Question: I am planning to relocate to the UAE this summer and am currently looking into job options. However, none of the employers I have contacted have agreed to provide a severance package. I’m interested in knowing if there are any laws or regulations regarding this matter. Can I request a “golden handshake” clause in my job contract? If I do, will it be enforceable?
Answer: It appears you are evaluating job offers from a company based in the UAE mainland. In such instances, UAE Employment Law, along with relevant cabinet resolutions and the Civil Transactions Law, will govern your circumstances.
In the UAE, employees who have served for a minimum of one continuous year are entitled to severance pay upon termination of their employment. The calculation for this severance pay is based on the employee’s basic salary. According to Article 51(2) of the Federal Decree Law no. 33 of 2021 concerning the Regulation of Employment Relationships and its subsequent amendments, it is stated:
“A full-time foreign employee who has completed one year or more of continuous service shall be entitled to end-of-service benefits upon conclusion of their employment, calculated according to the basic salary as follows:
a. A salary of twenty-one days for each year of the first five years of service;
b. A salary of thirty days for each additional year of service beyond that period.”
Moreover, Article 8 of the UAE Employment Law, in conjunction with Article 10 (1) of 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 and conditions that need to be included in an employee’s contract.
Legally, parties involved in any contract in the UAE are obligated to fulfill their respective commitments as outlined in the agreement, and must do so with honesty, fairness, and in good faith. Article 246 (1) of the Federal Law No. (5) of 1985 concerning Civil Transactions in the UAE specifies: “1. Contracts must be executed in accordance with their provisions and in a manner consistent with the obligations of good faith.”
Typically, the employment offer letter and contract template provided by the Ministry of Human Resources & Emiratisation (Mohre) does not include severance payment clauses. However, you can request that your potential employer adds such a clause.
If your prospective employer declines to include severance pay details in your offer letter or if the contract lacks this information, you will still be entitled to severance pay upon the conclusion of your employment, provided you have worked for at least one year with the organization.
As an employee, you are entitled to all benefits stipulated in the UAE Employment Law and its associated cabinet resolutions, including the severance pay outlined in Article 51(2).
Furthermore, while the UAE Employment Law safeguards employee rights, it does not prevent employers from offering more favorable terms. Article 65 (1) of the Employment Law indicates: “The rights established in this decree-law represent the minimum entitlements for employees. These provisions shall not undermine any other rights granted under different laws, agreements, declarations, regulations, or employment contracts that provide more favorable conditions than those specified in this Decree-Law.”
If you are considering the inclusion of a ‘golden handshake’ clause in your employment contract, you have the option to discuss this with your prospective employer and reach a mutual agreement to incorporate it into 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