Companies operating in the Dubai International Financial Centre are no longer permitted to make job contracts with less than 50% of pay as the 'basic salary' and indicating the remaining as 'allowances'.
This previous wage structure in the DIFC was cause for concern since it meant employees would lose a significant portion of their end-of-service gratuity.
End-of-service gratuity is calculated based on an employee's basic pay, however, the law didn't clarify how much of the total salary package should be categorised as 'basic'. This has allowed some employers to work around the system and pay less.
Now, the employment law has set a minimum threshold of 50% of basic salary, so you cannot go under 50%, but you can go higher"
Enacted on May 30, the DIFC's new employment law ensures that employers are giving at least 50% basic salary. It is a rule that has been based on workers' experiences.
"Now, the employment law has set a minimum threshold of 50% of basic salary, so you cannot go under 50%, but you can go higher," said Sethi, regional managing partner and head of employment at DWF Middle East, Khaleej Times reports.
"A delivery driver who earns, for example, a total remuneration of Dh10,000 cannot be given Dh1,000 as basic salary and Dh9,000 as allowances. It has to be the other way round, or at least Dh5,000 basic salary and Dh5,000 allowances."
The new rules also bring change to sick leave pay. Until now the law entitled employees up to 60 working days of sick leave with full pay. Under the new legislative framework, the law retains the 60 working day entitlement, but not all of it is to be paid at full pay instead: 100% pay for the first 10 working days of sick leave in a 12-month period; 50% pay for the next 20 working days of sick leave in the same 12 month period; and no pay for any additional working days of sick leave in the same 12 month period.
Employers have 90 days from May 30 to correct all employment contracts or they can be held accountable at DIFC courts and face hefty penalties.
The DIFC have recently announced proposed plans to introduce a savings scheme to replace the existing system of end of service gratuity. The 2019 Employment Law makes specific provision that the value of the aggregate contributions made by an employer into a savings scheme must not be less than the employee's gratuity entitlement.