Can an Employer Reduce an Employee’s Basic Salary Under UAE Labor Law?

During the economic uncertainties and global challenges, questions surrounding the rights and obligations of employers and employees have become increasingly pertinent. One such query that frequently arises is whether an employer possesses the legal authority to diminish an employee’s basic salary under UAE labour law, particularly under Federal Decree-Law No. 33/2021 on the Regulation of Labour Relations (UAE Labour Code).

The UAE Labour Code serves as the keystone of labour relations in the UAE, furnishing a framework for the rights and responsibilities of both employers and employees. It defines various provisions aimed at ensuring equitable and just treatment in the workplace, encompassing regulations regarding wages and remuneration.

Article 1 of the UAE Labour Code provides definitions for basic salary and remuneration.

Basic Salary:

This constitutes the principal amount of remuneration stipulated in the employment contract, serving as the fundamental compensation provided to the worker for their services rendered. It can be structured on a monthly, weekly, daily, hourly, or piecework basis, excluding any additional allowances or benefits in kind, and focusing solely on the fundamental monetary compensation agreed upon.

Remuneration:

This includes a broader range of compensation beyond the basic salary, incorporating not only the cash payment designated in the employment contract but also benefits in kind and other allowances provided to the worker. These additional components may be mandated by the employer as part of the employment contract or the establishment’s internal system, serving to augment the overall compensation package.

Article 8 of the UAE Labour Code outlines the requirements for employment contracts, stipulating that contracts must specify the terms of employment, including the basic salary and any other benefits provided to the employee. Employers are obligated to adhere to the terms of the employment contract and may not unilaterally alter the basic salary without proper justification or consent.

Furthermore, Article 13 of the UAE Labour Code outlines the obligations of employers towards their employees, encompassing the duty to pay wages in a timely manner and to provide a safe working environment. Any decision to reduce an employee’s basic salary must not breach these obligations.

Additionally, Article 19 of the UAE Labour Code addresses overtime working hours, stipulating that employees are entitled to receive additional compensation for overtime work. Any reduction in basic salary must not result in a violation of these provisions.

Articles 22 to 26 of the UAE Labour Code detail various aspects of remuneration, encompassing determination, calculation, transfer, and deductions from employee salaries. These provisions ensure that workers receive fair and just compensation for their contributions. These provisions ensure that workers receive fair and just compensation for their contributions.

Furthermore, Article 51 addresses the entitlement of full-time workers to end-of-service gratuity upon termination of employment. This gratuity serves as a form of financial security for employees and is calculated based on the duration of their service and the terms stipulated in the employment contract.

Conclusion:

While the UAE Labour Code provides certain provisions regarding the determination and payment of wages, including the basic salary, it also underscores the importance of equal treatment and non-discrimination in the workplace.

Dr. Hassan Elhais is a legal consultant in Dubai, specializing in the drafting of all statements of claim, memos and consultation on litigation of all manner.