UAE gratuity deductions: What employers can legally withhold

Dubai: If your end-of-service payout is coming up short, it might be because your employer has made certain deductions from it. When is it allowed for an employer to deduct from end-of-service benefits and what can you do if you feel your gratuity has been wrongly withheld? Find out below. End-of-service gratuity: Can an employer legally deduct from a gratuity? Imran Khan, legal consultant at I K Lawyers, said Article 51(7) of the Federal Decree-Law No. (33) of 2021 Regulating Labour Relations (the UAE Labour Law) clarifies the matter. He said: “It empowers an employer to deduct from an employee’s end-of-service gratuity amounts that are due by law or pursuant to a court judgment, provided that the deduction complies with the conditions and procedures prescribed by the Executive Regulation.” Employers are bound by law to ensure they do not deduct unfair amounts from their employees’ gratuities. Khan added: “An employer cannot make arbitrary deductions from an employee’s end-of-service gratuity. Any deduction must fall within the legally permitted categories and comply with the prescribed conditions and procedures.” Article 29 of Cabinet Resolution No. (1) of 2022 sets out the controls governing such deductions. When can an employer deduct from an employee’s gratuity? Khan explained that employers are subject to Article 51(7) of the UAE Labour Law, and any gratuity deduction must fit into one of five categories mentioned in Article 29 of Cabinet Resolution No. (1) of 2022. Each deduction must be supported with proper evidence, such as a payroll record, approved disciplinary regulations, or a court order, so that it is deemed valid. Here are the five categories or circumstances in which, it is permitted for employers to deduct amounts from a worker’s end-of-service pay: Loans or overpayments: Amounts owed for the repayment of loans or amounts paid to the worker in excess of their entitlement. Pension and insurance contributions: Repayment of amounts deducted for the worker’s pension or insurance contributions, in accordance with the applicable UAE legislation. Disciplinary fines: Amounts arising from violations committed by the worker, in accordance with the penalty schedule applicable at the establishment, and approved by the Ministry of Human Resources and Emiratisation (MOHRE). Debts ordered by courts: Debts owed pursuant to the execution of a court judgment against the worker. Damage caused by the employee: Amounts required to repair damage caused because of the worker’s mistake or because of a violation of the employer’s instructions, where it resulted in the damage, destruction, or loss of the employer’s tools, machines, products, or materials. Khan clarified that any deductions made due to the damage caused by an employee come with a time limit: “Where the amount claimed arises from a worker’s violation or damage attributable to the worker’s mistake, the employer must follow the procedures prescribed by the Decree-Law and the Executive Regulation. Such amounts must not have remained outstanding for more than three months from the date they became due, unless otherwise agreed.” What can employees do, if a deduction was incorrectly made? There are several ways employees can seek recourse: Ask for a written explanation or breakdown: Khan asserted that any deductions by employers must link back to one of the five categories mentioned in Article 29. You are well within your rights to ask your employer to trace the deduction back to a specific category, and to provide any supporting evidence, such as a disciplinary record, payroll record or loan agreement. Avoid signing a settlement if you are unsatisfied: If the gratuity calculation features a disputed deduction, note your objection in writing and avoid signing a release. Signing a release means you are acknowledging your approval – this can harm your case if you decide to take it up with the authorities later. Don’t delay raising a dispute: According to Khan, Article 54(9) of the UAE Labour Law states that gratuity-related dispute cases must be registered within two years from the date of exiting a workplace. If the two-year window has passed, the case cannot be brought to the authorities, so ensure you present your side in a timely manner. File a complaint with MOHRE: For disputes over end-of-service gratuity in the private sector, you can lodge a complaint with MOHRE . Ensure you have supporting documentation or evidence, to add credibility to your case. If the disputed claim value is below Dh50,000, MOHRE may grant a binding resolution, bringing an end to the dispute. For larger or unresolved issues, the matter is referred to the Labour Court.