appendix shall be renewed." he added.

This appendix to labour contract, Dr. Elhais said, would provide details of whether the reduction in the salary would affect an employee's end of service benefits, such as his gratuity.

"If the employee is made redundant and the appendix to his labour contract specifically provides that such reduction shall not affect his gratuity, the employee shall be entitled to claim full gratuity as per his regular salary," Dr. Elhais said.

However, he added that in appendices for temporary salary reduction, the provision is included that the salary reduction shall not affect the end of service benefits.

If an appendix to the labour contract is for temporary salary reduction, it shall not affect the end of services benefits as such appendices are not prepared by the employer but the Ministry, "Dr. Elhais said.

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