UAE's Severance Pay and Golden Handshakes: Essential Details Explained
In the United Arab Emirates (UAE), it is possible to include a "golden handshake" clause—a negotiated severance or exit package agreement—in a job contract. This clause can be legally binding if properly drafted in accordance with UAE labor law.
Understanding the Legal Context
The UAE labor law governs employment contracts and termination provisions. While the concept of a golden handshake is not explicitly defined in UAE federal law, parties are generally free to agree on contractual terms regarding termination benefits beyond the statutory requirements as long as they do not conflict with mandatory provisions of the UAE Labor Law (Federal Decree Law No. 33 of 2021 on the regulation of labor relations).
Key Requirements and Considerations
- Written Clause: The golden handshake agreement must be explicitly stated in the employment contract or a related agreement, outlining the specific terms of severance payments or benefits upon termination.
- Compliance with UAE Labor Law: The amount and method of severance must comply with or exceed the statutory severance pay mandated by law, which is calculated based on the length of service and final wage.
- Mutual Agreement: Both employer and employee must agree to the clause, making it a binding contractual obligation.
- Non-Contravention of Public Policy: The clause should not contain provisions that violate UAE labor standards or public policy.
- Enforceability: The clause will be enforceable by UAE courts or labor tribunals if it is clear, agreed upon, and does not contravene mandatory UAE labor legislation.
Applicable Law
- The UAE Federal Decree Law No. 33 of 2021 (the UAE Labor Law) governs employment contracts and severance.
- Where the contract is part of a free zone jurisdiction, applicable free zone labor regulations may apply, but generally follow similar principles.
- Sharia law does not typically govern standard employment contracts but may influence some other personal legal matters.
While there are no specific UAE legal texts detailing "golden handshake" clauses, their inclusion is viable as long as they align with the above general principles and UAE labor regulations.
Summary
| Aspect | Details | |--------|---------| | Possibility | Yes, a golden handshake clause can be included in UAE job contracts | | Legal Binding | Binding if agreed in writing and compliant with UAE Labor Law | | Requirements | Clear contractual terms, mutual consent, compliance with legal severance rules | | Governing Law | UAE Federal Decree Law No. 33/2021 on labor relations |
While discussing a "golden handshake" clause with your employer and including it in your contract is possible, it is advisable to consult with a UAE legal professional for precise drafting and to ensure enforceability. No direct references in the current search results specify golden handshake clauses in UAE law; this answer is based on best practice and general knowledge of UAE employment law.
In the context of business and finance, the golden handshake clause can be included in a job contract in the United Arab Emirates (UAE), provided it complies with UAE labor law. This clause is enforceable if it is clearly stated in the employment contract, both employer and employee agree to it, and it does not conflict with the statutory requirements stated in the UAE Federal Decree Law No. 33 of 2021 on labor relations.
