Question: I am preparing to relocate to the UAE this summer and have been looking into employment options. However, the employers I’ve approached so far have not been willing to discuss severance packages. I’d like to know if there are any legal frameworks regarding this matter. Can I request a “golden handshake” provision in my employment contract? If so, would it hold legal weight?
Answer: It seems you are evaluating a job offer from a company located in the UAE mainland. In this case, the UAE Employment Law, along with its associated cabinet resolutions and the Civil Transactions Law, would govern your employment situation.
According to UAE regulations, an employee who has served continuously for a minimum of one year is entitled to severance pay upon concluding their employment. This severance compensation is calculated based on the employee’s basic salary. Article 51(2) of the Federal Decree Law no. 33 of 2021 Regarding the Regulation of Employment Relationships and its amendments specifies:
“A full-time foreign employee, who has completed a year or more of continuous service, shall be entitled to end-of-service benefits upon termination of employment, calculated based on the basic salary as follows:
a. Twenty-one days’ salary for each year of the first five years of service;
b. Thirty days’ salary for each additional year beyond that period.”
Furthermore, Article 8 of the UAE Employment Law, along with Article 10 (1) of the Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Employment Relations, outlines the standard terms that must be incorporated into an employee’s contract.
In the UAE, both parties in any agreement are legally obligated to fulfill their responsibilities as defined within the contract, and must do so in good faith and fairness. This guideline is established in Article 246 (1) of the Federal Law No. (5) of 1985 On the Civil Transactions Law of the United Arab Emirates, which states: “1. The contract should be executed as per its provisions and in a manner consistent with the requirements of good faith.”
Typically in the UAE, the Ministry of Human Resources & Emiratisation (Mohre) employment offer letter and contract templates do not include clauses pertaining to severance pay. However, you are welcome to request that your potential employer includes this clause.
If your future employer declines to add any mention of severance pay in the employment offer letter or contract, you still retain the right to severance payments once your employment terminates, assuming you have served at least one full year with the organization.
As an employee, you are entitled to all provisions defined in the UAE Employment Law and the related cabinet resolutions, including the stipulations on severance pay as outlined in Article 51(2) of the UAE Employment Law.
Moreover, while the UAE Employment Law provides protection for employee rights, it does not prevent employers from offering more generous terms. This principle is reflected in Article 65 (1) of the Employment Law, stating: “The rights established in this decree-law constitute the minimum rights for employees. The provisions of this Decree-Law do not affect any rights granted to employees under other legislation, agreements, declarations, regulations, or employment contracts that provide rights more advantageous than those outlined in this Decree-Law.”
If you are interested in incorporating a ‘golden handshake’ clause into your employment agreement, you may bring it up with your prospective employer and reach a mutual consent to include it in the contract.
Applicable laws:
1. Federal Decree Law no. 33 of 2021 Regarding the Regulation of Employment Relationships and its amendments
2. Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Employment Relations
3. Federal Law No. (5) of 1985 On the Civil Transactions Law of the United Arab Emirates