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Founders have a lot on their plates, especially with regard to the various legal requirements they must adhere to.
Companies should be aware that, in addition to the financial consequences, firing an employee could lead to a volatile workplace if it is not handled properly. Any mistake in terminating someone could result in issues with employment, postponed visa clearances, etc.
Since the employment contract is primarily governed by labor laws, it is imperative that founders understand when it is possible to terminate the employment contract and what they should do after.
The purpose of this article is to inform business owners about the various forms of termination, when it is feasible, and the regulations they must follow when terminating employees in the United Arab Emirates.
Termination of employment in UAE: Meaning and When it Applies
Termination of employment in UAE means the ending of the contractual relationship between two parties, i.e., the employee and the employer, as per a legitimate employment contract. This could be through resignation or the expiry of the contract, among other reasons.
The UAE Labour Law under Federal Decree-Law No. 33 of 2021 is a much-needed update of the UAE’s labour regulations. Amendments such as Cabinet Resolution No. (1) of 2022 have been implemented since then.
The UAE’s Labor Law states that employment is covered by a contract wherein the employee works under supervision in exchange for compensation.
Under UAE private-sector labor law, either party may terminate the employment contract for a legitimate reason, provided written notice is given and the agreed notice period complies with the law.
When employment ends, employer must handle the notice period, final settlement and end of service gratuity, depending on the circumstances.
Employers must pay unpaid wages and other contractual or statutory entitlements within 14 days from the end date of the contract term.
Types of Termination of Employment (Overview + Examples)
During the hiring process, employees are made aware of the terms of their contract, including stipulations for when their employment ends. This should be the employee’s test of legitimacy, as it protects them under the UAE Labour Law.
There are several types of termination processes. Each affects the employee’s rights differently.
Type of Termination |
Definition |
Example |
|---|---|---|
Contract Expiry |
Fixed term contract ends and the employment is not renewed |
An employee signs a two-year contract and the employer decides not to renew it (can be because of visa issues, job redundancy or project end, among others) |
Resignation |
Employee initiates the end of their employment and completes the required notice period |
An employee submits their written resignation |
Employer initiated termination |
Occurs when the boss terminates employment due to economic or exceptional reasons |
|
Immediate termination without notice |
Termination without notice in situations permitted by labour law |
|
Note
Employers and employees may mutually agree to waive or shorten the notice period, provided that neither party’s rights are compromised.
Events such as worker’s death, employer death or permanent inability fall under legally recognized reasons for automatic termination of employment contract.
UAE Law’s Termination Procedures: Important Framework and Key Rules on Labour Relations
Given its sensitive nature, the UAE has laid down a legal framework that key stakeholders need to follow. Generally, everyone is given the right to fair and documented procedures before ending their employment.
- Fair process before employer terminates
- Employers should follow a fair and well-documented process that matches the reason for termination.
- Proper documentation
- Maintaining records to demonstrate that decisions were made with legitimate reason
- Protection against arbitrary dismissal
- Under Article 47, termination is unlawful if the employee is dismissed for filing a serious complaint with MOHRE or a lawsuit against the employer and its validity is proven.
- Compliance with contractual and legal framework
- Employers must follow procedures outlined in the employment contract and applicable legislation, including notice period, compensation, financial penalties and final settlement requirements
- Next steps after termination
- Once termination is confirmed, securing company property and revoking access to IT systems should happen immediately after the termination meeting to protect proprietary data.
Notice Period Requirements before Termination: What changes after
When either the employer or employee decides to end their contract, advance notice is required in UAE. This period must be observed based on what’s agreed in the contract.
Its purpose is to give both parties time to prepare for the transition, complete handovers, and prevent any damage to operations.
The minimum notice timeline is 30 days under UAE labour law. However, if the employee is still within the probation period, the employer may terminate employment by giving at least 14 days’ written notice. During the contractual notice period, the employee is entitled to their full remuneration according to the last salary they were receiving.
If either party fails to honor the notice period agreed, they are required to compensate the other party with an allowance equivalent to the full salary for the unobserved portion of the notice period.
Immediate termination without notice is permitted under specific conditions, which require a formal written investigation and justification for the dismissal.
Employees who believe they have been unlawfully terminated can file a complaint with the Ministry of Human Resources and Emiratisation (MoHRE).
If an employee is dismissed unlawfully, they may be entitled to compensation of up to three months’ salary.
When do longer notice periods apply in the UAE?
Longer notice obligations are primarily governed by the employee’s contract. A longer notice period may apply if it is validly agreed in the contract, provided it remains within the statutory range of 30 to 90 days.
For senior roles or business- critical positions, human resources may ask to serve a longer period given:
- Turnover of strategic responsibilities
- Handling of sensitive information or intellectual property
- Require longer transition for team continuity
When does a longer notice obligation not apply?
- Upon immediate termination
- Situations where employer fails to meet obligations, allowing employee to leave without notice
- Cases where the parties agree to waive active service during the notice period or shorten working obligations, while preserving the worker’s legal rights for the agreed notice period.
Immediate Termination of Employment UAE: Article 44 grounds and process
Immediate termination of employment UAE refers to ending the employment relationship without a notice when legally justified.
Under UAE labour regulations, certain serious violations may allow termination without notice. These provisions are commonly referenced under Article 44 of the labour law.
Immediate termination usually involves:
- A serious breach of duty
- Submits forged documents
- Misconduct or violation of workplace rules
- Circumstances defined by labour legislation
Because this type of termination bypasses the notice period, employers must ensure the legal grounds are clearly documented.
In the event of arbitrary dismissal
Termination is unlawful if the employee is dismissed for filing a serious complaint with MOHRE or a lawsuit against the employer and its validity is proven. In that case, the court may award compensation of up to 3 months’ wage, in addition to other entitlements such as notice pay and end-of-service benefits where applicable.
Employees may also raise claims with issues related to unpaid dues, including repatriation costs and the cancellation of their UAE residency visa.
Note
This article focuses on the UAE private-sector labour regime under Federal Decree-Law No. 33 of 2021.
Employment in financial free zones such as DIFC and ADGM is governed by separate employment laws and regulations and should be assessed separately.
Immediate termination by employer vs employee (when notice is not required)
If the employer terminates the employment contract without notice, the decision must rely on legally valid grounds under UAE labour law.
Immediate termination is generally associated with serious misconduct, actions that harm the employer’s business or major breaches of workplace rules. Employers should document the reason for termination and keep supporting evidence to ensure compliance with contractual obligations.
A worker may leave without notice only in the cases specified by Article 45, such as serious employer breach, violence or harassment, grave danger at the workplace that is not remedied, or instruction to perform fundamentally different work without written consent. This allows the employee to leave the job immediately rather than complete the notice period based on agreement.
Important procedural note
Because termination without notice is an exception, the legal basis and supporting evidence should be documented carefully.
Compensation for termination of employment UAE: what you may be owed
Employees who have completed at least one year of service are entitled to severance pay in the UAE.
Compensation for termination of employment UAE depends on the reason for termination and the employee’s length of service.
Employees terminated must ensure the final settlement reflects these obligations.
End of Service Benefits, Unused leave, and Final Settlement Checklist
After termination of employment, the employee may receive end of service gratuity if they meet the eligibility requirements.
Under UAE law:
- A foreign employee who completes one year of continuous service is entitled to gratuity upon the end of service.
- The gratuity is calculated based on the basic wage.
The end-of-service gratuity is calculated based on the employee’s length of service and final basic salary.
Calculations would include:
- 21 days’ wage per year for the first five years of service
- 30 days’ wage per year for each additional year of service
Typical final settlement items include:
- Final salary payment (i.e. full wage payment)
- Unused leave compensation
- End of service gratuity
- Any contractual benefits due
Gratuity payment is capped at two years’ wages for foreign employees in the UAE.
Termination of Employment Letter: What must be Included?
In practice, employers should document the end of employment clearly in writing. For termination with notice, written notice is required. For dismissal without notice under Article 44, the dismissal decision must be written and justified. Separately, an employee may request an experience certificate at the end of employment.
A typical letter of termination of employment should include:
- Employee name and position
- Reference to the employment contract
- Effective termination date
- Notice period (if applicable)
- Final settlement details
- Return of company property instructions
Clearer documentation helps avoid misunderstandings or legal disputes.
Common mistakes and dispute risk (and how to protect Employer and Employee Rights)
Employees dismissed unlawfully may be entitled to compensation of up to three months’ salary, depending on the severity of the breach.
Employers must conduct a formal written investigation before terminating an employee without notice for severe breaches.
Employment termination disputes can occur when an employer fails to:
- Provide proper notice as defined by UAE’s key legislation
- Final settlements
- Absence of formal termination paperwork
- Calculate gratuity accurately
Practical checklist: Documents and Next Steps
Employers must provide a notice for termination, which must include the reason for dismissal.
Key practices for employee termination include thorough documentation of performance issues, conducting in-person or live video meetings with an HR witness, providing written note and severance, and managing a smooth offboarding process.
Documentation of performance reviews, written warnings, and investigation reports is essential to prove that the termination is legitimate and non-discriminatory.
When handling termination of employment in UAE, both employers and employees should ensure the following steps are completed:
Employer checklist
- Maintain documentation including performance reviews, and investigation reports
- Conduct termination meetings preferably in person or via live video. It helps to bring a HR representative as a witness
- Issue termination of employment letter
- Calculate final settlement
- Process gratuity (if applicable)
- Cancel work permit and visa if required
- Manage a structured offboarding process, including return of company assets
Employee checklist
- Calculate and confirm settlement details
- Collect employment records
- Ensure gratuity and leave payments are included
- Clear any outstanding obligations with the employer before exit
Whether you’re terminating a contract as an employer or employee, it pays to protect yourself and ensure legitimate reasons are properly documented by the other party.
This will help you avoid compliance issues with the Ministry of Human Resources in the future.
Frequently Asked Questions (FAQs) on Employee Termination and Labor Law
What is the minimum notice period for the termination of employment in UAE?
The notice period must be stated in the contract and must be at least 30 days and no more than 90 days.
However, if the employee is still within the probation period, the employer may terminate employment by giving at least 14 days’ written notice. The parties may agree to reduce or waive active service during the notice period, but the worker’s rights for the agreed notice period must still be preserved.
If there is a default from either side, then they have to pay the salary for the notice period.
At what circumstances may the employer terminate the employment relationship immediately according to UAE labor rules under Article 44?
Gross misconduct or violation of the labour law provisions may lead to immediate termination.
Under federal law, it is a serious breach of the basic duties or acts that cause harm to the employer and the rest of the company. Other acts may involve the disclosure of confidential information and intellectual property.
Before proceeding, the employer needs to conduct a thorough investigation and establish a legitimate reason.
How is compensation for termination of employment UAE typically calculated (salary, leave, gratuity)?
Employees are entitled to receive their wages and all other end-of-service entitlements within 14 days from the end date of the contract term.
Final salary is determined by the amount earned but not paid until the last day of work, including any pending allowances or benefits.
Any leave that has been accrued but is still pending must be converted to cash and paid as part of the settlement. This is done on the basis of the last drawn salary by the employee.
End of service gratuity is paid to the employee if he/she has served for at least a year of continuous service. It is calculated on the basic wage (excluding allowances).
Minimum calculation is defined by:
1. 21 days’ basic salary per year for the first 5 years
2. 30 days’ basic salary per year for each additional year
The formula for final compensation =
Outstanding salary + unused leave + gratuity + (notice pay if applicable) + other contractual benefits
Does an employee lose end of service gratuity after summary dismissal?
Not automatically. It is important to note that summary dismissal does not necessarily mean losing out on the end-of-service gratuity.
Gratuity is still applicable for foreign employees whose period of service is more than one year.
Some exceptions apply depending on the grounds for termination. For those whose dismissal is based on serious violations, it is dependent on whether it was lawfully done or not.
It is the employer’s responsibility to prove the grounds for summary dismissal. If the employer fails, it is considered unlawful termination and the gratuity is still due.
What should employees do if they believe the termination was unfair or arbitrary?
The employees should keep a record and seek clarification from the labour authorities. In case there is a dispute, the employee may lodge a complaint to the Ministry of Human Resources and Emiratisation (MoHRE).
A competent court may finally decide whether the gratuity has to be paid, and they may also have a say on the unfair cancellation of work permits.
What documents should be collected and signed during the final settlement process?
Employers must document and communicate valid reasons for termination to protect against potential legal claims.
Common documents to ensure compliance include
✓ final settlement statement
✓ termination letter
✓ handover confirmation
✓ employment records
✓ work permit cancellation documents
The UAE Labour Law mandates that terminations be documented with a written notice or termination letter.
