A Practical HR Guide For Employee Termination in the UAE
Your up-to-date guide for employee termination in the UAE in a fair, legal and practical manner for international HR leaders and business owners.
Whether the separation is due to resignation, contract expiry, redundancy, performance issues, or termination for cause, employers must follow a process that is lawful, documented, and fair. Mistakes, such as miscalculating gratuity, applying the wrong notice period, or mishandling a misconduct investigation, can lead to penalties, disputes, or bans on future work-permit applications.
This guide outlines the key rules that employers and employees should understand in 2025, including grounds for termination, notice requirements, severance and gratuity calculations, termination for cause, redundancy obligations, and final settlement rules across mainland UAE and relevant free zones. It is designed for both international companies operating in the UAE and employees seeking clarity on their rights when a contract ends.
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Legal Framework And Grounds For Termination in the UAE
Contract Expiry
Since fixed-term contracts govern most employment relationships, many terminations simply occur when the contract reaches its end date. If the employer does not intend to renew, the employment relationship concludes automatically, provided all legal obligations are met. These include settling outstanding salary, paying unused annual leave, and calculating end-of-service gratuity. If the employee continues working beyond the expiry date, the contract is generally treated as renewed on the same terms.
Mutual Agreement
Another lawful method is termination by written mutual consent. The UAE requires that mutual termination be voluntary and clearly documented to avoid any later claims that the employee was pressured into signing. Even when employment ends on mutual terms, employers still need to comply with settlement timelines, including the requirement to pay all final dues within 14 days of termination.
Terminating With Notice For A Valid Reason
Employers may end a contract by giving notice for a legitimate work-related reason. This may include poor performance supported by documented evaluations, restructuring, financial challenges, or the elimination of a role due to operational changes. The UAE’s labour law framework does not recognise “employment at will”; therefore, employers must show that the decision is connected to business needs rather than arbitrary motives. When performance is involved, authorities expect employers to demonstrate that the employee had opportunities to improve and that issues were documented over time.
Termination with notice applies when the employment relationship is ending for ordinary, non-misconduct reasons, for example:
- Business restructuring, redundancy-type situations, or internal changes
- Poor performance after documented warnings
- Mutual agreement to separate
- End of contract where one party chooses not to renew
During the notice period:
- The employee is entitled to their full salary and benefits
- Both parties must continue to fulfil their contractual obligations
- Annual leave continues to accrue
- The employer may place the employee on garden leave if contractually permitted
- Termination must still follow a fair and transparent process
If a termination is found to be unrelated to work requirements, such as dismissing an employee for making a complaint or asserting a statutory right, it may be classified as arbitrary, which can trigger compensation.
Termination Without Notice (For Cause)
These include:
- Using forged documents,
- Causing serious financial loss through negligence,
- Major breaches of safety rules,
- Disclosing confidential information,
- Being intoxicated at work,
- Assault, or
- Repeating misconduct after written warnings.
Employers must follow a fair internal process before taking this step. That generally means investigating the incident, informing the employee of the allegations, giving them an opportunity to respond, and issuing the final decision promptly after the misconduct is confirmed. Because Article 44 is often misapplied, employers need to be particularly cautious. Wrongful or unproven allegations frequently result in disputes and compensation orders.
When dismissing an employee without notice, the employer must ensure:
- The misconduct clearly fits the legal criteria
- An internal investigation was conducted
- The employee had a chance to respond
- Evidence is documented
- The reason is communicated in writing
Failing to meet these standards can result in the dismissal being treated as arbitrary, entitling the employee to compensation of up to three months’ salary, as determined by the Labour Court.
Entitlements after Article 44 dismissal
Employees dismissed for serious misconduct:
- Are not entitled to notice pay
- Lose the right to end-of-service gratuity
- Must still receive:
- Unpaid salary
- Pay for unused annual leave
- Any owed benefits stated in the contract
Repatriation expenses may also still apply depending on the circumstances.
Medical Inability And Death
Employment may also end if an employee becomes permanently unable to work, but only after they have exhausted their statutory sick leave entitlement of up to 90 days. A government-approved medical report must confirm that the employee cannot continue performing their duties. In the unfortunate event of an employee’s death, the employment relationship ends immediately, and end-of-service benefits must be paid to the employee’s legal heirs.
Employee’s Right To Resign Without Notice
Employees may resign without notice if the employer breaches their legal or contractual obligations. Examples include:
- Non-payment of salary for more than 30 days (without a lawful reason)
- Physical or emotional abuse in the workplace
- Unsafe working conditions despite previous reporting
- Being assigned work fundamentally different from what was agreed, without consent
Free Zone Variations: DIFC and ADGM
While most private-sector employers fall under federal law, financial free zones such as DIFC and ADGM operate their own employment regimes. Termination rules in these jurisdictions differ slightly, particularly around notice periods, redundancy, and compensation for unfair dismissal.
DIFC
- Termination requires written reasons if the employee requests.
- Minimum notice periods differ (7 days to 90 days based on service).
- Compensation for unfair dismissal can equal up to 1 year’s salary, depending on the case.
ADGM
- Similar to DIFC, with clearer rules on redundancy and fair process.
- Failure to follow procedure may result in additional compensation.
- Employers must provide final settlement within a set timeline (often 14 days).
Despite these differences, visa cancellation and immigration steps still follow federal UAE rules, meaning employers must handle both systems in parallel.
Termination of Emirati Employees (UAE Nationals)
Employers must follow additional rules when dismissing UAE national employees, as set out under the updated Emiratisation framework. A termination will be considered unlawful in several situations, even if the general labour law requirements for dismissal are met.
When a Dismissal of a UAE National Is Considered Unlawful
A company may be found to have acted unlawfully if it dismisses an Emirati employee in any of the following circumstances:
1. The dismissal is not based on a lawful ground
2. Replacing the Emirati employee with a non-national
If the employer:
- Retains or hires a non-UAE national to carry out the same duties previously performed by the Emirati employee, or
- Intends to replace the national employee with an expatriate without adequate justification to the Ministry of Human Resources and Emiratisation (MOHRE),
The dismissal may be treated as discriminatory or contrary to Emiratisation policy.
3. Retaliation for raising a complaint
Termination linked to reasons unrelated to job performance, especially where the employee has raised a legitimate complaint, may be treated as unlawful.
4. Failure to follow exit procedures for Emirati employees
These additions expand the protections previously provided under the 2009 decree.
MOHRE Approval and Mediation
Although the older requirement to give MOHRE 30 days’ advance notice of planned termination is no longer expressly included in the new rules, current MOHRE practice still expects employers to seek prior approval before dismissing a UAE national.
MOHRE may then:
- Hold a mediation meeting with the employer and employee,
- Request additional information, and
- Assess whether the dismissal is justified
If MOHRE agrees with the employer’s rationale, the company can proceed with the termination.
If MOHRE disagrees and the employer dismisses the Emirati employee anyway, several consequences may follow.
MOHRE Support for the Employee
When the dismissal is deemed unlawful, MOHRE may:
- Prioritise the individual on its job-seeker register,
- Offer training and guidance to assist in securing new employment
These protective measures were introduced under the new Emiratisation rules and did not exist in the 2009 decree.
Penalties for Employer Non-Compliance
If an employer unlawfully dismisses an Emirati employee, MOHRE may impose the following:
1. Suspension of work permits
MOHRE can suspend the company’s ability to obtain new work permits for up to six months—a restriction that can seriously disrupt business operations, as employees cannot legally work without a valid permit.
2. Court referral
The case may be escalated to the Labour Court for adjudication.
3. Possible reinstatement
Under the new rules, MOHRE may order reinstatement if the Labour Court rules that the termination was unlawful. Although reinstatement has historically been rare in the UAE private sector, the power now exists and may be used more actively in national-employee cases.
4. Financial penalties
Fines of AED 20,000 per violation may be imposed for:
Unlawful dismissal of a UAE national,
Failing to reinstate an employee after a court order,
Non-payment of required GPSSA pension contributions, or
Non-genuine adherence to Emiratisation obligations
These penalties highlight the increased regulatory focus on the fair treatment and job security of UAE nationals in the private sector.
Redundancy Terminations And Economic Reasons
Unlike many other jurisdictions, the UAE Labour Law does not recognise “redundancy” as a formal legal category. However, in practice, employers may still terminate employees for genuine business or economic reasons, provided the termination is fair, justified, and not discriminatory.
MOHRE accepts business-related terminations when the employer can show that the role is no longer required and the termination is not being used as a disguise for misconduct or retaliation.
When Economic Or Organisational Termination Is Permitted
Termination for business reasons may be lawful when it stems from:
Operational restructuring – consolidation of departments, removal of duplicated roles, or changes to reporting lines.
Financial hardship – reduced revenue, cost-cutting measures, or declining demand affecting sustainability.
Business closure or relocation – including full shut-down, branch closure, or relocation to another emirate or country.
Technological change – automation or digital tools making certain functions redundant.
Strategic shifts – discontinuing certain services or product lines.
In each case, the employer must act in good faith and ensure that the stated reason is demonstrably genuine.
Employer Obligations During Redundancy-Style Termination
1. Provide Written Justification
A termination letter must explain why the role is being removed or why the position is no longer needed. Vague or generic statements may be rejected by MOHRE.
2. Apply Fair Selection Criteria
If multiple employees are in similar roles, selection should be based on objective factors such as:
- Job requirements
- Skills and qualifications
- Documented performance
- Business needs
Any appearance of bias can lead to disputes.
3. Explore Alternatives
While not mandatory, employers are encouraged to consider alternatives such as:
Reassignment to another department
Offering a role with revised duties
Temporary redeployment
Mutually agreed termination arrangements
Failure to explore alternatives can weaken the employer’s position if challenged.
4. Honour Notice Periods And Final Dues
Employees are entitled to:
- Contractual or statutory notice
- Payment for unused annual leave
- End-of-service gratuity (if eligible)
- Salary up to the last day worked
- Repatriation ticket (for expatriates, unless exempt)
Even when the dismissal is based on economic grounds, gratuity cannot be withheld.
5. Avoid Arbitrary Dismissal
Under Article 47, a dismissal is considered arbitrary if the employee is terminated:
- For filing a complaint or lawsuit,
- For exercising legal rights, OR
- Without a valid business justification.
Employees can seek compensation of up to three months’ salary if MOHRE or the court finds the termination arbitrary.
When Advance Approval Is Required
In certain free zones (e.g., DIFC, ADGM, JAFZA), redundancy may require:
- Advance notification,
- Consultation requirements, OR
- Adherence to zone-specific employment rules.
Most mainland employers do not require external approval, but must still demonstrate legitimate business reasons.
Economic Termination In Practice (MOHRE’s View)
MOHRE tends to accept redundancy-style terminations when the employer can show:
- Written evidence of restructuring, financial change, or business closure
- Consistent application of the stated reason
- No prior disputes or complaints suggesting retaliation
Where evidence is weak, the termination may be interpreted as arbitrary, exposing the employer to compensation and legal risk.
Arbitrary Dismissal Protection And Compensation For Employees
Although the UAE Labour Law allows employers to terminate employees for valid reasons, the law protects workers against arbitrary dismissal. Article 47 of Federal Decree-Law No. 33 of 2021 sets out when a termination becomes unlawful and the compensation that may apply.
Arbitrary dismissal generally arises when the employer terminates the contract without a legitimate reason related to work, or in retaliation for the employee exercising their legal rights.
When A Dismissal Is Considered Arbitrary
A termination may be classified as arbitrary if the employer:
1. Terminates Without A Valid Work-Related Reason
This includes situations where:
Business justification is unclear or unsubstantiated
Employer cannot provide evidence of performance issues
Termination is disguised as restructuring without real operational need
2. Retaliates Against An Employee
Dismissals linked to the employee’s decision to:
File a complaint with MOHRE
Start legal action against the employer
Report violations or misconduct
Request unpaid entitlements
can be considered arbitrary under Article 47.
3. Acts In Bad Faith
Examples include:
Targeting certain employees unfairly
Using termination to avoid paying gratuity or benefits
Dismissing an employee shortly before the end-of-service payout increases
4. Fails To Follow The Required Process
Even if the reason for dismissal is valid, failure to follow the below processes may lead to a finding of unlawful termination:
Provide written notice
Conduct a fair disciplinary process
Follow MOHRE guidelines
Compensation For Arbitrary Dismissal
If MOHRE or the UAE Labour Court finds the dismissal arbitrary, the employer may be ordered to pay compensation of up to three months’ salary. This amount is calculated based on:
- The employee’s last full monthly wage, including allowances
- The severity and circumstances of the dismissal
- The length of the employee’s service
- The level of harm caused to the employee
This compensation is in addition to:
- End-of-service gratuity
- Notice pay (if not given)
- Payment for unused annual leave
- Outstanding wages
- Repatriation ticket (for expatriates)
Possibility Of Reinstatement
Unlike some jurisdictions, the UAE does not typically reinstate employees into their old roles. Instead, compensation is the primary remedy for unfair or arbitrary dismissal.
How Employees Bring A Claim
Employees must first file a case with MOHRE, which attempts to resolve disputes through mediation. If unresolved, the case proceeds to court. Employers who ignore MOHRE summons or refuse to settle may face administrative penalties.
How Employers Can Prevent Arbitrary Dismissal Claims
To minimise risk, employers should:
- Document performance issues clearly
- Maintain consistent disciplinary procedures
- Ensure business reasons for termination are well supported
- Avoid dismissing employees involved in active complaints
- Issue clear, properly drafted notice letters
- Seek legal advice for complex cases (e.g., restructuring, misconduct allegations)
Notice Periods In The UAE
Under UAE Labour Law (Federal Decree-Law No. 33 of 2021 and its amendments), both employers and employees must give notice to end a fixed-term employment contract, unless the termination is for a legally recognised “without notice” reason.
Statutory Notice Requirements
The law sets a mandatory minimum notice period of 30 days for most employment contracts. However, employers and employees may agree to a longer notice period in the contract, as long as it does not exceed 90 days. Any clause attempting to reduce the notice period below 30 days is invalid.
In practice, notice periods vary across industries:
Standard roles typically range from 30 to 60 days.
Senior and executive-level positions often have 90-day notice periods written into their contracts.
Notice must be served in writing, and the employment relationship continues as normal until the notice period ends unless both sides agree otherwise.
Working During Notice
During the notice period, employees are entitled to full wages, benefits, and leave accruals. Employers can allow the employee to work, place them on garden leave if the contract allows, or mutually agree to waive the notice in exchange for payment.
Payment In Lieu Of Notice
If an employer wishes to end the employment immediately, they must pay the employee a lump sum equal to the salary they would have earned during the notice period. This includes full basic salary plus regular allowances. Employees may also request payment in lieu if the employer agrees.
Shortening Or Extending Notice
The notice period can only be shortened or waived if:
Both parties agree in writing, OR
The employer dismisses the employee for a legally valid “summary dismissal” reason under Article 44 (e.g., gross misconduct).
Conversely, an employer cannot extend the notice period beyond what is written in the employment contract unless the employee consents.
Employee’s Right To Job Search Time
Under UAE law, employees serving notice may take one unpaid day per week to attend interviews, provided the employer approves the request. This applies only when the employer initiates the termination.
Probationary Period Termination Rules
The UAE Labour Law sets out specific rules for ending employment during probation. These rules apply across all private-sector employers regulated by MOHRE, regardless of whether the employee is on a fixed-term or renewable contract.
Probation can last up to six months, and employees do not earn end-of-service gratuity during this period. However, employers must follow strict notice rules depending on who initiates the termination.
Termination Initiated By The Employer
If the employer chooses to terminate an employee during probation, they must give:
14 days’ written notice
No reason is legally required, but employers should still document their rationale to avoid disputes, especially in cases involving performance or suitability concerns.
Employees terminated during probation are not entitled to:
Notice pay
End-of-service gratuity
However, they must receive:
Salary up to the last day worked
Payment for any earned annual leave (if applicable)
Repatriation ticket if contractually required or under MOHRE rules for expatriates
Termination Initiated By The Employee (Leaving the UAE)
If the employee resigns during probation and intends to leave the UAE, they must give:
14 days’ written notice
The employer must process visa cancellation once the notice expires. Employees may relocate abroad freely without penalty.
Termination Initiated By The Employee (Joining Another UAE Employer)
If the employee resigns during probation to join another employer within the UAE, the notice period differs:
- 30 days’ written notice
In this case, the new employer is required to reimburse the previous employer for recruitment costs. This helps prevent disruption and ensures fair compensation for hiring expenses.
Restrictions During Probation
- Employers cannot extend probation beyond six months.
- Employees cannot be placed on probation more than once for the same employer.
- A new probation period can apply only if the employee moves to a different job role within the same employer, and both parties agree in writing.
Common Issues and Practical Considerations
- Premature termination without proper notice is a major cause of MOHRE complaints.
- Withholding salary or passport is unlawful, even during probation.
- Employers should finalise all dues quickly to avoid administrative penalties.
- Careful documentation of performance concerns helps protect against claims of arbitrary dismissal.
Final Salary, Benefits, and Entitlements on Termination
When an employment relationship ends in the UAE, employers must settle all outstanding payments within 14 days of the employee’s last working day. This requirement applies to all types of terminations: resignation, expiry of contract, mutual termination, or employer-initiated dismissal.
The final settlement typically includes:
Outstanding Salary
Employees must be paid for all days worked up to the termination date. This includes:
Basic salary
Any unpaid allowances (where contractually agreed)
Overtime (if applicable and approved)
Employers must ensure calculations are accurate, as disputes over unpaid wages are among the most common sources of labour complaints handled by MOHRE.
Unused Annual Leave
All accrued but unused annual leave must be compensated in cash, calculated using the employee’s basic salary. Employers cannot force employees to “use up” remaining leave during the notice period unless both parties agree.
End-of-Service Gratuity
EOSG is calculated based on the employee’s basic salary only, excluding allowances and bonuses.
How Gratuity Is Calculated
- First 5 years of service: Employees receive 21 days of basic salary for each year worked.
- After 5 years of service: Employees receive 30 days of basic salary for each additional year.
Maximum cap: The gratuity cannot exceed two years of total wage, as per the Labour Law.
Partial years: Service of less than a full year is calculated on a pro-rata basis.
EOSG Deductions And Forfeiture Rules
The UAE no longer applies the old system where gratuity was reduced or forfeited for resignations. Since the law changed, employees retain full gratuity, regardless of whether they resign or are terminated, provided they have completed at least one year of service.
However, gratuity may be lost or reduced if:
The employee commits serious misconduct under Article 44
The employer can legally terminate without notice and prove the misconduct
There is a judicial ruling that voids the end-of-service benefit (rare cases)
Payment Deadlines For EOSG
Employers must settle gratuity and all final dues within 14 days from the employee’s last working day. Delays can result in:
- Labour complaints
- Administrative penalties
- Potential fines under MOHRE regulations
Special Cases And Clarifications On EOSG
Employees on commission or variable pay: Only basic salary applies to gratuity, so employers must ensure basic pay is clearly defined in the employment contract.
End-of-service for part-time employees: Part-time workers are entitled to a pro-rated gratuity based on actual working hours compared with full-time equivalents.
Domestic workers: Domestic employees fall under a separate legal framework (Federal Law No. 10 of 2017), but gratuity rules are similar.
Free zones: Most free zones follow federal rules; however, DIFC and ADGM operate under separate legal systems and use different schemes (DIFC DEWS, ADGM trust-based pension-style benefits). These apply only to employees working within those jurisdictions.
Repatriation Costs
For expatriate employees, the employer is responsible for providing a one-way ticket home unless:
- The employee joins another employer immediately, or
- The employee is terminated for serious misconduct and found liable.
This rule may vary in free zones depending on specific regulations but remains standard in mainland UAE.
Deductions And Offsets
Employers may deduct certain amounts only if they are lawful and documented. Permitted deductions include:
- Outstanding salary advances
- Penalties authorised by law
- Amounts owed under a signed agreement
- Visa cancellation expenses (if contractually agreed)
Unauthorised or arbitrary deductions are prohibited and may lead to MOHRE intervention.
Returning Company Property
Employees must return all company property, such as laptops, access cards, documents, and uniforms, before final settlement is issued. Any loss or damage must be proven before deductions can be applied.
Certificate of Employment
Under UAE law, employees may request a service certificate at the end of employment. It must include:
- Dates of employment
- Last position held
- A description of the work performed (if the employee requests it)
The employer cannot mention performance issues or disciplinary actions in this document.
Cancellation of Work Permits and Visas
For expatriates, the employer is responsible for cancelling:
- The employee’s work permit
- The residence visa
Employers must start cancellation shortly after the last working day to avoid overstaying fines. Employees are usually given a grace period, which can range from 30 to 180 days, depending on visa category.
Severance Pay And Additional Compensation
However, in practice, many organisations choose to offer ex-gratia severance packages, especially during restructuring exercises or where there is a higher risk of an arbitrary dismissal claim. These discretionary payments are used to support employees through the transition and to reduce the likelihood of disputes.
In situations involving large-scale reorganisations, companies may also provide voluntary severance packages to encourage mutually agreed exits. These can include lump-sum payments, extended notice, health insurance extensions, relocation support, or outplacement assistance. None of these elements are legally mandated, but they are commonly used in multinational organisations operating in the UAE.
It is also important to note that free-zone jurisdictions such as DIFC and ADGM follow separate employment regulations, which differ from the federal labour law.
Both frameworks require end-of-service contributions under their own qualifying schemes, but they do not impose mandatory severance pay either.
However, they do permit enhanced contractual severance terms, and DIFC in particular requires employers to follow a structured process for termination to avoid compensation claims linked to unfair or discriminatory dismissal. As a result, severance packages are often used in these zones as part of negotiated settlements.
Overall, while severance pay is not a legal requirement in the UAE, offering additional compensation is a common commercial and risk-management practice. Employers typically consider seniority, length of service, the nature of the role, and the potential legal exposure before finalising any severance arrangement.
How Beyond Borders HR Can Help
Managing employee termination in the UAE requires a deep understanding of local labour laws, procedural nuances, and cultural sensitivities. At Beyond Borders HR, we help organisations navigate this complexity with clarity and confidence.
We assist you in ensuring that every step from identifying valid grounds for dismissal to drafting compliant termination letters, calculating severance pay, and conducting exit interviews is handled with precision. Our experts work closely with you to tailor solutions that fit your business structure while aligning with UAE’s legal requirements.
Beyond compliance, we guide you on how to communicate effectively with employees, minimise disputes, and protect your company’s reputation. Whether you are facing redundancy, performance-related dismissal, or mutual termination, our support helps you approach each case fairly and thoughtfully.
With our help, you can ensure that your processes are not only legally compliant but also respectful of your workforce, turning a difficult situation into one handled with professionalism and care.
Need help handling dismissals in the UAE with confidence? Chat to Beyond Borders HR for expert guidance.
