UAE Labour Law Termination Benefits: A Comprehensive Guide to Rights and Calculations as of November 2025

UAE Labour Law Termination Benefits: Comprehensive Analysis as of November 2025

Estimated reading time: 12 minutes

Key Takeaways

• Structured statutory regime under Federal Decree Law No. 33 of 2021 and its amendments.
• End-of-service gratuity, notice pay, unused leave salary, and outstanding entitlements form the core benefits.
• Tiered gratuity calculation: 21 days per year for the first five years; 30 days thereafter, capped at two years’ salary.
• Payment within 14 days of termination or face penalties and legal exposure.
• Special rules for UAE nationals, part-time roles, and exclusions for gross misconduct.

Introduction: UAE Labour Law Termination Benefits in 2025

The evolving landscape of employment relations in the United Arab Emirates continues to fascinate legal professionals and business leaders alike. As of November 2025, the UAE’s legal regime for end-of-service (termination) benefits stands as one of the world’s most structured, transparent, and employee-protective systems, rooted in Federal Decree Law No. 33 of 2021 Regarding the Regulation of Employment Relationships (“UAE Labour Law”) and its latest amendments. The robust statutory regime, clarified further by Cabinet Resolution No. 1 of 2022 and Federal Law by Decree No. 57 of 2023 (concerning pensions for UAE nationals), meticulously prescribes rights, calculation methodologies, deadlines, and employer obligations attendant to every employment termination in the federal private sector.

Governing Statutes and Current Validity

At the fulcrum of UAE employment relations is Federal Decree Law No. 33 of 2021, which, alongside its Executive Regulations (Cabinet Resolution No. 1 of 2022), firmly governs all matters of employment termination and resultant benefits. These legal instruments are confirmed in full force as of November 2025, providing a unified legal standard for private sector employment in the Emirates.

The most recent amendments taking effect include:

• Federal Law by Decree No. 57 of 2023: This law updates termination benefits specifically for UAE nationals, channeling them into pension and social security frameworks instead of the classic gratuity model.

Applicability and Scope
This legal regime is mandatory for virtually all private sector employees across the UAE, excluding only those working in the Dubai International Financial Centre (DIFC), Abu Dhabi Global Market (ADGM), and certain government or public sector bodies, which have their own localized rules.

The Architecture of Termination Benefits: Types and Components

Perhaps the most anticipated post-employment entitlement is the end-of-service gratuity—a lump sum financial benefit paid to every qualifying employee upon termination of employment. The right to gratuity accrues after only one full year of continuous service, with the benefit scaled to years of service.

The law prescribes a minimum notice period of thirty (30) days before termination by either party. Where no notice is provided, the employer or employee must compensate the other party with payment in lieu of notice. Employment contracts specifying a longer notice period are given effect.

Involuntary or voluntary termination triggers a mandatory payout for all accrued but unused annual leave days. This payment is calculated using the employee’s basic salary at the time of termination.

All unpaid salaries, wage arrears, and contractual monetary entitlements must be settled fully during the final settlement.

Employers may offer contractual severance benefits exceeding these statutory minimums if expressly stipulated in employment agreements.

Conditions for Entitlement to Termination Benefits

A decisive precondition for gratuity entitlement is one uninterrupted year of service; periods of unpaid absence are excluded from continuity. Importantly, the law provides for pro rata calculation for incomplete years beyond the first year. There is no gratuity for service periods less than one year.

Employees dismissed without notice for reasons listed in Article 44 of Federal Decree-Law No. 33 of 2021 remain entitled to end-of-service gratuity. Forfeiture of gratuity is not permitted. Any dismissal must comply with the investigation and procedural requirements set by law.

Under current law, resigning employees are entitled to 100% of their accumulated gratuity as long as they satisfy the one-year minimum requirement. This marks a stark improvement from prior legislative positions that reduced gratuity entitlements in the event of resignation, signaling increased statutory protection for voluntary leavers.

Gratuity Calculation under the 2025 Law

The calculation of end-of-service gratuity rests on a tiered formula tied to the employee’s basic salary and the length of service, with a statutory ceiling imposed for maximum entitlements. The rules are summarized as follows:

• 1–5 years: 21 days’ basic salary per year
• More than 5 years: 21 days/year for first 5 years; 30 days/year for each subsequent year

Only Basic Salary Included: All allowances (housing, transport, overtime, commission, bonus) are categorically excluded from gratuity calculation. Only the employee’s basic wage at termination is considered.

Maximum Cap Applied: The total gratuity cannot exceed the equivalent of two years’ basic salary, irrespective of length of service or accumulated benefit.

Gratuity Calculation Example
For an employee earning AED 5,000 per month, with 6 years of continuous service:

• Years 1–5: (21 × 5000 / 30) × 5 = AED 17,500
• Year 6: (30 × 5000 / 30) × 1 = AED 5,000

Total Gratuity: AED 22,500

Payment Deadlines and Procedures

Employers are required by law to pay all end-of-service settlement amounts—gratuity, notice pay, accrued salary, leave payout, and contractual extras—within 14 days following the effective date of termination. Failure to comply triggers penalties and potential legal exposure.

An employer (or employee) may withhold or adjust sums due in respect of outstanding loans, advances, or documented overpayments, provided full disclosure and lawful documentation are furnished.

Delays in payment expose the employer to compensatory damages and administrative sanctions.

Special Categories, Exceptions, and Disputes

For UAE nationals, termination benefits are no longer provided as gratuity but as tailored pension or social security contributions administered under Federal Law by Decree No. 57 of 2023, commensurate with the national pension law’s requirements.

(For Emirati employees first registered on or after 31 October 2023, termination benefits are administered exclusively through the pension and social security system established under Federal Decree-Law No. 57 of 2023; earlier registrants remain governed by Federal Law No. 7 of 1999 on Pensions and Social Security.)

The current law and Executive Regulation extend full coverage to part-time, temporary, and flexible employment. However, these categories invoke specialized formulas for calculating benefits, detailed in Cabinet Resolution No. 1 of 2022.

Employees have up to two years after the employment relationship ends to initiate claims for unpaid end-of-service benefits—a welcome extension from the prior one-year statute of limitations.

Employees do not forfeit end-of-service gratuity due to summary dismissal for misconduct. Unlawful termination compensation, where awarded, does not prejudice the employee’s entitlement to warning allowance or end-of-service gratuity.

Procedural Safeguards: From Dismissal to Dispute

If a termination is found to be arbitrary or based on unlawful grounds, the employee is entitled to full statutory termination benefits plus potential compensation. Article 47 of Federal Decree Law No. 33 of 2021 anchors this pivotal safeguard. Learn more.

Non-compliance with the 14-day statutory payment window exposes employers to fines, liability for damages, and a negative record with the Ministry of Human Resources and Emiratisation (MOHRE).

Employees have up to two years from the date the entitlement becomes due to file a labour claim, in accordance with Article 54(9) of Federal Decree-Law No. 33 of 2021 as amended.

Calculation Tools and Practical Guidance

A number of reputable government and consultancy sources provide regularly updated, fully compliant end-of-service calculators. These tools incorporate proration for part-year service, caps for maximum payouts, leave accrual, and wage arrears to ensure accuracy for both employer and employee.

Summary Table: UAE End-of-Service Benefits (2025)

Component	Rule	Legal Reference
Gratuity Eligibility	1+ year continuous service	FDL No. 33/2021, Art. 51
Gratuity Calculation	21 days/year (1–5 yrs); 30 days/year (>5 yrs)	FDL No. 33/2021, Art. 51
Salary Base	Basic wage only (no allowances or extras)	FDL No. 33/2021, Art. 51
Maximum Cap	2 years’ total basic salary	FDL No. 33/2021, Art. 51
Payment Deadline	Within 14 days of contract termination	FDL No. 33/2021, Art. 53
Notice Period	Minimum 30 days; pay in lieu if not given	FDL No. 33/2021, Art. 43
Leave Pay	Compensation for unused annual leave	FDL No. 33/2021, Art. 29
UAE Nationals	Pension per FDL No. 57/2023, not gratuity	FDL No. 57/2023

Closing Observations: Evolution and Security in Employment Relations

The UAE continues to maintain and develop a labour law framework of remarkable sophistication and clarity, ensuring predictability for employers and security for employees. With statutory protection for end-of-service benefits more robust than ever, both domestic and expatriate workforces can transact professional relationships with increased confidence.

For complex scenarios, calculation anomalies, or high-value disputes, it is imperative to consult with a seasoned UAE labour law specialist. Clear documentation, proactive policy, and in-depth understanding of the changing statutory landscape are the keys to both compliance and strategic advantage.

For further information, always refer to the UAE Ministry of Human Resources and Emiratisation and the latest official government legal guidance.

Frequently Asked Questions

• What constitutes end-of-service gratuity?
  The end-of-service gratuity is a lump-sum entitlement calculated on basic salary, payable after one full year of continuous service.
• How is gratuity calculated for long-term employees?
  First five years accrue 21 days’ salary per year; each subsequent year accrues 30 days, subject to a two-year salary cap.
• Can benefits be withheld for gross misconduct?
  Yes, employees lawfully dismissed for gross misconduct forfeit their gratuity entitlement entirely.
• What penalties apply for late payment?
  Employers failing to settle within 14 days may face compensatory damages, administrative sanctions, and fines from MOHRE.