UAE worker on fixed contract liable to compensate employer after early resignation

I plan to resign from my company after working for them for 18 months and want to know if I will receive any gratuity payment. I am on a free zone visa for a three-year contract. When I joined the company in January 2014 I had to sign a piece of paper that said if I left the company before three years I would pay all visa expenses and any other costs. I wasn’t shown this when I was given the offer letter and had no option but to sign it. Can you tell me if this is correct? SE, Dubai

My understanding is that SE is on a three-year fixed-term employment contract, so specific terms apply that are different to those for people on unlimited contracts. Article 138 of UAE Labour Law states: “If an employee under a contract with limited period leaves his work at his own option before the end of the contract period he shall not be entitled to end of service gratuity unless the period of his continuous service exceeds five years”. In addition anyone who resigns before the end of the fixed term is liable to compensate the employer for breaking the terms of the contract. Article 116, in reference to fixed terms contracts only, states that: “If the contract has been terminated on part of the employee … the employee becomes liable for compensating the employer against losses incurred by him in consequence of contract termination, provided that the amount of compensation may not exceed half a month’s pay for a period of three months or for the remaining period of contract whichever is shorter, unless the terms of the contract provide otherwise”. This is broadly equivalent to 45 days of pay. Although a penalty is payable for breaking contract terms, an employee should never be asked to pay for the cost of employing them or for visa costs. The law is clear that these costs are to be borne by the employer and not passed on to the employee, and this applies even if someone has signed paperwork to this effect, especially if coerced.

Keren Bobker is an independent financial adviser with Holborn Assets in Dubai, with over 20 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. Readers are encouraged to seek appropriate independent legal advice.

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