Coronavirus effect: Questions on salary cuts explained

Gulf News

UAE-based lawyer explains the legalities concerning salary cuts during the COVID-19 pandemic  See more videos at https://gulfnews.com/videos  Read more Gulf News stories here: https://bit.ly/2HLJ2km  #coronavirus #UAE #COVID19

Transcript

00:00The new directives issued by the Ministry of Human Resources and Immunization provides

00:14for measures that a company can do in order to stabilize its workforce.

00:20We can basically categorize it into two major groups.

00:23The first group are the actions or measures that will not require the consent of the employees

00:30while the second group are the actions or measures that would require the consent of the employees.

00:36So we go to the first group which will not require the consent of the employees.

00:43These are work from home arrangements and utilization of annual leave.

00:48The annual leave is a paid leave and this is provided for by the labor code

00:53even prior to the issuance of this new directive.

00:57Now, for the actions that would require the consent of the employees,

01:02the company can propose to the employees to go on an unpaid leave,

01:10meaning the employees will not be required to go to work and they will not be paid for that particular period of time.

01:18The other measure is the temporary reduction of salary

01:22and then the third measure is the permanent reduction of salary.

01:28So these three measures, unpaid leave, temporary reduction, and permanent reduction of salary

01:35would require the consent of the employees in order for it to be valid

01:39and for order to be legally executed by the company.

01:45For the measures that do not require the consent of the employees,

01:53the company will just simply have to give notice to the employee that he will be placed on a work from home arrangement

02:01or a notice telling the employees of the dates where he will have to take his annual leave.

02:08It is important that the employee is paid for his salary during the annual leave

02:13prior to the start of the annual leave.

02:16For the measures that require the employee consent,

02:19it is important to follow the template contract issued by the Ministry of Human Resources and Emeritization.

02:27So for unpaid leave and for temporary salary reduction,

02:35this has to be executed by the company and the employee.

02:40They have to sign two copies, one copy will be retained by the employee

02:45and another copy will be retained by the company.

02:48There is no need to do this before the notary

02:52or there's no need for you to present this to the Ministry of Human Resources,

02:57but the company should be able to keep a copy just in case the ministry will do an inspection.

03:04For the permanent reduction in salary,

03:08the employer and the employee must do this under the process of amendment of employment contract

03:16with the Ministry of Human Resources and Emeritization.

03:19So they cannot just do it privately,

03:21they have to go to the ministry in order to effect a permanent reduction in the salary.

03:32For the temporary reduction of salary,

03:34the duration will depend on the agreement of the employer and the employee.

03:39So any period of time they can agree for initial one month

03:42and they can even extend it for another month and so on.

03:46The only condition imposed by the ministry is that

03:49the agreement for the temporary reduction of salary

03:53will automatically become ineffective upon the revocation of the directive issued by the ministry.

04:01So they cannot go beyond the effectivity of the ministerial decision.

04:11The rights of the employees are fully protected

04:14as the provisions of the labor code are not suspended,

04:18especially those with regard to employment benefits protection

04:23and other rights that are provided for them by law.

04:27In the amendment or in the changes to be implemented,

04:33the consent of the employees are required,

04:35especially if their salary will be affected.

04:39In terms of protection of the employers,

04:43again, the government is making all its effort to balance

04:49the rights of the employees and the employer,

04:51especially at this particular time.

04:54The provisions on employee discipline still applies under the labor code.

05:00It is not being suspended by the new directive.

05:03So management still has the authority to discipline their employees.

05:08If the employees are not performing well, they can be sanctioned.

05:12So both employers and employees are protected at this period of time.

05:24It is very important that both employers and employees have transparency.

05:30Both should act in good faith.

05:32If the company is doing well,

05:34we do not suggest that the employer take drastic changes

05:40in the terms of employment of the employee.

05:43I think the employees will be in the best position to know

05:47what is the financial condition of their company.

05:49Are they still having clients?

05:51Is operation still normal or there's a reduction of clients?

05:57Based on this, they can talk with their employers

06:00and the employers can also be transparent with the employees

06:05if the rents are being reduced,

06:08if there are other suppliers who are giving them a reduction in prices.

06:14So they can show to the employees the true financial situation of the company

06:19and both can mutually agree on what is best,

06:22not just for the company or not just for the employee,

06:25but for both with the aim of going through these trying times stronger.

06:34Hopefully, the company will be doing its regular course of business

06:39and everything will be normalized

06:41and they can again talk if the company is doing well,

06:45if they can be given additional benefits

06:48since the company has already recovered.

06:51But before that, at this time, they should all work in good faith

06:56and be transparent and honest to each other.

07:05Under the directives issued by the ministry,

07:09they have the authority to inspect records.

07:12Therefore, if the employers do not secure the consent of the employees

07:19in implementing the unpaid leave or the temporary reduction in salary

07:26or the permanent reduction in salary,

07:28then the employers can be penalized by the ministry.

07:35There is a mechanism where the ministry is ensuring

07:39that the companies are complying with the requirements of the law.

07:48There's really no exact rule or formula,

07:52computation on how we can do a fair salary cut.

07:56But based on the companies that we are representing

07:58and with what we have experienced with a lot of our clients,

08:03typically, the company should first go to a less drastic measure

08:08in order to continue the operations of the company.

08:12But if they have tried that and still it's not enough,

08:16typically, it's the higher management that would first be affected

08:21by the salary reduction.

08:24It could range to even 100%

08:26which just allow us being paid to higher management.

08:30The lower level or the rank and file employees,

08:34they should be given the least deduction if as much as possible.

08:41We have seen that the cuts range from 20% to 30%

08:45per salaries below 5,000 dirhams.

08:48And those getting salaries above 5,000 dirhams,

08:52they are getting about 50% reduction.

08:55Again, this is not an exact formula,

08:57but these are the usual arrangements that we are seeing

09:04from our clients and employees who are also consulting with us.

09:13For employees who have already agreed to a temporary salary cut,

09:17and if their employers will propose to convert it into a permanent one,

09:21they need to re-execute an amendment document

09:26so that the permanent salary cut will be affected.

09:30This document has to be made through the process of amendment

09:34of provisions of contract under the Ministry of Human Resources and Immunization.

09:39So this has to be approved by the ministry.

09:43The employer and the employee cannot just agree

09:48without the approval of the ministry.

09:51If an employee is terminated at this time,

09:54the standard provisions of the labor code on termination would still apply.

09:59Therefore, the employee is given the full end of service benefits,

10:04and depending on the terms of his contract, the notice period,

10:08or the type of his contract,

10:10he may be also entitled to up to a three-month compensation.

10:16The employee is also entitled to encash any unused leave.

10:23The employer has to convert that into monetary terms.

10:28Regarding the airfare, if the employee is returning to his home country,

10:33then the employee has to pay for his air ticket.

10:38If the employee is returning to his home country,

10:43if the employee wants to stay in the country,

10:49it should be remembered that he has a 30-day grace period

10:53following the cancellation of his visa.

10:57And finally, the employee is entitled to receive a certificate of employment

11:03stating his role, his salary, and other details of his service to his employer.

11:14The computation of gratuity is not affected for those employees

11:19who agreed to have a temporary reduction on their salary.

11:25It means that your gratuity would still be computed

11:28based on the original basic pay that you are getting.

11:32But for those who have agreed to a permanent salary cut,

11:37your gratuity will now be computed based on your reduced salary

11:44because this is of a permanent nature.

11:47That's why you should be able to negotiate fairly with your employers

11:53if you are entering into a permanent salary reduction

11:56because it will have an impact in the computation of your gratuity.

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