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UAE labor law and DIFC employment law A Comparison

June 2007
The major differences between the Federal Law on regulating No. 8 for 1980 on Regulation of Labour Relations (the "UAE Labour Law") and Dubai International Financial Centre Employment Law No. 4 of 2005 (the " DIFC Employment Law") with regards to leaves and end of service.

UAE Labour Law
Labour matters under the UAE are governed by Federal Law No. 8 of 1980 regulating labour relations as amended by Federal Law of 1981, no 15 of 1985, and 12 of 1986. This Labour Law has 193 Articles distributed into 12 chapters covering all issues related to labour matters including:
definitions,
recruitment and employment,
employment of women and minors,
work relations,
employment contracts and remunerations,
working hours and leaves,
work conditions and industrial safety,
health and social care,
disciplinary rules,
termination of contract and employment severance pay,
compensation in respect to employment accidents and occupational disasters,
collective labour disputes,
labour inspection and penalties.

DIFC Employment Law
Labour matters under Dubai International Financial Centre (DIFC) are governed by Employment Law DIFC Law No. 4 of 2005.

This Law has 84 Articles distributed into 14 Parts covering all issues related to labour matters including :
wages,
working hours,
leaves,
maternity rights,
obligations of both parties,
termination of employment and
appeals

This Law applies to all employees of entities having a place of business within the DIFC and entities created by law No.9 of 2004.

Similar to other labour laws, any provision in an agreement under this Law to waive any right or requirement granted has no effect, except where expressly permitted under the Law. The requirements of this Law are considered minimum requirements. Furthermore, any terms and conditions of employment in any agreement that are more favorable to the employee shall be valid.

Main Difference between the Federal Law and the DIFC Law
Annual Leave (Paid)
UAE Labour Law
Every employee shall, within each year of service, be granted an annual leave as follows:
30 days per annum if the employee's service is more than one year.
2 days per month if the employee's service is more than 6 months but less than 1 year.

Annual leave in respect of fractions of the last year where the employment has been terminated.

If the employee has been dismissed or leaves the job after the notice period, they will be entitled to remuneration in respect of annual days not taken.

Such remuneration will be based on the remuneration earned on the date on which the leave was due.

If an employee works during all or part of their annual leave, and the days on which they work are not carried on to the following year, the employer shall pay remuneration plus a leave allowance in respect of the days worked at a rate equal to his basic wage.

In any circumstances, it is not allowed for an employer to ask his employee to work during his annual leave more than once in two successive years.

DIFC Employment Law
An employee whose service is more than one year is entitled to an annual leave of 20 days per annum. For an employee who has completed three months in service but less than 1 year, the annual leave is calculated at the rate of one-twelfth of the 20 days specified, on the first day of each month which is almost 1.7 working day per month.

An employer must ensure that the employee takes an annual vacation within 12 months of completing the year of employment.

Annual leave can be taken in periods of one or more weeks.

Leave cannot be cashed except:
If employment is terminated
If employer agrees otherwise.

If the employment is terminated, the employer shall pay an amount in lieu of vacation days accrued but not taken. In the case of an employee having taken more holidays than accrued at the termination date, the employee shall repay the employer the corresponding sum.

National Holidays
UAE Labour Law
Each employee shall be entitled to a leave with full pay on the following occasions:
One day for New Year's Day (Hegira)
One day for New Year's Day (Christian)

Two days for Feast of Lesser Bairam
Three days for Feast of Greater Bairam and Eve of Greater Bairam
One day for the Birthday of the Prophet
One day for the Nocturnal Journey and Ascension of the Prophet
One day for the National Day

If an employee works on a public holiday, he shall be entitled to:
A compensatory leave in respect of such days and a bonus equal to 50% of his remuneration, or;
A bonus equal to 150% of his basic remuneration in respect of the days worked without a compensatory leave.

DIFC Employment Law
All employees are entitled to the national holidays that are announced in the UAE.

An employee is entitled to be paid for national holidays at the appropriate hourly or daily rate. The appropriate hourly rate is the amount of 1 week's pay divided by the number of normal working hours in a week on the day when the national holiday is taken.

National holidays may be replaced by:
A day in lieu, or ;
A payment in lieu

Sick Leave
UAE Labour Law
According to the UAE Labour Law there is no paid sick leave during the probation period.

An employee who has completed more than 3 months after the probation period is entitled to a sick leave not exceeding 90 days per annum, whether continuous or not, as follows:
The first 15 days with full pay
The next 30 days with half pay
Any subsequent periods without pay

There shall not be a paid sick leave if illness is due to use of alcohol or drugs.

DIFC Employment Law
According to the DIFC Employment Law, the maximum annual sick leave entitlement is 90 days per annum full paid. The employer shall pay the employee sick pay at the employee's normal weekly rate provided that the employee notifies the employer of his sickness, provides a medical report upon the employer's instructions and notifies the employer at least once every 7 days during the period of absence.

Maternity Leave
UAE Labour Law
A female employee is entitled to maternity leave as follows:
45 days with full pay, including the period preceding and the period following her delivery, if she has been in service for not less than 1 year.

45 days with half pay including the period preceding and the period following her delivery, if she has been in service for less than 1 year.

An additional period of 100 days, consecutive or non-consecutive, can be granted following the 45 days to the employee without pay upon providing a medical report evidencing her illness which prevents her from resuming her work, or if it is confirmed by a competent health authority that the illness was caused by the employee's work or delivery.

During the 18 months following the delivery, a nursing mother is entitled to two breaks of not more than 30 minutes each in addition to her daily break.

There is no compensation in lieu of maternity leave.

DIFC Employment Law
A female employee shall be entitled to a minimum maternity leave of three months if she:
has been continuously employed for at least one year preceding the 8th week before the expected week of birth;
notifies her employer in writing that she is pregnant at least 8 weeks before the expected week of delivery;
provides a certificate stating the expected delivery date if required by the employer;
notifies her employer in writing at least 21 days before the day she proposes to begin her maternity leave.

The three months maternity leave isdivided as follows:
the first 45 days with full pay
the next 45 days with half pay

The maternity rights granted under this law apply to a female employee who is adopting a child of less than 3 months old. In such, references to child birth are treated as references to the date of adoption.

There is no compensation in lieu of maternity leave.

Termination of Employment
UAE Labour Law
Notice period required by both the employer and the employee in the termination of an unlimited employment contract is: 30 days written notice before the termination.

For employees working on a daily basis the period of notice shall be as follows:
One week - if the service is more than six months but less than a year
Two weeks - if the service is not less than one year
One month - if the service is not less than 5 years

Where the employee or employer fails to give notice or reduces the period of the notice, the party obliged to give the notice shall pay compensation in lieu of notice to the other party.

Employee can be terminated without notice for reasons stated in Article 120:
If the employee adopts a false identity or nationality or submits forged certificates or documents;
If the employee is in probation period;
If the employee makes a mistake resulting in substantial material loss, provided that the employer notifies the Labour Department within 48 hours of his knowledge of the incident;
If the employee disobeys written instructions regarding industrial safety or the safety of the work place, provided that such instructions are up in the work place and orally told to the illiterate employees;
If the employee does not perform his basic duties under the contract despite of warning;
If the employee reveals any confidential information regarding the establishment he works in;
If the employee is sentenced by a competent court for an offense involving honour, honesty or public morals;
If the employee is found in a state of drunkenness or under the influence of drugs during working hours;
If the employee assaults his employer, responsible manager or any of his mates;
If the employee is absent without a valid reason more than 20 nonconsecutive days or more than 7 consecutive days in one year.

As for the employee, he can terminate without notice in the following cases:
If the employer fails to comply with his obligations under the contract or the law.

If the employee has been assaulted by the employer or the employer's legal representative.

DIFC Employment Law
The notice period required by both the employer and the employee to terminate the employment is as follows:
One week if the period of continuous employment is less than three months;
One month if the period of continuous employment is three months or more but less than five years;
Three months if the period of continuous employment is five years or more.

The employer and employee may agree to a longer or shorter period of notice.

Moreover, either party may waive notice or accept a payment in lieu of notice.

An employer may terminate employment without notice where there has been a misbehaviour or misconduct by the employee.

In the case that a condition in the employment has been substantially altered, the director may determine the termination of an employee.

Severance Pay/ Gratuity
UAE Labour Law
An employee who has completed a period of one year or more of continuous service shall be entitled to a severance pay on the termination of his employment as follows:
2 1 days' remuneration for each year of the first five years of service.

30 days' remuneration for each additional year of service provided that the aggregate amount of severance pay shall not exceed 2 years remuneration.

Fractions of a year in proportion to the time actually worked.

An employee who terminates, of his own accord, a contract of unlimited duration is entitled to severance pay as follows:
If his continuous service is not less than one year and not more than three years, he shall be entitled to one third of the severance pay.

If his continuous service exceeds three years but less than five years, he shall be entitled to two thirds of the severance pay.

If his continuous service exceeds five years, he shall be entitled to the full severance pay.

An employee who terminates, of his own accord, a contract of a limited duration before the expiry of his contract, shall not be entitled to severance pay unless his continuous period of service exceeds five years.

An employee shall not be entitled to severance pay if his employment is terminated for any of the reasons of Article 120 above mentioned, or if he leaves his work in order to avoid being dismissed in accordance with this Article.

The severance pay shall be calculated on the basis of the last basic salary excluding all allowances.

DIFC Employment Law
An employee who has completed continuous employment for one year or more is entitled to gratuity payment as follows:
2 1 days' wage for each year of the first five years of service.

30 days' wage for each additional year of service, provided that the total of the gratuity shall not exceed the wages of two years of service.

Gratuity pay shall be calculated on a proportionate basis where the termination occurs prior to the end of any full year.

An employee shall not be entitled to gratuity pay if his employment is terminated for his misbehaviour or misconduct.

The gratuity pay shall be calculated on the basis of the last basic salary excluding all allowances.

By Nawal Abdelhadi

© Al Tamimi & Company 2007

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