# Gratuity and 401K



## vista (Sep 21, 2011)

This is the question regarding a US employee who is contributing to 401K and getting employer's match. In this case can an employer stop the gratuity payment. I have gone through the labor laws in UAE and it does not talk anything about this. My employer is denying the gratuity payment to me because I am contributing to 401K and also getting some match from employer. You response also if any references regarding this would be greatly requested. Thanks


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## vantage (May 10, 2012)

there was a piece on the radio about this yesterday.

don't quote me on this, but i THINK:

A company has a choice to offer pension contributions, OR end of Service Gratuity.
The employee is protected, as the end payment MUST be equal too or greater than the end of Service Gratuity, regardless of performance of the pension fund.

An employer can give both

If an employee is making contributions too, the EMPLOYER'S contributions and final valuation MUST be equal to or greater than the end of Service gratuity ammount.

An employer CANNOT use employee contributions to make up their legal requirement.

In short, the MINIMUM they MUST pay you is the equivalent to the legal End of Service Gratuity. Personal contributions are irrelevant, and must be segregated from any calculation.


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## Chocoholic (Oct 29, 2012)

As far as I know expats can't get pensions here.

Plus gratuity is paid on an employees basic salary alone - why do you think so many companies make the basic ridiculously low and all the rest of the salary is made up of allowances?


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## Elphaba (Jan 24, 2008)

vista said:


> This is the question regarding a US employee who is contributing to 401K and getting employer's match. In this case can an employer stop the gratuity payment. I have gone through the labor laws in UAE and it does not talk anything about this. My employer is denying the gratuity payment to me because I am contributing to 401K and also getting some match from employer. You response also if any references regarding this would be greatly requested. Thanks



The employer can contribute to a savings plan in place of the EoS gratuity if it is properly documented and both parties agree. Employees can usually choose one or the others, not both.

This is covered in Articles 140 and 141 of UAE Labour law.

To pick up a point from another poster, EoS gratuity is calculated on basic salary plus regular commissions.


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## vantage (May 10, 2012)

Elphaba said:


> The employer can contribute to a savings plan in place of the EoS gratuity if it is properly documented and both parties agree. .


But the EoS figure is still the guaranteed minimum, whichever route is chosen?
So if your Company chooses a duff savings plan, the EoS remains a safety-net figure that the Company is duty-bound to honour?

That's what the radio types on Dubai Eye were on about over the weekend..


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## Elphaba (Jan 24, 2008)

vantage said:


> But the EoS figure is still the guaranteed minimum, whichever route is chosen?
> So if your Company chooses a duff savings plan, the EoS remains a safety-net figure that the Company is duty-bound to honour?
> 
> That's what the radio types on Dubai Eye were on about over the weekend..


Not exactly. It depends in the wording in the contract.

Who was saying this as it wasn't me?


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## vantage (May 10, 2012)

Elphaba said:


> Not exactly. It depends in the wording in the contract.
> 
> Who was saying this as it wasn't me?


That's a very good question!
It was during an 'interview' (infomercial!) with one of the banks. NBAD, i think


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## Elphaba (Jan 24, 2008)

vantage said:


> That's a very good question!
> It was during an 'interview' (infomercial!) with one of the banks. NBAD, i think


A bank  Stick to believing my answers and on air comments.


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