Termination of Employment and End-of-Service Benefits in the UAE Guide 2025

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

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, provided they follow the agreed notice period and provide a valid and legitimate reason.
• Employer’s Death: If the work is linked to the existence of the business owner, the contract may terminates.
• Employee’s Death or Permanent Disability: The contract can be terminated if 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: Facing exceptional economic circumstances that make continuing the business impossible.
• Non-renewal of Work Permit: If the employee fails to meet the requirements for reasons beyond the employer’s control.

Notice Period Rules 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:

• Notice Period Must Be in Writing: Either party must give written notification.
• Duration: 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 equal to the wage of the full notice period.

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 if:

1. The worker used a false identity or forged documents to get the job.
2. The employee commits a mistake causing significant material loss or intentionally damages company property.
3. The employee fails to follow workplace safety rules after being warned.
4. The employee repeatedly fails to perform their job responsibilities despite receiving two written warnings.

End-of-Service Benefits (EOSB) and Gratuity Calculation

End-of-Service Benefits (EOSB), commonly known as gratuity, are lump-sum payments due to employees when their employment ends. 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. The calculation is based on the employee’s basic salary, excluding allowances like housing, transportation, or bonuses.

Minimum Service Requirements

The minimum service period to be eligible for any gratuity is one year of continuous employment. Continuous service means unbroken employment with the same employer; note that any days of unpaid absence (leave without pay) do not count towards the service period for EOSB calculation.

Gratuity Calculation Formula

As per the standard formula under Article 51, the entitlements are structured as follows:

• First five years of service: 21 days of basic pay for each year.
• Additional years beyond five years: 30 days of basic pay for each year.
• Maximum Cap: The law caps EOSB at the equivalent of two years of wages.

Limited Contract Specifics

A limited contract in the UAE is an employment contract with a specified term, typically not exceeding four years. For employees who have completed more than one year of service on a limited contract, the gratuity amount is calculated as three weeks of basic salary for each year of service. The terms of a limited contract cannot be changed during its term unless both parties agree to the changes in writing.