Court rules full salary is basis for employee gratuity

Lawyers say ruling on end-of-service payoffs could open floodgates for future claims
Court rules full salary is basis for employee gratuity
In the absence of pension schemes in the Gulf, firms are required to provide an end-of-service payout to employees
By Claire Ferris-Lay
Tue 28 Jun 2011 12:59 PM

UAE lawyers predict a surge in disputes over end-of-service employee payoffs after a Dubai court this week ruled commission should be used in the calculation of gratuities.

The Dubai Court of Cassation on Monday overturned a verdict upheld by two Dubai courts after ruling an employee’s gratuity should be calculated on his total salary, and not his basic wage.

The man had sought more than AED150,000 from his former employer, and the court supported his claim that his monthly commission should be included in his payout.

“[This ruling] will open people’s eyes to what’s happening. I’m sure if they are asking for end of service, they will make sure to ask their lawyer…to claim for this,” said Walid Azzam from Dubai-based legal firm, Hadef & Partners.

“More people will be able to take it further to substantial that they were actually paid [more than their contract states],” added Mazen Boustany from law firm Habib Al Mulla.

In the absence of mandatory pension schemes in the Gulf, firms are required to provide an end-of-service payout to employees, calculated on the length of the employment and basic salary.

Saudi Arabia has no cap on the total amount employees can receive while the UAE and Kuwait cap payouts at equivalent to two years’ pay.

In its ruling, the Court of Cassation said “all that a worker receives as emolument, whether in cash or in kind… including his monthly commission,” should be used to calculate gratuities, Emirates 24/7 reported.

Lawyers saw a rise in disputes between staff and their former employers in the wake of the financial crisis, which sparked widespread redundancies across the Gulf.

Dubai courts have been ruling in favour of employees who received regular commission for some time, said Azzam.

“There are several courts…that consider if you are getting a regular commission on a monthly basis, this is part of your salary. A lot of construction companies, for example, give employees a small basic salary as well as a bonus that gets divided over twelve months,” he said.   

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