The termination of employment is one of the most significant stages in the employment relationship for both the employee and the employer. It often carries important legal, financial and practical consequences. In the UAE, employment termination is regulated by the UAE Labour Law, which sets out the rights and obligations of each party, including notice periods, end-of-service gratuity, final salary payments, unused leave and the circumstances under which a termination may be considered lawful or unlawful.
For employees, understanding these rights is important to ensure that they are treated fairly and receive all entitlements due to them at the end of their employment. Whether the termination is initiated by the employer, the employee resigns or the employment contract simply expires without renewal, the law provides a framework designed to balance business interests with employee protection.
This article provides an overview of the key rights employees should be aware of when their employment is terminated in the UAE and highlights the practical considerations that may arise during the process.
Legal Framework Governing Termination in the UAE
Employment termination in the UAE is primarily governed by Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Employment Relationships, as amended, together with its Executive Regulations. The law applies to employment relationships in the private sector and provides the legal framework governing how employment contracts may come to an end, the notice that must be provided and the financial entitlements employees may receive upon termination.
When Can an Employment Contract Be Terminated?
An employment contract may be terminated in several circumstances, including by mutual agreement, upon the expiry of the contract term, or at the request of either party, subject to the applicable notice period.
Other circumstances include the death of the employer where the contract is directly linked to the employer in their personal capacity; the death or permanent incapacity of the employee; the permanent closure of the establishment; the bankruptcy or insolvency of the employer; or the employee’s failure to meet work permit renewal requirements for reasons beyond the employer’s control.
In practice, however, the most common form of termination occurs when either party provides written notice in accordance with the employment contract and the UAE Labour Law. The law requires the notice period to be no less than 30 days and no more than 90 days. During this period, the employment contract remains valid, and the employee is entitled to receive their full wages.
If either party fails to comply with the agreed notice period, the defaulting party may be required to pay compensation equivalent to the employee’s wage for the full notice period or the remaining portion of it.
Employee Rights During the Notice Period
Where the employer terminates the employment relationship, the employee is entitled to be absent from work for one working day per week, without pay, during the notice period to search for alternative employment. The employee must notify the employer of the intended day of absence at least three days in advance.
This right is of utmost importance because it recognises that termination is not only a contractual matter but also a practical transition period for the employee. Employers should therefore ensure that employees are not prevented from exercising this statutory right where the termination is initiated by the employer.
Termination Without Notice
In certain circumstances, the law protects employees by allowing them to leave their employment without notice while retaining their end-of-service rights.
This may apply where:
- the employer breaches its obligations under the employment contract or the law and fails to rectify the breach after being notified;
- the employer or its legal representative assaults, harasses or commits violence against the employee;
- a serious workplace danger threatens the employee’s safety or health and the employer fails to remove it; or
- the employee is instructed to perform work that is fundamentally different from what was agreed, without the employee’s written consent.
These provisions are significant because they recognise that employees should not be forced to continue working in circumstances where the employer’s conduct or the working environment creates a serious legal, health or safety concern.
End-of-Service Gratuity
Employees who have completed at least one year of continuous service are generally entitled to receive an end-of-service gratuity upon the termination of their employment.
For full-time foreign employees, the gratuity is calculated based on the employee’s basic salary. It is generally calculated as follows:
- 21 days’ basic salary for each year of service during the first five years; and
- 30 days’ basic salary for each year of service after the first five years.
Employees may also be entitled to a gratuity for part of a year, calculated on a pro-rata basis, provided that they have completed at least one full year of continuous service.
It is also important to note that the total end-of-service gratuity should not exceed two years’ wages. Any unpaid periods of absence are excluded when calculating the employee’s period of service. Furthermore, the employer may deduct amounts from the gratuity only where such deductions are legally permitted or supported by a court judgment.
Final Salary, Leave Balance and Other Entitlements
Upon the termination of employment, the employee may also be entitled to receive any unpaid salary, payment for accrued but unused annual leave, compensation in lieu of notice where applicable and any other amounts due under the employment contract, company policies or applicable law.
The employer is required to pay the employee’s wages and final entitlements within 14 days of the employment contract’s end date.
In addition, if the employee has accrued annual leave that was not used before the end of the employment relationship, the employee is generally entitled to receive payment in lieu of those unused leave days. This is usually calculated based on the employee’s basic wage and in proportion to the period worked.
Labour Complaints and Time Limits
If an employee believes that their final dues have not been paid or that their termination was unlawful, they may submit a labour complaint to the Ministry of Human Resources and Emiratisation.
Where the employee works within the jurisdiction of a free zone, the complaint may need to be submitted to the relevant competent authority, which will review the complaint and take the appropriate action.
In most cases, the Ministry will first attempt to resolve the dispute amicably between the parties. If no settlement is reached, the matter may then be referred to the competent court.
Following the 2024 amendments, the limitation period for labour claims was also updated. The competent court will not hear labour claims filed more than two years after the date on which the employment relationship ended. Employees should therefore ensure that any claim is filed within the applicable legal timeframe.
Conclusion
Termination of employment in the UAE must be handled in accordance with the requirements of the UAE Labour Law. Employees are entitled to several important protections, including proper notice, payment of an end-of-service gratuity where applicable, settlement of final dues, payment for unused annual leave and protection against unlawful termination.
From an employer’s perspective, following the correct termination process is important to avoid potential disputes and legal liability. From an employee’s perspective, understanding these rights helps to ensure that the termination has been handled properly and that all legal and contractual entitlements have been paid.