Termination of Employment in UAE: Detailed Guide for 2025 Based on UAE Labour Law
The termination of employment in the UAE is governed by the Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations, commonly known as the UAE Labour Law. This law ensures fairness and clarity for both employees and employers in the private sector. Whether you're an employee wondering about your rights when losing a job, or an employer needing clarity on how to legally end a contract, this guide will walk you through the updated termination rules in the UAE for 2025.
Situations Where an Employment Contract Can Be Terminated (Article 42)
Under Article 42 of the UAE Labour Law, a work contract may be legally terminated in any of the following ways:
- Expiry of Contract Term: If the contract's duration ends and neither party extends or renews it, the employment automatically terminates.
- Mutual Agreement: Both the employer and employee can agree in writing to end and terminates the contract before its end date.
- Resignation or Termination by One Party: Either the employer or the employee may initiate the termination of the employment contract, as long as they follow the agreed notice period and provide a valid and legitimate reason for termination.
- Employer’s Death: If the employer dies and the work is linked to the existence of the business owner.
- Employee’s Death or Permanent Disability: If the worker dies or is fully and permanently disabled, supported by an official medical report.
- Imprisonment of Employee: If the employee is given a final court ruling that imposes a freedom-restricting penalty of at least 3 months.
- Permanent Closure of Company: If the establishment shuts down permanently in accordance with UAE laws.
- Employer’s Bankruptcy or Economic Inability: If the employer is bankrupt, insolvent, or facing exceptional economic circumstances.
- Non-renewal of Work Permit: If the employee fails to meet the requirements for renewing the work permit for reasons beyond the employer’s control.
Notice Period Rules in The UAE Under Article 43
According to Article 43 of the UAE Labour Law, both parties can terminate the contract for any legitimate reason with proper notice. The following rules apply regarding the notice period:
- Notice Period Must Be in Writing: Either party must give written notification, and the notice must be between 30 to 90 days as agreed in the contract.
- During the Notice Period: The employee must continue working as normal and is entitled to full salary during this time.
- If Notice Is Not Given: The party failing to serve the notice must compensate the other with an amount that equals the wage of the full notice period (or the remaining time).
- Mutual Agreement: The notice period can be shortened or removed if both parties agree.
Termination Without Notice by Employer (Article 44)
In certain serious cases, termination without notice is legal and justified under Article 44. Employers can dismiss employees immediately in the following cases:
- False Identity or Forged Documents: If the worker used a false identity or fake documents to get the job.
- Serious Loss or Damage: If the employee commits a mistake causing significant material loss or intentionally damages company property.
- Repeated Safety Violations: If the employee fails to follow workplace safety rules after being warned.
- Negligence of Duties: If the employee repeatedly fails to perform their job responsibilities despite receiving two written warnings.
End-of-Service Benefits (EOSB) and Gratuity
End-of-Service Benefits (EOSB), commonly known as gratuity, are lump-sum payments due to employees when their employment ends. In the UAE, EOSB serves as a financial safety net to reward employees for their service. Any employee who has worked for a firm for a specific period of time is entitled to a gratuity, according to UAE labour law. Notably, Article 51 of the UAE Labour Law provides that a foreign worker who completes at least one year of continuous service is entitled to EOSB upon termination.
Gratuity Calculation and Eligibility
The EOSB calculation in the UAE is based on the employee’s basic salary (excluding allowances like housing, transportation, bonuses, etc.) at the time of termination. Following a year of employment, employees become entitled to gratuity. After one year of employment, the employee is qualified for the entire gratuity regardless of whether they leave from the firm or are terminated by the employer.
The standard formula for calculation is presented below:
| Period of Service | Gratuity Entitlement |
|---|---|
| Less than one year | Not entitled to any EOSB |
| First 5 years of service | 21 days of basic pay for each year |
| Sixth year onwards | 30 days of basic pay for each year |
The law caps EOSB at two years of wages maximum. Additionally, the new UAE labour legislation stipulates that the deadline for end-of-service payments, including gratuities, must be made within 14 days of the employee’s last day of employment.
Employer’s Termination during Employee’s Leave
Termination of employees in the U.A.E. during their leave, whatever the nature of the leave, can only take effect after the employee returns from leave. In other words, a termination notice only takes effect once the employee comes back to work. This is in line with the UAE Labor Law No. 33 of 2021, and Article 35, specifically.