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Salary increase clause in employment contract – UAE Dubai labour law

salary increase clause in employment contract

This article will explore the salary increase clause in employment contract, its implications, and the concept of the basic salary.

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Salary increase clause in employment contract.

Clauses of salary increment in UAE law are standard in employment contracts, designed to reward employees for their hard work and dedication.

But ensuring these clauses are fair, equitable, and compliant with all applicable laws and regulations is essential.

Several aspects should be considered when drafting a Dubai salary increase clause.

These include the employee’s job title, experience, and performance. It’s also crucial to specify the increase amount, its effective date, and any conditions that must be met to receive the increase.

UAE labour law salary increment clauses can be a valuable tool for employers and employees. However, they must be drafted with care and under the law.

Al Mulla Labour Lawyer & Legal Consultant is a recommended resource for professional advice on salary increment in UAE.

Now that we’ve covered the salary increase clause in employment contract, let’s focus on UAE basic salary law and how it impacts various benefits.

Basic salary in UAE labour law.

In the context of the UAE Labour Law – Federal Decree-Law No. 33 of 2021, the term “basic wage” or “basic salary” refers to the pay specified in your employment contract earned in exchange for your services under the contract.

The basic salary constitutes a part of your total remuneration, with the rest being different allowances like housing, transport, or other incentives.

The total salary combines the basic wage and these allowances, which aim to cover living costs, sales percentages, or profit percentages relevant to your work.

Determining Your Basic Salary.

To determine your primary salary, one needs to refer to their employment contract, where the salary breakdown, including the basic salary and additional allowances, is mentioned.

Employee Benefits Based on Basic Salary.

Upon determining your primary salary, let’s delve into some employee benefits calculated based on this figure:

Gratuity/Severance Pay.

Gratuity or severance pay is the sum you receive upon terminating your services at a company, provided you have completed one or more continuous years of service.

As per Article 51 of the UAE Labour Law, a full-time foreign worker is entitled to a severance pay, calculated based on the basic wage. The severance pay is calculated as follows:

  • Twenty-one working days’ wage for the first five years of service.
  • Thirty working days’ wage for each subsequent year of service.

The calculation also considers fractions of the year worked. For example, if you have worked for two years and three months, the three months of service will also be calculated.

Job Loss Insurance Payout.

The newly implemented Involuntary Loss of Employment (ILOE) scheme, also called job loss or unemployment insurance, provides eligible workers with financial support if they lose their jobs due to reasons beyond their control.

You will receive 60 per cent of your basic salary for three months if eligible. However, you must fulfil specific eligibility criteria, including being subscribed to the scheme for at least one year.

Compensation for Working on a Public Holiday.

If you work on a public holiday, you are entitled to a leave-in-lieu or financial compensation per Article 28 (2) of the UAE Labour Law.

Overtime Pay.

If you work beyond your regular work hours, you might be eligible to receive overtime pay. However, not all employees qualify for overtime pay, and if you do, the payout will be calculated based on the basic salary, not the overall salary.

Encashment of Annual Leave at Job Termination.

When you leave your job, you are entitled to cash in any unused annual leave as per Article 19 (2) of Cabinet Resolution No. 1 of 2022, which states:

“If the worker’s service ends, he or she shall be paid a cash allowance for the balance of his or her legally due annual leave, according to the basic wage.”

FAQs About salary increase clause in employment contract.

A salary increase clause is a provision in an employment contract that outlines the terms and conditions for increasing an employee's salary based on their job title, experience, and performance.
Basic salary is the pay specified in an employee's employment contract earned in exchange for their services under the contract. It constitutes a part of an employee's total remuneration, with the rest being different allowances like housing, transport, or other incentives.
Gratuity/severance pay in the UAE is calculated based on the basic wage, as per Article 51 of the UAE Labour Law.
The calculation considers the length of continuous service, with 21 working days' wages for the first five years of service and 30 working days' wages for each subsequent year of service.

In conclusion, understanding your basic salary and the salary increase clause in employment contract is critical to making informed decisions about your career and financial future.

Always take the time to read and understand your employment contract and consult a legal expert if needed.

Your hard work and dedication deserve to be rewarded appropriately, and a fair and equitable salary increase clause is one way to ensure that happens.

Contact the office of  Al Mulla via Whatsapp. Click here. Or visit us at our law firms: Dubai. You can also call us on phone: 00971501961291.

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