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Currently my company is doing a 20% pay cut and asked all the employees to sign an agreement.

I did not sign it but when I get paid, they only paid out 80% of my salary, is this legal?

If I make a complaint to the ministry of labour, what is the chance to win the case? I heard that the MOL is more protecting the employer than the employee.

I was told that if we get laid off, either you've sign or not signing the agreement, the severence pay will be calculated base on 80% of my salary. So they scam us to have pay cut first, and then lay us off with less pay, is this legal at all?

My advice is to talk to your company first and try and negotiate the 20% of your salary back. Assuming you have already tried that, I suggest you go ahead and file your grievance with the MoL. They should be able to tell you whether or not this is legal. You could also hire a lawyer if their rates are respectable (I don't know anything about attorney's fees here).

Firstly it’s not legal, but you have to weigh the options of taking a cut or not having a job. there are employer who are most certainly having a difficult time with the recession - others are simply using it as an excuse to cut some overheads and possibly loose some surplus staff.

In most cases if a company didn't want your services they would simply terminate your contract by giving you a months notice; this doesn't cost them anything and all they have to do is say they could no longer afford to keep you on.

I agree the practice of cutting the base salary and then terminating the staff is a load of BS. HOWEVER, under normal circumstances the amount of benefit that you would gain (gratuity) at the premature termination of a contract is negligible - i calculated once that if you terminated your (indefinite) contract after between 3 and 5 years into the contract your gratuity was about the equivalent of 2% your annual salary - not much money after all!

There is possibly a loophole that you could use. If your contract includes amounts for accommodation and transport (as well as a basic salary), then get the company to cut back on these items.

For example if the company wanted you to take a 10% drop in salary and your contract was laid out as follows:

Basic salary 3000, accommodation 1000, transport 1000 = total of 5,000

Then I would suggest that you have the company cut back 10% (500 AED) from the accommodation or transports amounts.

“Perks” such as accommodation and transport do not form part of the gratuity or severance calculations, and as such can be sacrificed (if need be) without effecting the end amount of your gratuity payment.

dbxsoul wrote:
There is possibly a loophole that you could use. If your contract includes amounts for accommodation and transport (as well as a basic salary), then get the company to cut back on these items.

For example if the company wanted you to take a 10% drop in salary and your contract was laid out as follows:

Basic salary 3000, accommodation 1000, transport 1000 = total of 5,000

Then I would suggest that you have the company cut back 10% (500 AED) from the accommodation or transports amounts.

“Perks” such as accommodation and transport do not form part of the gratuity or severance calculations, and as such can be sacrificed (if need be) without effecting the end amount of your gratuity payment.

As I work in HR department, I do acknowledge these breakdown of your salary will affect the gratuity pay. Since we getting all base salary and allowance paid out on monthly basis, they just cut 20% over the whole package instead of on just basic salary.

Also I am on unlimited contract, which means I may just get a 'penny' for my gratuity. 7 days pay for 1 year service...

I agree, it sucks. But, try and see if you can get the company to deduct the 20% from your "perks" and not your basic.

At the end of the day they are still saving 20% (current), the economy is sure to be more stable when your contract is finally worked out and you may then get the full amount of your gratuity.

dbxsoul wrote:I agree, it sucks. But, try and see if you can get the company to deduct the 20% from your "perks" and not your basic.

At the end of the day they are still saving 20% (current), the economy is sure to be more stable when your contract is finally worked out and you may then get the full amount of your gratuity.

I have already asked them and they will not make any amendment, but if you think further, its not just 20% of your pay has cut, also including the annual leave that you have accumulated as well.

No, leave is accumulated at a specific rate irrespective of whether you are an unskilled labourer or a rocket scientist. The rate is specified by law and is not subject to bargaining.

The employer has no right to tamper with the accumulated leave of an employee.
As the leave is actually specified by law, the employee has no right to bargain with it either!

The number of annual leave days accumulated will not be affected, however if you are let go whereby they would need to pay out the accumulated annual leave in cash... then it will be calculated based on the reduced pay! That means cost saving for the company but bad news for you.

correct me of I'm wrong -

Since the MOL will have a copy of your contract, they will go as per what is mentioned on that copy. Dont you have a copy of what was submitted by your company to the MOL?

Any revised contract docs have to go the MOL. so the same applies to your revised salary.

dbxsoul wrote:
There is possibly a loophole that you could use. If your contract includes amounts for accommodation and transport (as well as a basic salary), then get the company to cut back on these items.

Thats not a loophole - just a renegotiating strategy. its up to the company how they are willing to distribute the cut. the law does not lay down any guidelines on breakup of total salary.

But I agree - if they do force you to take a pay cut - and you are willing to accept rather than lose the job, ask them to cut down on the allowance since leave/gratuity is calculated on basic.

Agreed, a more eloquent way of putting it.

The MOL does indeed have the original, as per law all increases/ decreases and disciplinary procedures against an employee are supposed to be lodged with the MOL so that your "central labour record" (for want of a better term) is kept up to date. I cannot say that I have ever met an employer who actually does this.

The labour law, however does state that in the absence of a information in their file any supporting documents that an employee can provide will be used, this includes pay-slips, bank statements etc.

In terms of an employees final settlement dues (that which he is paid out on termination of his services), it is very easy to fudge the records that are submitted to the MOL as, the Labour Law states that the employer is entitled to deduct any outstanding dues (such as company loans) from the final settlement....

The law is in place, but has numerous holes which can be exploited (by either party)

michaeldubai wrote:correct me of I'm wrong -

Since the MOL will have a copy of your contract, they will go as per what is mentioned on that copy. Dont you have a copy of what was submitted by your company to the MOL?

Any revised contract docs have to go the MOL. so the same applies to your revised salary.

I don't think many people would do that, like us, no one will amend the labour contract when they have a pay raise, especially pay raise occurred so frequently last year. We only renew the labour contract when we renew their 3 years residency visa.

oops JHK, then it looks difficult. If you HAVE refused to sign the agreement of the pay cut - thats probably the only thing you can fall back on - but then again - they probably havent got you to sign anything during a raise either.

dbxsoul, looks like there ARE loopholes - but against us!

Also - not sure I understood you correctly about they annual leave - but there is just NO WAY they can play around with that. You sure you understood them correctly?

The leave is fixed as per labour law as:

24 days leave for the first year of service. Most employers simply give 30 days as it is easier from an administrative perspective.

30 days leave per one calendar year service thereafter.

The law also make provision for the settlement of outstanding "leave dues" as cash payment if you leave before the leave cycle is complete and you have leave to your credit.

This as you pointed out before is where the employee stands to loose as it is paid out on the base salary rate (exclusive of perks) - the same as the gratuity payments.

Leave may not be accumulated (left un-taken) for more than 2 successive years.

With regards to the loopholes agreed, they are there, some employers know about them if they have an astute PRO; some don't.

michaeldubai wrote:oops JHK, then it looks difficult. If you HAVE refused to sign the agreement of the pay cut - thats probably the only thing you can fall back on - but then again - they probably havent got you to sign anything during a raise either.

dbxsoul, looks like there ARE loopholes - but against us!

Also - not sure I understood you correctly about they annual leave - but there is just NO WAY they can play around with that. You sure you understood them correctly?

I do have a confirmation letter to confirm that I had a pay raise, so there is something i can show to MOL.

Pay cut won't effect the 'Days' of annual leave, but if I get laid off, any accumulated annual leave will be paid out base on your salary, which means a cut on the leave salary too

dbxsoul wrote:HOWEVER, under normal circumstances the amount of benefit that you would gain (gratuity) at the premature termination of a contract is negligible - i calculated once that if you terminated your (indefinite) contract after between 3 and 5 years into the contract your gratuity was about the equivalent of 2% your annual salary - not much money after all!

Correct me if I'm wrong but according to the law, gratuity is calculated as:

Section II: Severance Pay
Article 132
A worker who has completed one or more years of continuous service shall be entitled
to severance pay at the end of his employment. The days of absence from work
without pay shall not be included in calculating the period of service. The severance
pay shall be calculated as follows:
1. 21 days' wage for each of the first five years of service.
2. 30 days’ wage for each additional year of service provided always that the
aggregate amount of severance pay should not exceed two year's wage.

So let's say if I work for 2.5 years in my company for indefinite contract, then I will get 2 x 21/30 x basic salary.

yes, but you also have to read Article 137:

Article 137
Where a worker under an indefinite term contract abandons his work at his own initiative after a continuous service of not less than one year and not more than three years, he shall be entitled to one-third of the severance pay provided for in the preceding article. Such a worker shall be entitled to two thirds of the said severance pay if his continuous service exceeds three years up to five years, and to the full severance pay if it exceeds five years.

Which in effect dillutes the gratuity which you have provided under Article 132:

In your case (example):

21/30 x basic salary divided by 3 ....

I'm not sure where you get the 2 x 21/30 x basic salary - portion of your salary.

Here is another example:

Unlimited contract workers:
If the employee leaves the employer of their own free will after successfully completing not less than one full year and not more than three they are entitled to a 1/3, for service of between 3 and 5 years 2/3, and after 5 years a full gratuity payment.

Example:
Unlimited contract
Basic salary of 10,000 per month
Worked for 4 years

= 10,000/30 days * 21 days = 7,000 per year worked
= 7,000 * 4 years = 28,000
= 28,000 * 2/3
= 18,666

In this case 15% of a full years salary as a "bonus"

its much better on a limited contract, and you will get 3 months notice if you get laid off

Limited contracts are worse!

They are not employee friendly. There is not 3 month notice period. The law states that the party breaking the limited contract must compensate the other party 3 months salary, but does not have to pay more than 50% of that. In effect if you are terminated on a limited contract you may be paid 6 weeks salary; or if you wish to break your contract early you are liable to pay the employer 6 weeks salary.

They call it UNLIMITED CONTRACT yet it will expire after 2 or 3 years.

dbxsoul wrote:Here is another example:
Example:
Unlimited contract
Basic salary of 10,000 per month
Worked for 4 years
= 10,000/30 days * 21 days = 7,000 per year worked
= 7,000 * 4 years = 28,000
= 28,000 * 2/3
= 18,666
In this case 15% of a full years salary as a "bonus"

QUESTION:
1.BASIC SALARY- Is this based on the contract? or your current salary(incase of increase/increment)?

ArchitectRoel wrote:

dbxsoul wrote:Here is another example:
Example:
Unlimited contract
Basic salary of 10,000 per month
Worked for 4 years
= 10,000/30 days * 21 days = 7,000 per year worked
= 7,000 * 4 years = 28,000
= 28,000 * 2/3
= 18,666
In this case 15% of a full years salary as a "bonus"

QUESTION:
1.BASIC SALARY- Is this based on the contract? or your current salary(incase of increase/increment)?

its base on your basic salary of last salary

JojoHK wrote:

ArchitectRoel wrote:

dbxsoul wrote:Here is another example:
Example:
Unlimited contract
Basic salary of 10,000 per month
Worked for 4 years
= 10,000/30 days * 21 days = 7,000 per year worked
= 7,000 * 4 years = 28,000
= 28,000 * 2/3
= 18,666
In this case 15% of a full years salary as a "bonus"

QUESTION:
1.BASIC SALARY- Is this based on the contract? or your current salary(incase of increase/increment)?

its base on your basic salary of last salary

So what's the proof of your last salary? the company can always deny it or any employee can declare a high salary for high graduity fee.

ArchitectRoel wrote:

JojoHK wrote:

ArchitectRoel wrote:

dbxsoul wrote:Here is another example:
Example:
Unlimited contract
Basic salary of 10,000 per month
Worked for 4 years
= 10,000/30 days * 21 days = 7,000 per year worked
= 7,000 * 4 years = 28,000
= 28,000 * 2/3
= 18,666
In this case 15% of a full years salary as a "bonus"

QUESTION:
1.BASIC SALARY- Is this based on the contract? or your current salary(incase of increase/increment)?

its base on your basic salary of last salary

So what's the proof of your last salary? the company can always deny it or any employee can declare a high salary for high graduity fee.

if you don't have a confirmation letter about your pay rise, you can show your pay slip or bank statement as a proof.

dbxsoul wrote:yes, but you also have to read Article 137:

Article 137
Where a worker under an indefinite term contract abandons his work at his own initiative after a continuous service of not less than one year and not more than three years, he shall be entitled to one-third of the severance pay provided for in the preceding article. Such a worker shall be entitled to two thirds of the said severance pay if his continuous service exceeds three years up to five years, and to the full severance pay if it exceeds five years.

Which in effect dillutes the gratuity which you have provided under Article 132:

In your case (example):

21/30 x basic salary divided by 3 ....

I'm not sure where you get the 2 x 21/30 x basic salary - portion of your salary.

But that's for the workers who abandon their work (e.g. absconding).

Well, the article 132 explain it clearly the rule/formula.
"21 days' wage for each of the first five years of service"
21/30 x wage x years of service

JojoHK wrote:its much better on a limited contract, and you will get 3 months notice if you get laid off

Notice is not "that" important but compensation is. I believe both workers having limited or unlimited contracts are entitled for 3 months compensation (based on last basic salary) when arbitrarily dismissed (unless breaking article 120). And gratuity is another which is compulsory. Therefore they are entitled of 3 months compensation PLUS gratuity (PLUS leave balance if any).

Article 123
1. Where a worker is arbitrarily dismissed, the competent court may order the employer to pay him a compensation, to be assessed by the court with due regard to the nature of the work, the extent of damage sustained by the worker and his period of service, and after investigating the work circumstances, provided that such compensation shall in no case exceed the worker's wage for three months, calculated on the basis of his last wage.
2. The provisions of the preceding paragraph shall not prejudice the worker's right to the gratuity he is entitled to and the compensation in lieu of notice provided for in this law.

xty wrote:

JojoHK wrote:its much better on a limited contract, and you will get 3 months notice if you get laid off

Notice is not "that" important but compensation is. I believe both workers having limited or unlimited contracts are entitled for 3 months compensation (based on last basic salary) when arbitrarily dismissed (unless breaking article 120). And gratuity is another which is compulsory. Therefore they are entitled of 3 months compensation PLUS gratuity (PLUS leave balance if any).

Article 123
1. Where a worker is arbitrarily dismissed, the competent court may order the employer to pay him a compensation, to be assessed by the court with due regard to the nature of the work, the extent of damage sustained by the worker and his period of service, and after investigating the work circumstances, provided that such compensation shall in no case exceed the worker's wage for three months, calculated on the basis of his last wage.
2. The provisions of the preceding paragraph shall not prejudice the worker's right to the gratuity he is entitled to and the compensation in lieu of notice provided for in this law.

but Article 117 also says:


Either the employer or the worker may terminate an indefinite term contract for a valid reason at any time following its conclusion, by giving the other party a notice in writing at least 30 days prior to termination.

JojoHK wrote:

ArchitectRoel wrote:

JojoHK wrote:

ArchitectRoel wrote:

dbxsoul wrote:Here is another example:
Example:
Unlimited contract
Basic salary of 10,000 per month
Worked for 4 years
= 10,000/30 days * 21 days = 7,000 per year worked
= 7,000 * 4 years = 28,000
= 28,000 * 2/3
= 18,666
In this case 15% of a full years salary as a "bonus"

QUESTION:
1.BASIC SALARY- Is this based on the contract? or your current salary(incase of increase/increment)?

its base on your basic salary of last salary

So what's the proof of your last salary? the company can always deny it or any employee can declare a high salary for high graduity fee.

if you don't have a confirmation letter about your pay rise, you can show your pay slip or bank statement as a proof.

Ok but some small companies doesn't give salary thru bank they give directly the employees salary evry month w/o any reciept.

ArchitectRoel wrote:They call it UNLIMITED CONTRACT yet it will expire after 2 or 3 years.

hi there, yes. limited contracts were initially designed with specific tasks or jobs in mind (much like the current mission visas). unlimited are re-negotiable and therefore "unlimited" by comparison.

yes, confusing