I am employed on a two-year contract. I have completed more than a year of employment and have given my resignation with a notice period. I know that because I am breaking my contract, I have to compensate my employer. Will this be based on my basic salary or my salary with allowances? My basic salary accounts for 60 per cent of the total. The contract just says that the termination compensation will be "in accordance with the UAE Labour Law". MH, Abu Dhabi
As MH is aware, he has broken the terms of his contract of employment and is liable to pay a penalty to his employer in accordance with Article 116 of the UAE Labour Law, which states: “Should the contract be rescinded by the worker … the worker shall be bound to compensate the employer for the loss incurred thereto by reason of rescission of the contract, provided that the amount of compensation does not exceed the wage of half a month for the period of three months, or for the remaining period of the contract, whichever is shorter, unless otherwise stipulated in the contract.”
The Labour Law does not state whether the penalty should be calculated using basic or gross salary, but this has been clarified in Ministerial Degree (765) of 2015 on Rules and Conditions for the Termination of Employment Relations, which clearly states that the penalty is based on “gross wages”.
In this case, no end-of-service gratuity is payable because MH will forfeit this by leaving before the end of the contract term, as per Article 138, which says: “Should the worker bound by an employment contract with determined term leave his work by his own choice prior to the expiry of the contract, he shall not be entitled to an end-of-service gratuity, unless the duration of the service period exceeds five years.”
I have a property in Dubai, which is mortgaged with a local bank. I have been made redundant but have also applied for a property visa in Dubai. I have been granted my trade licence for the visa and am waiting to cancel my employment visa to get the new visa. The mortgage will be finished in three years and I intend to keep paying the mortgage monthly as agreed. My concern is that the bank will try to keep my end-of-service benefits to cover the loan and leave me with no cash flow.
My question is whether the bank has the right to hold my gratuity even if I have a property visa in Dubai and agree to keep my commitment? JA, Dubai
The term “trade licence” in relation to a property visa, also known as an investor visa, is confusing because this is not the same as the licence obtained to set up a business. It is granted by the Dubai Economic Department as part of the requirement to apply for a property-linked investor visa from the Dubai Land Department. An investor visa does not give someone the right to work in the UAE.
An investor visa does not give someone the right to work in the UAE
When an employee ends a period of service, the employer is obliged to mark the last payment to banks, which should include any end-of-service gratuity that is payable, as “final salary”. This puts the bank on notice that there may be an issue in meeting future loan repayments and that is partly why bank accounts are frozen.
Depending on the terms of the loan agreement, the bank may have the right to retain the gratuity amount and apply it against the outstanding debt in order to reduce liabilities. JA will need to check the terms of the loan agreement that he signed to confirm what he agreed to when taking out the mortgage.
If the terms state that the bank could retain monies in accounts to cover liabilities and these were signed in agreement, then the bank can use the end-of-service gratuity in this way. If JA will not be working, the bank will have concerns regarding loan repayments and want to reduce the level of risk.
As part of the investor visa process, an individual must demonstrate that they have a source of income of at least Dh10,000 per month, not from employment in the UAE.
So, I would recommend that JA contacts the bank to have a discussion with a senior member of staff to come to an agreement. The bank may be willing to consider not applying the payment to the loan if it sees that there will be no problem in payments being met in future. But as such, decisions would need to be signed off by a senior staff member. There is no guarantee that a bank will vary from its usual practice.
Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with more than 25 years’ experience. Contact her at keren@holbornassets.com. Follow her on Twitter at @FinancialUAE
The advice provided in our columns does not constitute legal advice and is provided for information only
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
The biog
Family: Parents and four sisters
Education: Bachelor’s degree in business management and marketing at American University of Sharjah
A self-confessed foodie, she enjoys trying out new cuisines, her current favourite is the poke superfood bowls
Likes reading: autobiographies and fiction
Favourite holiday destination: Italy
Posts information about challenges, events, runs in other emirates on the group's Instagram account @Anagowrunning
Has created a database of Emirati and GCC sportspeople on Instagram @abeermk, highlight: Athletes
Apart from training, also talks to women about nutrition, healthy lifestyle, diabetes, cholesterol, blood pressure
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Hydrogen: Market potential
Hydrogen has an estimated $11 trillion market potential, according to Bank of America Securities and is expected to generate $2.5tn in direct revenues and $11tn of indirect infrastructure by 2050 as its production increases six-fold.
"We believe we are reaching the point of harnessing the element that comprises 90 per cent of the universe, effectively and economically,” the bank said in a recent report.
Falling costs of renewable energy and electrolysers used in green hydrogen production is one of the main catalysts for the increasingly bullish sentiment over the element.
The cost of electrolysers used in green hydrogen production has halved over the last five years and will fall to 60 to 90 per cent by the end of the decade, acceding to Haim Israel, equity strategist at Merrill Lynch. A global focus on decarbonisation and sustainability is also a big driver in its development.
UAE currency: the story behind the money in your pockets
Oppenheimer
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Company profile
Date started: 2015
Founder: John Tsioris and Ioanna Angelidaki
Based: Dubai
Sector: Online grocery delivery
Staff: 200
Funding: Undisclosed, but investors include the Jabbar Internet Group and Venture Friends
WOMAN AND CHILD
Director: Saeed Roustaee
Starring: Parinaz Izadyar, Payman Maadi
Rating: 4/5
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Bio
Born in Dubai in 1994
Her father is a retired Emirati police officer and her mother is originally from Kuwait
She Graduated from the American University of Sharjah in 2015 and is currently working on her Masters in Communication from the University of Sharjah.
Her favourite film is Pacific Rim, directed by Guillermo del Toro
List of officials:
Referees: Chris Broad, David Boon, Jeff Crowe, Andy Pycroft, Ranjan Madugalle and Richie Richardson.
Umpires: Aleem Dar, Kumara Dharmasena, Marais Erasmus, Chris Gaffaney, Ian Gould, Richard Illingworth, Richard Kettleborough, Nigel Llong, Bruce Oxenford, Ruchira Palliyaguruge, Sundaram Ravi, Paul Reiffel, Rod Tucker, Michael Gough, Joel Wilson and Paul Wilson.
Zayed Sustainability Prize
KEY HIGHLIGHTS
Healthcare spending to double to $2.2 trillion rupees
Launched a 641billion-rupee federal health scheme
Allotted 200 billion rupees for the recapitalisation of state-run banks
Around 1.75 trillion rupees allotted for privatisation and stake sales in state-owned assets
The biog
Simon Nadim has completed 7,000 dives.
The hardest dive in the UAE is the German U-boat 110m down off the Fujairah coast.
As a child, he loved the documentaries of Jacques Cousteau
He also led a team that discovered the long-lost portion of the Ines oil tanker.
If you are interested in diving, he runs the XR Hub Dive Centre in Fujairah
Bio:
Favourite Quote: Prophet Mohammad's quotes There is reward for kindness to every living thing and A good man treats women with honour
Favourite Hobby: Serving poor people
Favourite Book: The Alchemist by Paulo Coelho
Favourite food: Fish and vegetables
Favourite place to visit: London
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
