UAE Labour Law Termination Benefits: What You Need to Know?

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When an employment contract ends in the UAE, what benefits are employees entitled to? Understanding termination benefits is crucial for both employees and employers, as UAE Labour Law outlines specific rights regarding gratuity pay, compensation, and other entitlements. Whether an employee resigns or is terminated, they must receive their end-of-service benefits within 14 days.

But how are these benefits calculated? What happens in cases of unfair dismissal? How can employees claim their dues if an employer refuses to pay?

This guide answers these questions, providing a detailed overview of UAE labour laws on termination benefits in 2025. Employees must be aware of their rights to ensure they receive their lawful compensation without delays or disputes.

What Are UAE Labour Law Termination Benefits?

When an employment contract ends in the UAE, employees are entitled to specific termination benefits under Federal Decree-Law No. 33 of 2021.

These benefits ensure that employees receive fair compensation when they resign or are dismissed. The exact entitlements depend on factors such as length of service, reason for termination, and type of employment contract.

Key Termination Benefits for Employees:

Employees who complete at least one year of continuous service are eligible for termination benefits, including:

End-of-service gratuity, calculated based on basic salary and years of service.
Unpaid salary for any work completed before termination.
Compensation for unused annual leave, paid at the basic salary rate.
Notice period salary, unless terminated for a valid reason under UAE labour law.
Severance pay or compensation for unfair dismissal, if applicable.
Repatriation costs (for expatriates), including a return flight to their home country unless they secure a new job.

How Termination Type Affects Benefits?

The benefits an employee receives depend on whether they:

Resign voluntarily: Employees with less than five years of service receive a reduced gratuity, while those with over five years receive full gratuity.
Are terminated with notice: Employees are entitled to full gratuity, salary for the notice period, and all other due benefits.
Are unfairly dismissed: Employees may claim compensation of up to three months’ salary, along with gratuity and unpaid wages.

Understanding UAE termination benefits ensures employees are aware of their rights and can take legal action if their entitlements are not provided.

What Are the Different Types of Employment Contracts in the UAE?

In the UAE, labour laws recognize two primary types of employment contracts, limited contracts and unlimited contracts. These contract types determine an employee’s rights, termination procedures, and end-of-service benefits.

1. Limited Contracts

A limited contract has a fixed duration, typically up to three years, and includes a specified end date. Employers and employees agree on the contract length at the time of signing.

If an employer terminates a limited contract before its expiry without a valid reason, the employee may be entitled to compensation of up to three months’ salary or the remaining contract period, whichever is shorter.
If an employee resigns before completing the contract term, they might forfeit their gratuity unless they have completed at least one year of service.

2. Unlimited Contracts

Unlimited contracts have no fixed end date and continue until either party decides to terminate them with proper notice.

Employees under an unlimited contract must serve a notice period (usually 30 to 90 days) before leaving.
If an employer terminates an unlimited contract without cause, the employee may claim wrongful dismissal compensation in addition to gratuity and other entitlements.

Understanding these contracts is crucial, as they directly affect gratuity pay, termination benefits, and legal protections under UAE labour laws.

What Are the Key Termination Rules Under UAE Labour Law?

Termination of employment in the UAE is governed by Federal Decree-Law No. 33 of 2021, which outlines the legal grounds for dismissal, employee rights, and employer obligations. Understanding these rules ensures compliance and protects both parties from legal disputes.

1. Legal Grounds for Termination

Employers can lawfully terminate employees under the following conditions:

End of contract: A limited contract expires without renewal.
Mutual agreement: Both parties agree to terminate the employment relationship.
Performance-related termination: If an employee consistently fails to meet performance standards despite receiving formal warnings.
Disciplinary dismissal: Misconduct, including fraud, workplace violence, or disclosure of confidential information, can lead to termination without notice.

2. Notice Period Requirements

Employers and employees must provide a minimum notice period of 30 days and a maximum of 90 days.
Failure to provide notice can result in compensation equivalent to the notice period salary.
Immediate termination without notice is allowed in cases of gross misconduct, as defined by Article 44 of the UAE Labour Law.

3. Probation Period Termination

Employers can terminate employees during probation with a 14-day notice.
Employees leaving during probation to join another UAE employer must give one month’s notice and their new employer must compensate the previous employer for recruitment costs.

Following these regulations helps ensure that employment terminations comply with UAE law, reducing the risk of legal claims and disputes.

How Is End of Service Gratuity Calculated in the UAE?

End-of-service gratuity is a key financial entitlement for employees upon termination. It is calculated based on the employee’s basic salary and years of service, following Article 51 of the UAE Labour Law.

1. Gratuity Calculation for Limited and Unlimited Contracts

Employees who complete at least one year of continuous service are eligible for gratuity. The calculation differs based on the length of service:

Less than 1 year: No gratuity entitlement.
1 to 5 years: Gratuity is 21 days’ basic salary for each year of service.
More than 5 years: Gratuity increases to 30 days’ basic salary for each additional year beyond five years.
Maximum Limit: The total gratuity payout cannot exceed two years’ total salary.

2. Exclusions and Deductions

Allowances (housing, transport, and bonuses) are excluded from gratuity calculations.
Unpaid leave days are not counted in service tenure.
Any pending employee debts to the employer can be deducted from gratuity.

3. Payment Timeline

By law, employers must settle gratuity payments within 14 days of the employee’s last working day. Failure to do so can result in legal action.

Properly calculating gratuity ensures employees receive fair compensation while helping employers remain compliant with UAE labour laws.

What Is the Difference Between Resignation and Termination Benefits?

Understanding the distinction between resignation and termination is crucial in determining an employee’s entitlement to gratuity, compensation, and other end-of-service benefits.

1. Employee Resignation Benefits

When an employee voluntarily resigns, the following rules apply:

With less than 1 year of service: No gratuity is paid.
1 to 5 years of service: Entitled to gratuity of 21 days’ basic salary per year.
More than 5 years: Entitled to 30 days’ basic salary per year beyond five years.
Employees must serve a notice period (30 to 90 days) or compensate the employer if they fail to do so.

2. Employer Termination Benefits

If an employer terminates an employee:

The employee is entitled to full gratuity pay if they have completed at least one year of service.
If termination is without just cause, the employee may receive compensation up to three months’ salary.
The employer must pay all outstanding dues, including salary, unused leave, and gratuity, within 14 days.

3. Impact on Work Permits and Visas

Resignation: Employees may need to serve their notice period before their work permit is canceled.
Termination: Employers must immediately process visa cancellation and settle dues.

Knowing the difference between resignation and termination benefits helps employees plan their career moves while ensuring employers meet their legal obligations.

Are Employees Entitled to Compensation for Unfair Dismissal?

Unfair dismissal occurs when an employer terminates an employee without a valid reason or in violation of UAE Labour Law. Employees dismissed unlawfully are entitled to compensation, which varies based on the case circumstances.

1. Definition of Unfair Dismissal

According to Article 47 of the UAE Labour Law, termination is considered unjustified if:

The dismissal is not based on work performance or conduct.
The employee is fired for filing a labour complaint or exercising legal rights.
The termination violates the terms of the employment contract.

2. Compensation for Unlawful Termination

Employees dismissed without a valid reason can claim:

Up to three months’ salary as compensation, based on the employee’s last salary.
Gratuity pay, notice period compensation, and unpaid dues.
Additional damages if proven that the employer acted in bad faith.

3. Filing a Complaint for Unfair Dismissal

Employees can:

Report the issue to MOHRE (Ministry of Human Resources and Emiratisation) within 30 days of termination.
If mediation fails, escalate the case to the UAE Labour Court.
Seek legal assistance to maximize compensation claims.

Understanding unfair dismissal protections helps employees safeguard their rights and pursue legal remedies when faced with wrongful termination.

What Happens to Benefits in Case of Termination Without Notice?

Termination without notice occurs when an employer immediately dismisses an employee without following the standard notice period. While certain situations allow for dismissal without notice, employees may still be entitled to compensation under UAE labour laws.

1. Conditions for Termination Without Notice

Under Article 44 of the UAE Labour Law, an employer can terminate an employee without notice if the employee:

Commits misconduct, such as theft, fraud, or workplace violence.
Falsifies documents or provides false identity.
Repeatedly violates workplace policies despite receiving written warnings.
Fails to perform job duties or abandons work for more than seven consecutive days without valid reason.

2. Employee Rights in Case of Immediate Termination

Employees terminated without just cause can claim compensation for the full notice period salary.
They are still entitled to gratuity pay, unpaid wages, and other benefits if they meet eligibility requirements.
If wrongful termination is suspected, employees can file a labour complaint with MOHRE.

3. Employer Obligations After Immediate Termination

Employers must cancel the work permit and residence visa immediately.
Any pending payments, including gratuity and leave salary, must be cleared within 14 days.
If an employer fails to justify termination, they may face fines or penalties.

Knowing these rules ensures employees understand their legal rights when facing termination without notice and allows them to take action if necessary.

What Other Benefits Are Employees Entitled to Upon Termination?

Apart from gratuity and unpaid wages, employees may be eligible for additional benefits upon termination, depending on their contract terms and UAE labour regulations.

1. Unpaid Salary and Unused Leave Compensation

Employees must receive all pending salaries for work completed before termination.
Unused annual leave must be compensated in cash based on the employee’s last salary.
If an employer fails to pay dues within 14 days, the employee can file a complaint with MOHRE.

2. Repatriation Costs for Foreign Employees

Employers are responsible for providing a return flight ticket to the employee’s home country, unless the employee finds a new job.
If termination was unjustified, the employer may also have to compensate for relocation expenses.

3. End-of-Service Certificates and Experience Letters

Employees have the right to request a service certificate detailing their job role and tenure.
Employers cannot charge fees for issuing these documents.

4. Continuation of Health Insurance

Health insurance coverage usually ends upon termination, but in wrongful dismissal cases, employers may be required to extend coverage temporarily.
Employees should confirm their insurance status before leaving the job.

Knowing these entitlements ensures employees receive all benefits they are legally owed after termination, helping them transition smoothly to new opportunities.

How Can Employees Claim Their Termination Benefits in the UAE?

Employees who have been terminated in the UAE are entitled to receive their end-of-service benefits, including gratuity, unpaid wages, and compensation for unlawful termination if applicable. To ensure a smooth process, employees should follow the legal steps outlined by the UAE Ministry of Human Resources and Emiratisation (MOHRE).

1. Verify Entitlements and Gather Documentation

Before filing a claim, employees should:

Review their employment contract to confirm the agreed benefits.
Calculate their gratuity pay and other dues based on UAE Labour Law.
Collect all relevant documents, such as salary slips, termination letters, and contract copies.

2. Request Payment from the Employer

Employees should formally request their dues in writing within 14 days of termination.
If an employer refuses or delays payment, the employee can escalate the issue to the MOHRE complaint system.

3. File a Complaint with MOHRE

If the employer fails to settle termination benefits, employees can:

Submit a complaint through MOHRE’s online portal, mobile app, or service centers.
MOHRE will attempt mediation between the employer and employee.
If the dispute is unresolved, the case will be referred to the Labour Court.

4. Labour Court Proceedings

If a case reaches the Labour Court, employees should:

Hire a labour law specialist for legal representation if needed.
Present all evidence of unpaid dues or unfair dismissal.
Court rulings usually favor employees if employers violate UAE Labour Law.

5. Enforcement of Court Decisions

If the Labour Court rules in favor of the employee:

The employer must pay the full compensation ordered by the court.
If the employer fails to comply, MOHRE may take legal action, including business suspension or fines.

Following these steps ensures that employees can successfully claim their termination benefits and receive fair compensation as per UAE labour regulations.

Conclusion

Employees in the UAE are entitled to gratuity pay, unpaid salaries, and other compensation when their employment ends. The calculation of termination benefits depends on the type of contract, length of service, and reason for termination.

In cases of unfair dismissal, employees can claim compensation of up to three months’ salary and report the issue to MOHRE. Employers are legally required to settle all dues within 14 days of termination. If disputes arise, employees can seek legal support and escalate complaints to the Labour Court.

Understanding UAE termination benefits helps employees protect their rights and receive their full entitlements under the law.

FAQs

What is the minimum service period to receive gratuity in the UAE?

Employees must complete at least one year of continuous service to be eligible for gratuity. Those who leave before completing one year are not entitled to gratuity pay.

How is gratuity calculated for employees in the UAE?

Gratuity is based on the employee’s basic salary and years of service. Employees receive 21 days’ salary per year for service up to five years and 30 days per year beyond five years.

Can an employer terminate an employee without notice?

Yes, an employer can dismiss an employee without notice for serious misconduct, including fraud, violence, or breach of contract, as per Article 44 of the UAE Labour Law.

What should employees do if an employer refuses to pay termination benefits?

Employees can file a complaint with MOHRE, which will mediate between both parties. If unresolved, the case can be taken to the Labour Court for a legal ruling.

Are expatriates entitled to repatriation costs after termination?

Yes, if an expatriate employee is terminated and does not secure a new job, the employer must pay for their return flight to their home country, unless otherwise agreed.

Does resignation affect gratuity entitlement?

Yes, employees who resign before five years of service receive a reduced gratuity. Those who complete five years or more are entitled to full gratuity benefits.