Gratuity in Case of Resignation in Limited Contract

When it comes to resigning from a limited contract, one question that often arises is whether a gratuity payment is owed to the employee. The answer is yes, but with some important caveats.

First, let`s define what we mean by a limited contract. In many countries, including the UAE, an employment contract may be for a fixed term rather than being indefinite. This may be due to the nature of the work, such as for a specific project, or due to the employer`s preference for flexibility. In such cases, the contract will specify the duration of the employment, which may be renewed upon expiration if both parties agree.

Now, let`s turn to the issue of gratuity. This refers to a payment made to an employee upon termination of their employment, based on their length of service. In the UAE, gratuity is governed by Federal Law No. 8 of 1980, also known as the Labor Law.

Under the Labor Law, employees who have completed one year of continuous service are entitled to a gratuity payment upon termination of their employment, regardless of whether it was voluntary or involuntary. The amount of gratuity is calculated as follows:

– 21 days` pay for each year of service for the first five years

– 30 days` pay for each additional year

Note that « pay » in this context refers to the employee`s basic salary, excluding any allowances or bonuses.

So what about employees on limited contracts? The answer is that they are also entitled to gratuity, but the amount may be prorated based on the duration of their contract. For example, if an employee`s contract is for two years and they resign after one year, they would be entitled to half of the gratuity payment they would receive if they had completed two years of service.

It`s important to note that there are some exceptions to the gratuity requirement. For example, if an employee is terminated for misconduct or violation of the law, they may not be entitled to gratuity. Additionally, if the employee has entered into an agreement with the employer that waives gratuity or provides for a different calculation method, that agreement may be enforceable.

In conclusion, employees on limited contracts are entitled to gratuity upon termination of their employment, but the amount may be prorated based on their length of service. It`s important for both employers and employees to be aware of these requirements and to ensure that any agreements regarding gratuity are clear and compliant with the law.

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