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Thu 11 Jul 2019 02:14 PM

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Sick pay, gratuity, paternity: All you need to know about the DIFC's new law

Experts discuss new DIFC Employment Law and whether the balance has been struck between employers and employees

Sick pay, gratuity, paternity: All you need to know about the DIFC's new law
Around 24,000 staff will benefit from the new DIFC Employment Law

For gratuity alone, there were nearly 100 pages of feedback during the consultation of the new Dubai International Financial Centre (DIFC) Employment Law, which in itself has taken three years to come to fruition; not surprising given paternity leave, maternity leave, regulations to cover discrimination and the always contentious issue of end-of-service payments, could quite easily cause some discontent.

Legal director at Clyde & Co, Ben Brown, who helped formulate the new law, says the matter of gratuity particularly ‘polarised opinion’ during the course of the consultation. But the employment law due to come into force on August 28 seems to have finally struck the right balance for employees and employer.

Jacques Visser, chief legal officer, DIFC, says: “I think when you look at this particular law, there was room for improvement. The original law was enacted in 2005; there was a revision in 2012 which meant that we’re standing at another seven-year cycle. We’re not trying to go off on a completely separate track. If you actually look at the new law, it is very much built in terms of the articles and references of what the old law looks like.

“If you look at the amount of consultation and outreach that we’ve done and the amount of input that we’ve taken from people who represent the interests of both, I would hope that we’ve achieved the right balance. I’ve not seen anybody pointing out any particular areas where we haven’t done that, but ultimately time will tell and we are very positive that we have achieved that balance.”

Changes

The fundamental change in terms of gratuity will see employees receive their payment regardless of whether they have been dismissed from their roles by the company. Under the previous law, there was no such thing as ‘unfair dismissal’, and the money could be withheld by the firm pending an appeal process by the employee, which could often be long and laborious.

“The rationale is simple. We did look at other jurisdictions on this one. Personally, I couldn’t find another jurisdiction whereby an employee is dismissed for cause, or gross misconduct as it’s called in other jurisdictions, and they lose all their pension entitlement, which they’ve accrued during their employment. Obviously the gratuity is an equivalent to the pension,” Clyde & Co’s Brown explains.

“Yes it may be frustrating for an employer to pay out gratuity to an employee who may have done something wrong, but equally it was felt employees shouldn’t lose what could be a significant sum accrued over 15 years or so, just because of one unacceptable piece of conduct at the end of their employment,” he adds.

Frustrating indeed, but there is still recourse for the employer.

DIFC chief Visser explains: “If an employer had a fraudulent employee who stole from them, there’s nothing precluding the employer to go to court immediately and get injunctive relief and say, ‘I’m about to pay this guy his end of service benefit; he owes me a lot of money, and it’s clear from the criminal proceedings going on; as a consequence I want this amount to be attached’.

“It’s not as if we’ve taken away the remedies of employers, I think we’ve just tried to make it a little bit fairer given there’s no general concept of fairness in dismissal.”

Calculating gratuity

Calculating end of service also falls under the new legislation. It stipulates that the basic salary for the purpose of calculating gratuity must be no less than 50 percent of the employee’s total remuneration.

Brown says: “We came across a lot of employers who tried to circumvent, or reduce, their exposure to end of service gratuity by agreeing with an employee that actually their basic salary will only make up 30 percent of their total remuneration. Now that’s not correct and it must be at least 50 percent.”

There will also be the opportunity for employees to elect, in writing, to receive contributions to a pension fund, retirement fund, or savings scheme of sorts. This doesn’t need to be in the UAE, but contributions from the employer must be no less than the gratuity they would have received otherwise.

The new law, which was signed by Dubai Ruler Sheikh Mohammed Bin Rashid Al Maktoum on May 30, will affect more than 2,100 companies operating from DIFC and 24,000 workers.

A new addition coming into force next month is the introduction of paternity leave. There will be five working days leave, providing the employee has at least 12 months of service – a benefit not enjoyed by male employees in onshore UAE or the other main free zones such as the DDA or JAFZA, unless provided for by an employer’s policy. There is also the right for expectant fathers to take time off to attend appointments for ante-natal care.

Maternity leave

Maternity leave has also been tweaked, allowing leave where a child under the age of five has been adopted. Previously, this only applied to a child under the age of three months.

As far as the new rules on sick pay is concerned, Gordon Barr, head of employment & incentives, Al Tamimi & Company, says: “The old law provided for what most of us would agree were very generous sick pay entitlements.”

Sick leave entitlement remains the same at 60 working days, but whereas employees would receive sick pay for the whole 60 days, that has been changed to 10 days full pay, 20 days half pay and then no pay for the final 30 days of sick leave. There is also a reduction in the amount of leave being carried forward, which was reduced from 20 to five days.

Among the 44 key changes to the current employment law document, the biggest change has been to the discrimination law, according to Barr. Under the current law, discrimination includes sex, marital status, race, nationality, religion and mental or physical disability, but the new law now includes pregnancy, maternity and age.

“Of those three I would suggest that age is the most ground-breaking because arguably pregnancy and maternity were still covered in sex discrimination provisions in the existing law; whereas age, everybody has an age and as a result of that, the ‘stale, pale male’ as he is referred to in other jurisdictions, didn’t have a discrimination claim but now potentially does. That is a significant change,” Barr says.

The law now also provides for various remedies, including compensation payable in respect of a discrimination claim capped at one years’ wages – or two years’ wages for repeat offenders.

There is also provision for whistle blowers to act without fear of retribution, which according to Rebecca Ford, partner at Clyde & Co, means it is up to each and every company to make any alterations to policies and procedures before the new law is live. 

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