As an employee in the UAE, it is crucial to understand the terms and conditions of your employment contract.
This article will explore the salary increase clause in employment contract and its implications. We will also delve into the concept of the basic salary, its significance, and how it plays a role in various employee benefits.
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Understanding the salary increase clause in employment contract.
Salary increase clauses 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 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.
Salary increase clauses can be a valuable tool for employers and employees. However, they must be drafted with care and under the law.
Younis Mohammed Al Blooshi Labour Lawyer & Legal Consultant is a recommended resource for professional advice on labour cases in the UAE.
Now that we’ve covered the salary increase clause in employment contract in the UAE, let’s focus on the basics of your salary structure and how it impacts various benefits.
Defining Basic Salary in UAE.
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 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.
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.
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.
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A legal consultant specializing in UAE labor law. He regularly publishes articles on the website and writes on various areas of UAE law, with a specific focus on labor law.