A number of rights and obligations in DIFC Law No. 4 of 2005, as amended (the DIFC Employment Law) rely upon a daily wage calculation. However, what that may in fact mean is open to interpretation, as demonstrated in the submissions before the Court of Appeal in Elseco Limited v. Pierre Eric Lys [2016] DIFC CA 006. Whilst the judgment in this case is pending, this article considers the different methods for calculating daily wage which is referred to in the DIFC Employment Law and is used in practice.

What does the DIFC Employment Law say?

The DIFC Employment Law contains certain rules of interpretation and confirms that:

  • A "day" means a calendar day, unless expressly stated otherwise;
  • A "week" shall mean a calendar week or seven (7) days;
  • A "month" shall mean a calendar month or thirty (30) days; and
  • A year shall mean a calendar year of the Gregorian calendar.

The DIFC Employment Law makes a distinction between a "daily wage" and "basic wage":

  • "Daily wage" means the compensation received by an employee as wages for services performed during a working day. In this regard:
    • "wages" are defined as all payments made to an employee in return for work done or services provided under a contract of employment; and
    • "daily wage" shall be calculated taking into consideration the total amount of working days in a year.A "working day" is defined as a normal working day for the employer as defined in the employment contract.
  • "Basic wage" means the employee's wage, excluding any portion of an employee's wage received in kind or as an allowance for housing, travel, currency exchange, children's education, social and entertainment, or any other type of allowance, bonus or commission payment, or overtime pay.It also provides that the "basic wage" shall be calculated by taking into consideration the total number of calendar days in a year.

The law therefore makes a distinction between a "daily wage", which covers all payments due to an employee, calculated with reference to a working day, and "basic wage", which expressly excludes various allowances, overtime pay, bonus and commission payments, calculated with reference to a calendar day.

What entitlements rely upon a daily wage calculation?

There are a number of entitlements listed under the DIFC Employment Law which refer back to the wage calculations:

  • Annual leave is said to be a minimum of 20 working days' paid leave each year, for employee who has been employed for at least 90 calendar days.Where an employee's employment is terminated, the employer is required to pay in lieu of any vacation leave accrued but untaken, calculated using the employee's daily wage, applicable on the employee's last day of employment.
  • Employees shall be paid a daily wage for national holidays announced in the UAE for the private sector falling on a work day.
  • Employees who have at least one month's service are entitled to paid sick leave, of a maximum of 60 working days in aggregate in any 12 month period (subject to notification requirements set out in the law), calculated with reference to the daily wage.
  • An employee shall be entitled to a minimum maternity leave entitlement of 65 working days, which shall be paid where the employee has at least 12 months' continuous service prior to the expected or actual week of birth.Pay for these purposes is the normal daily wage for the first 33 working days, and 50% of the normal daily wage for the remaining 32 working days.

A daily wage is also relevant in calculating an hourly rate (where the daily wage is divided by the number of normal working hours in a working day), for the purposes of time off work provided for under the law.

Finally, the daily wage also appears in the calculation of the penalty payment under Article 18(2) of the DIFC Employment Law, where the employer fails to pay wages or other amounts owing to an employee within 14 days of the termination date.

What entitlements rely upon a basic wage calculation?

An employee with at least one year's continuous service is entitled to an end of service gratuity payment, unless they are dismissed for cause or receive a pension in lieu of gratuity.

The gratuity calculation is based upon 21 days' pay for each year of service for the first five years, and 30 days' pay for each year thereafter. This provision expressly provides that the daily rate for the employee's pay shall be the "basic wage", and that it shall be calculated with reference to the number of days in a year (i.e. a calendar day calculation).

What are the issues?

Although the law identifies in each case whether an entitlement or obligation is based upon a daily wage or basis wage calculation, there have in fact been variations in the approach by the DIFC Courts in certain circumstances. In addition, an unresolved question which is currently being considered by the Court of Appeal is whether payments (such as bonus) which were not due at the point of termination should be included in the calculation.

In the Court of First Instance decision of Asif Hakim Adil v. Frontline Development Partners Limited [2014] CFI015/2015 the Judge noted that the basic wage of Mr Adil was US$60,000, calculated to a daily rate, based upon calendar days, of US$1643.84. When considering the Article 18 penalty payment, the Judge noted, "It was accepted that Mr Adil's daily wage was US$1643.84. He submitted that he was entitled to that amount for each day from fourteen days after whatever termination date was found; here from 15 July 2013".

The DIFC Courts have taken a similar approach in other cases – for example, in Gerda v. Geoff LLC [2016] the Small Claims Tribunal calculated vacation leave with reference to a monthly salary divided by 30 days; in Halsey v. Halina DIFC Limited [2016] the Small Claims Tribunal calculated the Article 18 penalty payment with reference to a monthly salary divided by 30 days; and in Genager v. Greet Limited [2016], George v. Gloria Beauty Lounge LLC [2016], Giselle v. Gordon DIFC [2016], Grear v. Greetj Restaurant LLC [2016] and Gideon v. Griame LLC [2016], the Small Claims Tribunal calculated the Article 18 penalty payment with reference to an annual salary divided by 365 days.

The question of the calculation of the Article 18 penalty has been addressed in the submissions before the Court of Appeal in Elseco Limited v. Pierre Eric Lys [2016] DIFC CA 006. In that appeal, the parties argued before the court which method of calculation should be used and in particular, whether a bonus (which had not become due at the point of termination) should be included in the meaning of "daily wage" for the purposes of calculating the penalty payment.

It appears from the cases listed above, that market practice for the calculation of daily wage, including for an Article 18 penalty, is to use the monthly remuneration (i.e. that stated in a payslip) which does not include additional payments such as a bonus or commission, and calculate the daily rate with reference to a calendar payment. Case law in the Small Claims Tribunal has adopted this approach. However, whether or not that is correct, and whether the Court of Appeal will agree, remains to be seen.