TRW & Co · Employment & Immigration
Termination and End of Service Benefits in the UAE
The end of service gratuity in the UAE is usually the largest payment on exit for expatriate employees: 21 days' basic wage per year for the first five years, then 30 days per year. Lawful termination also turns on notice, protected situations and payment deadlines, and the DIFC and ADGM apply different models. This page explains the rules and the decisions.
Key pointThe gratuity formula is rarely the problem; the inputs are. Basic wage, service dates and unpaid absence decide the number, and DIFC and ADGM employers are on different systems entirely.
At a glance
The onshore formula
Article 51: 21 days' last basic wage per year for the first five years and 30 days per year after that, capped at two years' wage.
One year to qualify
Full-time foreign workers need at least one year of continuous service; part years then count pro rata and unpaid absence is excluded.
Pay within 14 days
Onshore final wages and entitlements are due within 14 days of the end of the contract; ADGM allows 21 days with daily late penalties.
Notice of 30 to 90 days
Article 43 requires contractual notice of at least 30 and at most 90 days, or a notice allowance in lieu.
DIFC uses DEWS
The DIFC replaced gratuity with monthly qualifying-scheme contributions of 5.83% of basic wage, rising to 8.33% after five years.
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What termination and the end of service gratuity in the UAE cover
Ending an employment relationship in the UAE involves two linked questions: was the termination lawful, and what does the employer owe on exit? For most expatriate employees on the mainland, the largest single exit payment is the end of service gratuity in the UAE, a statutory lump sum calculated on basic wage and length of service. Around it sit notice pay, accrued leave, unpaid wages, repatriation costs and the immigration steps that close the employee's work permit and residence.
The rules differ sharply by location. Onshore and in most free zones, the federal Labour Law applies. The Dubai International Financial Centre (DIFC) replaced gratuity with a funded savings scheme in 2020. Abu Dhabi Global Market (ADGM) retains gratuity but, since 1 April 2025, under rules that differ in important ways from the federal model.
Terminations go wrong in predictable ways: notice is miscalculated, allowances are wrongly included or excluded, the 14-day payment deadline is missed, or a performance or misconduct dismissal is not supported by a proper process. Each mistake converts a routine exit into a claim.
The legal framework for termination
Onshore private-sector employment is governed by Federal Decree-Law No. 33 of 2021, as amended by Federal Decree-Law No. 14 of 2022 and Federal Decree-Law No. 9 of 2024, with its Implementing Regulation in Cabinet Resolution No. 1 of 2022. The Ministry of Human Resources and Emiratisation (MOHRE) registers contracts, handles complaints and, since the 2024 amendments, can issue binding decisions on claims up to AED 50,000.
Grounds and notice
Article 42 lists the ways a contract ends, including mutual written agreement, expiry of the fixed term, either party's decision with notice, death or permanent incapacity of the worker, and permanent closure of the establishment. Article 43 requires the notice period agreed in the contract, which must be at least 30 and no more than 90 days. A party that does not give notice owes the other a notice allowance equal to the wage for the notice period. A worker under notice from the employer may take one unpaid working day a week to look for new work.
During probation, which may not exceed six months under Article 9, either party can end the contract on at least 14 days' written notice, with additional requirements where a worker leaves to join another UAE employer.
Dismissal without notice and unlawful termination
Article 44 permits dismissal without notice only on listed grounds, such as forgery, gross losses, disclosure of trade secrets, assault at work and prolonged unauthorised absence, and only after a written investigation. Article 45 lets a worker leave without notice while retaining end-of-service rights where the employer has breached its obligations and failed to cure after notice to MOHRE, where the worker has been assaulted or harassed, or where there is a serious unaddressed safety risk.
Article 47 makes termination unlawful where it follows a serious complaint by the worker to MOHRE or a lawsuit against the employer that proves valid. Compensation is capped at three months' wages, in addition to the worker's other entitlements. Claims must be brought within two years of the end of the employment relationship.
How the end of service gratuity in the UAE is calculated
Article 51 sets the formula for full-time foreign workers with at least one year of continuous service:
- 21 days' basic wage for each of the first five years of service;
- 30 days' basic wage for each additional year;
- a pro-rata amount for part of a year, once the first year is completed;
- days of unpaid absence excluded from the service period;
- a total cap of two years' wage.
The wage base is the last basic wage, excluding allowances such as housing and transport, or the average daily wage for workers paid by piece. Amounts the worker owes under law or a judgment may be deducted, in line with the Implementing Regulation. UAE nationals are covered by pension and social security legislation instead, administered at federal level by the General Pension and Social Security Authority.
The current Law does not reduce the end of service gratuity in the UAE because an employee resigns, which was a key feature of the old 1980 Labour Law. That change matters in any negotiation built on outdated assumptions.
| Completed service | Calculation | Gratuity (days of basic wage) |
|---|---|---|
| Under 1 year | No entitlement | 0 |
| 3 years | 3 x 21 | 63 |
| 5 years | 5 x 21 | 105 |
| 8 years 6 months | (5 x 21) + (3.5 x 30) | 210 |
| 12 years | (5 x 21) + (7 x 30) | 315 |
These illustrations ignore unpaid absence and assume a single continuous period of service. Convert days into money using the basic daily wage method applied by MOHRE and the courts, and keep the calculation in the settlement file. For a fuller explanation, see our article on the UAE end-of-service gratuity.
Continuity of service and earlier contracts
Because every onshore contract is now fixed-term, renewals are common. Article 8 treats extensions and renewals as continuous service, so the end of service gratuity in the UAE is calculated from the original start date unless the earlier period was genuinely closed out and paid. Where an employer has transferred staff between group entities, the paperwork should say whether service carries over. Silence tends to be read in the employee's favour.
Unpaid leave, by contrast, is excluded from service. Keep clear records of approved unpaid leave so that the end of service gratuity in the UAE can be calculated accurately, and notify MOHRE where the Wages Protection System rules require it.
Unemployment insurance
Most private-sector employees must also hold cover under the federal Involuntary Loss of Employment (ILOE) scheme, which pays a limited monthly benefit for a period after involuntary job loss. It does not replace gratuity and is not paid by the employer on exit, but employees dismissed for disciplinary reasons may not qualify, so the termination route can affect what the employee receives.
Part-time workers and contract structure
Part-time workers earn gratuity in proportion to the hours actually worked, under Article 52 and the Implementing Regulation. Because gratuity is calculated on basic wage, the split between basic pay and allowances in the employment contract directly determines its value. Employers that set a low basic wage to reduce gratuity should expect scrutiny if the structure looks artificial.
Alternatives to gratuity: savings schemes, DIFC and ADGM
Onshore voluntary savings scheme
Cabinet Resolution No. 96 of 2023 introduced a voluntary alternative end-of-service benefits savings scheme for private-sector and free zone employers, overseen by MOHRE and the Capital Market Authority (which replaced the Securities and Commodities Authority on 1 January 2026). Participating employers make monthly contributions of 5.83% of basic wage for employees with under five years' service and 8.33% from five years. Gratuity accrued before enrolment remains payable, and the scheme does not apply in the DIFC or ADGM.
DIFC: the DEWS model
The DIFC Employment Law (DIFC Law No. 2 of 2019, as amended) replaced gratuity with monthly contributions to a qualifying scheme, the DIFC Employee Workplace Savings plan, from 2020: at least 5.83% of basic wage in the first five years and 8.33% thereafter. On exit there is no lump-sum gratuity calculation for service after the switch; the employee's account is held by the scheme. Notice under the DIFC Law depends on service, from seven days to 90 days, and final payments are due within 14 days of termination. Late payment carries a statutory penalty, so DIFC employers should treat the deadline as hard.
ADGM: gratuity with different rules
ADGM's Employment Regulations 2024, in force from 1 April 2025, keep gratuity for eligible non-GCC employees with at least one year's service, calculated on last basic wage, but remove the two-year cap that applies onshore and make gratuity payable whatever the reason for termination. Basic wage must be at least half of total wage. Employers can offer a pension or savings scheme instead if the employee chooses it in writing. Final amounts are due within 21 days, with a penalty of a day's wage for each day of delay capped at six months' wages, which the ADGM Courts can reduce. Check the current text at Abu Dhabi Global Market.
Before calculating any exit package, confirm which regime applies to the employing entity, not to the employee's office location. An employee working from a DIFC address but employed by a mainland branch is under the federal Labour Law; one employed by a DIFC entity is under the DIFC Law even if they travel across the region.
The exit process step by step
- Confirm the regime and route. Identify the employing entity, the applicable law, the contract terms and whether this is resignation, termination with notice, mutual agreement, expiry or dismissal for cause.
- Check protections. Screen for pregnancy, maternity leave, sick leave, a pending complaint to MOHRE, recent whistleblowing or other facts that make termination risky or unlawful.
- Serve notice correctly. Give written notice within the 30 to 90 day range onshore, or the DIFC or ADGM period, and decide whether the employee will work the notice, take garden leave or receive pay in lieu.
- Calculate final dues. Prepare a statement covering unpaid wages, notice allowance, accrued annual leave paid on basic wage, gratuity or scheme balances, repatriation and any contractual bonus or commission.
- Agree terms where appropriate. If there is risk, negotiate a settlement agreement with a clear release, confidentiality and transition terms, mindful of how each regime treats waivers.
- Pay on time. Pay onshore dues within 14 days of the end of the contract, DIFC dues within 14 days and ADGM dues within 21 days, through the payroll channel used for wages.
- Close immigration and records. Cancel the work permit and residence, address the involuntary loss of employment insurance position, issue the experience certificate on request and keep the worker's file for the statutory period.
Documents to assemble
- The signed employment contract, any amendments and the MOHRE or free zone registered version.
- Salary history showing basic wage and allowances, and records of unpaid leave or absence.
- Leave records showing accrued and taken annual leave.
- For dismissals, the investigation file, warnings and decision letters.
- Notice letter, final settlement statement and proof of payment.
- Settlement agreement, if any, and evidence the employee understood it.
- Visa and work permit cancellation documents and the experience certificate.
Most gratuity disputes are not about the formula. They are about the inputs: what counts as basic wage, when service started, and whether periods of unpaid absence or earlier contracts break continuity.
Risks and common mistakes
Calculating gratuity on the wrong wage
Onshore gratuity is calculated on the last basic wage, excluding allowances. Errors happen in both directions: employers sometimes include allowances and overpay, or treat a large part of fixed pay as an allowance to reduce gratuity. Where the contract registered with MOHRE shows a different wage split from the internal offer letter, the registered contract usually carries weight in a dispute. Review contracts now, and align the basic wage with the actual pay structure. In ADGM, the basic wage must be at least half the total wage, so a low basic wage can itself be a breach.
Missing the payment deadline
Onshore employers must pay final wages and entitlements within 14 days of the end of the contract. DIFC employers have 14 days and ADGM employers 21 days, and both financial centres attach daily penalties to late payment. Delays often arise from waiting for clearance of company property or the return of a car or laptop. Separate those processes from the payment of statutory dues, and set off only amounts the law allows you to deduct. A late payment can turn a cooperative exit into a complaint.
Treating every dismissal for cause as summary
Article 44 lists specific grounds and requires a written investigation. Poor performance, a breakdown in relationships or a single minor policy breach will rarely qualify. If the grounds fail, the dismissal is treated as an ordinary termination and the employer will owe notice and may face an unlawful termination argument. Use the disciplinary route with a proper investigation where misconduct is genuinely serious, and otherwise terminate with notice and full entitlements. Our workplace investigations team can help structure the process.
Ignoring protected situations
Article 30 prohibits termination because of pregnancy or maternity leave. A termination shortly after an employee complains to MOHRE or sues the employer can be unlawful under Article 47. In the DIFC and ADGM, discrimination and victimisation claims can attract substantial compensation. Before serving notice, check the employee's leave status, recent complaints and protected characteristics, document the genuine business reason and keep the decision-maker's reasoning on file.
Signing settlement agreements that do not hold
Settlement agreements are widely used but are not a cure-all. Onshore, an employee cannot waive statutory minimum entitlements before they arise, and a release that recites payment of sums that were not in fact paid will not protect the employer. In the DIFC and ADGM, courts may review whether a waiver was fair. Pay statutory amounts in full, describe additional consideration separately, use plain language and give the employee time to consider the document. Where the employee is senior, see our executive employment practice.
Cross-border angle
Many UAE employees are seconded from, or will move on to, group companies in the UK, India, Bangladesh, Singapore, China or Saudi Arabia. Continuity of service across entities affects gratuity, and the group should decide whether to settle UAE gratuity on transfer or carry service over by written agreement. Home-country social security rules may also apply to secondees.
Tax treatment differs by destination. The UAE does not tax employment income, but an individual moving to the UK or India may face questions on how a lump sum attributable to UAE service is taxed after departure. Senior employees with share plans should check leaver provisions and how vesting interacts with the exit date. For regional restructurings involving Saudi Arabia or other GCC states, end-of-service rules differ by country, so align documentation across the group.
Where an exit forms part of a redundancy programme or a business closure, coordinate with workforce planning and, if the business is in distress, with insolvency advisers, because employee claims rank in specific ways.
How TRW & Co helps
We advise employers and senior employees on terminations and on the end of service gratuity in the UAE across onshore, DIFC and ADGM regimes. Where representation before UAE onshore courts or the DIFC/ADGM Courts is required, we work alongside locally licensed advocates and registered practitioners.
Exit strategy
We review the contract, the regime and the risk profile, then recommend the route: notice, mutual agreement, disciplinary dismissal or restructuring, with the evidence each requires.
Gratuity and final dues
We check service dates, wage structure and unpaid absence, calculate gratuity or scheme balances and prepare a final settlement statement that will stand up at MOHRE or in court.
Settlement agreements
We draft settlement and release agreements that respect statutory minimums, deal with confidentiality and restrictive covenants, and record what has been paid.
Redundancy programmes
We plan group reductions in headcount, including selection, communication, Emiratisation effects, visa timelines and payroll, so that exits happen in an orderly sequence.
Savings scheme decisions
We help onshore employers assess whether to join the voluntary alternative scheme, and advise DIFC and ADGM employers on qualifying scheme and pension options.
Claims and disputes
We respond to MOHRE complaints and prepare defence strategy for onshore, DIFC and ADGM proceedings through our employment disputes practice.
For advice on a specific exit, contact our Dubai team or browse our wider practice areas. Our article on terminating employment in the UAE offers a short primer for HR teams.
Checklist for decision-makers
- Identify the employing entity and the regime: federal Labour Law, DIFC or ADGM.
- Check the contract, registered wage split, probation status and notice clause.
- Screen for protected situations: pregnancy, sick leave, recent complaints or whistleblowing.
- Choose the termination route and document the reason.
- Calculate the end of service gratuity in the UAE, or the scheme position, from verified service and basic wage data.
- Add notice pay, accrued leave, unpaid wages, repatriation and contractual amounts.
- Agree settlement terms only after statutory amounts are secured.
- Pay within the statutory deadline and keep proof.
- Close the work permit and residence, and retain the file for the required period.
Frequently asked questions
01How is the end of service gratuity calculated for a mainland employee?
For a full-time foreign employee with at least one year of continuous service, gratuity is 21 days' last basic wage for each of the first five years and 30 days for each additional year, with part years counted pro rata and unpaid absence excluded. The total cannot exceed two years' wage. Allowances such as housing and transport are not included. UAE nationals are covered by the pension and social security system instead of gratuity.
02Does an employee lose gratuity if they resign?
Under the current federal Labour Law, resignation does not reduce gratuity in the way the old 1980 Law did. An employee who has completed at least one year of continuous service is entitled to gratuity calculated on the standard formula whether the contract ends by resignation, by the employer with notice or by expiry. Failing to work the required notice period creates a separate liability for notice allowance, which the employer may seek to set off within the limits of the law.
03Is gratuity payable if an employee is dismissed for misconduct?
Under the current federal Labour Law the gratuity entitlement is not framed around the reason for termination, and the disciplinary sanction of dismissal in Article 39 preserves end-of-service benefits. Employers should not assume that an Article 44 dismissal removes gratuity. In ADGM, the 2024 Regulations make gratuity payable whatever the reason for termination for eligible employees. In the DIFC, contributions already made to the qualifying scheme belong to the employee's account.
04When must final dues be paid?
Onshore, wages and entitlements must be paid within 14 days of the end of the contract. In the DIFC, final payments are due within 14 days of termination, and in ADGM within 21 days. Both financial centres apply daily penalties for late payment, and ADGM caps its penalty at six months' wages. Delay in returning company property is not usually a lawful reason to withhold statutory dues.
05What is the alternative end-of-service savings scheme?
Cabinet Resolution No. 96 of 2023 lets private-sector and free zone employers opt into a regulated savings scheme instead of accruing gratuity for enrolled employees. Employers contribute monthly, at 5.83% of basic wage for under five years' service and 8.33% from five years, and employees may add voluntary contributions. Gratuity accrued before enrolment stays payable. The scheme does not apply in the DIFC or ADGM, which have their own regimes.
06How long does an employee have to bring a claim about final dues?
Under Article 54 of the federal Labour Law, as amended in 2024, claims must be brought within two years of the end of the employment relationship, and they start with a complaint to MOHRE. MOHRE can decide claims up to AED 50,000, with an appeal to the Court of Appeal; larger claims go to the competent court. DIFC claims face much shorter time limits, generally six months from termination, so employees there must act quickly.
07Can we pay in lieu of notice?
Onshore, a party that does not give the contractual notice must pay the other a notice allowance equal to the wage for the notice period, so payment in lieu is effectively built into the Law. In ADGM, the 2024 Regulations require the employee's written consent to payment in lieu, subject to limited exceptions. Check the contract and any garden leave clause, and record the choice in the termination letter.
Sources and official materials
- Federal Decree-Law No. 33 of 2021 (consolidated, MOHRE) — Articles 42 to 54 on termination and gratuity
- End of service benefits (UAE Government portal) — Official guidance on gratuity for private-sector workers
- Ministry of Human Resources and Emiratisation — Contracts, complaints and dispute decisions
- General Pension and Social Security Authority — Pensions for UAE and GCC nationals
- Dubai International Financial Centre — DIFC Employment Law and qualifying scheme
- Abu Dhabi Global Market — ADGM Employment Regulations 2024
- Involuntary Loss of Employment insurance — Federal unemployment insurance scheme
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
