Advancing against gratuity payments not in the spirit of UAE Labour Law

I have been employed by the same company for some 20 years. A couple of years ago, I availed of an advance against my end of service gratuity of around 50 per cent of what was due, a practice that was prevalent in the company at that time, and the understanding was that this amount would be deducted from the final settlement at the end of the service. A number of ex-employees have taken advantage of this facility in the past, and a few of us who have also taken the money earlier have continued in service. Now the company is saying that the money we have been paid will now be considered to be a loan on which they intend to charge interest and is insisting on a monthly repayment. RS, Abu Dhabi

Strictly speaking, the end of service gratuity is due at the time an employee leaves service and should not be paid out sooner unless there is a change of contract, as agreed by both parties, so that any monies accrued can be paid out. This must be clearly documented and accepted by both the employer and employee. I am aware that there are companies who permit their employees to receive the gratuity payments sooner, but this is not in the spirit of UAE Labour Law. It is also not acceptable for an employer to change the terms of any agreement, to charge interest for example, without the full agreement of the employee as this would be deemed a change in the contract of employment and that is only permissible with the agreement of both parties. Unless the employee has agreed to these terms, the employer is not permitted to start charging interest, nor can they insist on repayment. The action of the company may well be a reaction to new rules that state that employers must make proper provision for the payment of gratuities rather than hoping to be able to meet liabilities out of cash flow. As I have written before, where there is any deviation from standard practice under UAE Labour Law, for the protection of all parties, everything should be properly documented.

Keren Bobker is an independent financial adviser with Holborn Assets in Dubai, with over 20 years’ experience. Contact her at Follow her on Twitter at @FinancialUAE.

The advice provided in our columns does not constitute legal advice and is provided for information only.

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