COVID-19 risks: Gratuity payments of laid-off workers become an issue for many businesses in UAE

Dubai: Getting their full end-of-service benefits is turning out to be the most difficult task many recently laid-off workers in the UAE are dealing with. With companies finding they are short of cash to meet those pay outs, things could get progressively worse for ex-staff.

According to the rules, there is no compulsory timeframe for gratuity–linked payments, though standard practice has been for employers to pay off on or around the termination date. “But these are unprecedented economic circumstances with extremely challenging market conditions,” said Luke Tapp, Partner – Employment at Pinsent Masons, a law firm.

“We advise all clients to work together with their employees to agree a payment schedule appropriate for all parties.”

If no such agreement can be reached, then the only option for laid-off employees would be to escalate the matter by bringing it before the appropriate local authority – the Ministry of Human Resources & Emiratisaton or the free zone authority if the company is based there. The other recourse would be to approach the courts of the emirate in which the company is registered.

But can all laid-off workers have the time and cash in hand to start proceedings against their former employers? Businesses and employment companies say that a clear indication of likely job losses would be had only when all the restrictions on movements and commercial activity are eased.

Extended leave

Companies have been telling their employees to clear all of their accumulated annual leave before mid-year. A good number of them have already had salary cuts enforced on them, while others have to make do without any pay for the next couple of months or longer.

This, according to industry sources, buys companies more time. In the coming weeks they will have a better grip on what their likely cashflow will be and how long it would take for their operations to get back to pre-COVID-19 levels… if at all. Once they do have some reading on the immediate future, they can then work on adjusting their staff needs accordingly.

“The companies that have already made the job cuts were primarily those with the cash available to honour their gratuity pay outs,” said the head of a recruitment firm. “Most have, however, delayed the major layoffs and instead opted for salary cuts or non-payment for the next few months.

“This helps them in one way – delay having to make the gratuity payments.”

This is happening even in critical sectors such as healthcare – doctors and other personnel who are not directly involved in the fight against COVID-19 have seen their take-home packages cut by up to 40-50 per cent. This is happening across the board, with seniority not given any consideration.

Influential CEOs have come out to say that a partial pick up for consumer and overall business sentiments could be delayed until next year. If so, companies will have to learn making more painful adjustments just to survive until then.

Another start-up revival?

The last time the local economy went through such trying circumstances – 2009 and 2010 – it eventually paved the way for a wave of start-ups to come into being. There were several who shifted from corporate roles to launching their own business – it helped that the local economy was also transitioning to digital ways of doing business. Some of the online-focussed start-ups – the ride-hailing services, food order and delivery, mother-and-child focussed apparel and accessories – that have gone on to dominate their categories had founders who did not think twice before launching during crisis times.

Can the current crisis set off a fresh round of start-up launches? Industry sources are divided on this – “It will depend on how long it will take for consumers to feel they are back to normal times,” said the founder of one online retail business. “Today’s crisis goes way beyond falling property values and sudden loss of income.”

Parallel moves

But even now, there are professionals who are trying to make a change now… and not necessarily by launching their own start-up. It could be a new position at another company still willing to hire in the current circumstances. “For these transitions, visas will continue to be issued to support such moves,” said Gareth El Mettouri, Associate Director at Robert Half UAE, the recruitment firm.

“Healthcare, government utility companies, and FMCG continue to hire to match the demand for their service. These professionals starting their [new] roles are working from home.”

A few gainers as well

The International Labour Organisation has warned that almost half the global workforce is at risk of losing their jobs. But amidst all such extreme doom scenarios, there are some job descriptions for which demand is still there. According to Bayt.com, anyone with a fair expertise and track record in logistics and e-commerce will have been jobs with their skills being advertised. These are not limited to a specific role.

“The percentage growth rate for jobs is 35 per cent for logistics, 10 per cent for e-commerce, and 46 per cent for telecom when comparing Q1-2020 to Q4-2019,” said Akram Assaf, Chief Technology Officer at Bayt.com. “Many critical roles continue to operate at full capacity… even beyond normal levels.”

But they are the exceptions – for the majority, it’s a time of uncertainty. And not least, what they might have to face with their gratuity cheques.