UAE Compensation Packages: Insights into Severance Pay and Golden Handshakes
Golden Handshakes in UAE Employment Contracts: What You Need to Know
In the United Arab Emirates (UAE), it is possible to include a "golden handshake" clause in an employment contract. This clause, which outlines a more generous severance or termination compensation arrangement, can be legally binding if it complies with UAE labor laws and regulations.
The UAE Labor Law allows for mutually agreed terms between employer and employee in the employment contract, including severance terms and end-of-service benefits. A golden handshake, if explicitly included and agreed upon, is generally enforceable as part of the contract provided it does not contravene mandatory provisions of the Labor Law.
For a golden handshake clause to be legally binding, it must be clearly drafted in the contract, specifying the conditions, amount, and timing of payments. Both parties need to consent without coercion, and the terms must comply with UAE law, particularly regarding end-of-service gratuity and other statutory entitlements.
It is essential to note that the standard employment contract template provided by the Ministry of Human Resources & Emiratisation (MoHRE) does not typically include a clause about severance pay. However, the UAE Labor Law mandates minimum end-of-service gratuity payments based on length of service. A golden handshake can offer a severance payment above this minimum, but it cannot reduce the employee’s statutory rights.
In case of dispute, a UAE labor court or tribunal will review the contract terms and ensure compliance with labor law. Contracts including a golden handshake clause have been upheld if they meet legal standards and are not unfair or illegal.
After the first five years, the severance pay in the UAE increases to 30 days of salary per year. Employers in the UAE are not required by law to offer a severance package, but employees may negotiate for one. Employees who complete at least one year of continuous service are entitled to severance pay upon the end of their employment, regardless of whether it is explicitly mentioned in the contract.
When discussing a golden handshake clause with your employer and incorporating it into the contract, it is advisable to consult with a UAE labor law expert or legal advisor to ensure the clause is drafted correctly and enforceable under prevailing UAE regulations. The UAE's Employment Law and Civil Transactions Law protect employee rights, including those related to severance pay.
In summary, a "golden handshake" clause is permissible and can be legally binding in UAE employment contracts when carefully structured and compliant with UAE Labor Law. However, it is best practice to consult with a UAE labor law expert or legal advisor to ensure your rights are fully protected.
- The UAE Labor Law allows for business negotiations between employer and employee, including agreements on more generous severance packages, commonly known as 'golden handshakes'.
- In the context of employment contracts in the UAE, a 'golden handshake' can be a valuable financial aspect, offering additional compensation above the mandatory end-of-service gratuity, but it must adhere to UAE labor laws and regulations.
