Navigating employment termination in the United Arab Emirates requires a thorough understanding of the applicable labour laws to ensure compliance and avoid potential disputes. The UAE Labour Law (Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations) provides a clear framework for ending employment relationships, outlining the rights and obligations of both employers and employees. Adhering to these regulations is crucial for a smooth and lawful termination process.
Properly managing the termination process involves understanding various aspects, including the required notice periods, the calculation and payment of end-of-service gratuity (severance pay), the valid grounds for dismissal, and the necessary procedural steps. Employers must also be aware of employee protections against arbitrary or wrongful dismissal.
Notice Period Requirements
The UAE Labour Law mandates a minimum notice period for terminating an employment contract, regardless of whether the contract is limited or unlimited. The purpose of the notice period is to provide both parties with time to prepare for the end of the employment relationship.
The minimum notice period is generally 30 days. However, this period can be longer if specified in the employment contract, but it cannot be less than 30 days.
During the notice period, the employee is entitled to their full salary and benefits. The employer cannot terminate the employee's services during approved leave. The employee is also entitled to one unpaid day off per week during the notice period to search for new employment, provided they give the employer notice of their intention to take this day off.
Either party can agree to waive the notice period or reduce it, but this must be done in writing. If the notice period is not observed by either party, the party terminating the contract is liable to pay the other party compensation equivalent to the employee's gross salary for the notice period or the remaining part of it.
Severance Pay (End-of-Service Gratuity)
Employees who have completed one year or more of continuous service are entitled to end-of-service gratuity upon termination, provided the termination is not for one of the specific gross misconduct reasons outlined in the law. The calculation of this gratuity depends on the employee's length of service and the reason for termination.
The gratuity is calculated based on the employee's last basic salary. Allowances are generally not included in the calculation unless explicitly stated in the contract.
Here is the general calculation for employees who resign or are terminated by the employer for reasons other than gross misconduct:
| Length of Service | Calculation Based on Basic Salary |
|---|---|
| 1 to 5 years | 21 days' pay for each year |
| More than 5 years | 30 days' pay for each year |
The total gratuity amount should not exceed two years' gross salary.
If an employee resigns before completing 5 years of service, their gratuity entitlement is reduced:
- 1 to 5 years of service: Entitled to one-third of the gratuity calculated as above.
- More than 5 years of service: Entitled to the full gratuity calculated as above.
Employees terminated for specific acts of gross misconduct (as defined by the law) are not entitled to end-of-service gratuity.
Grounds for Termination
Employment contracts in the UAE can be terminated for various reasons, broadly categorized as termination with cause and termination without cause.
Termination Without Cause
Under the current law, both employers and employees can terminate an employment contract for any legitimate reason, provided they adhere to the agreed notice period. This is often referred to as termination without cause, although the law emphasizes that termination should be for a "legitimate reason related to the efficiency of the employee or the establishment."
Termination With Cause (Summary Dismissal)
The UAE Labour Law specifies certain grounds upon which an employer can terminate an employee's contract immediately without notice and without paying end-of-service gratuity. These grounds typically involve serious misconduct by the employee. Some examples include:
- Assuming a false identity or submitting forged certificates.
- Committing a mistake that results in substantial material loss for the employer.
- Violating instructions related to the safety of employees or the workplace, provided these instructions were in writing and displayed or communicated to the employee.
- Failing to perform basic duties as per the contract and failing to rectify the situation after written investigation and warning.
- Disclosing company secrets.
- Being found guilty by a competent court of a crime involving honour, honesty, or public morals.
- Being found in a state of intoxication or under the influence of narcotics during working hours.
- Committing an assault on the employer, manager, or colleagues during working hours.
- Absenteeism without legitimate cause for more than 20 intermittent days or more than 7 consecutive days in a year.
- Illegally exploiting their position for personal gain.
Even in cases of summary dismissal, employers must follow specific procedures.
Procedural Requirements for Lawful Termination
To ensure a termination is lawful, employers must follow specific procedural steps. Failure to adhere to these procedures can render the termination arbitrary or wrongful, even if a valid ground for dismissal exists.
Key procedural steps include:
- Written Notice: Providing the employee with a written termination notice that clearly states the effective date of termination and adheres to the required notice period (unless it's a summary dismissal case).
- Reason for Termination: Clearly stating the legitimate reason for termination in the notice, especially in cases of termination with cause.
- Investigation (for Cause): If terminating for cause, conducting a written investigation into the alleged misconduct and providing the employee with an opportunity to respond. A written warning may also be required depending on the specific ground for termination.
- Final Settlement: Calculating and paying all outstanding entitlements to the employee, including:
- Salary and allowances up to the last working day.
- Payment in lieu of the notice period (if notice is not worked).
- End-of-service gratuity (if applicable).
- Payment for accrued but untaken annual leave.
- Any other amounts due as per the contract or law (e.g., repatriation ticket).
- Documentation: Preparing all necessary documents, including the termination letter, final settlement statement, and cancellation of the employee's visa and labour card.
- Visa Cancellation: Initiating the process to cancel the employee's UAE residency visa and labour permit through the Ministry of Human Resources and Emiratisation (MOHRE) and the General Directorate of Residency and Foreigners Affairs (GDRFA).
Common pitfalls include failing to provide adequate notice, incorrectly calculating or withholding end-of-service benefits, not having proper documentation for termination with cause, and delays in processing the final settlement and visa cancellation.
Employee Protections and Wrongful Dismissal
The UAE Labour Law provides protections to employees against arbitrary or wrongful dismissal. A termination may be considered wrongful if:
- The employer terminates the employee for reasons unrelated to the employee's work performance or the operational needs of the business.
- The termination is based on discriminatory grounds (e.g., race, gender, religion).
- The employer fails to follow the correct legal procedures for termination, such as not providing the required notice or failing to pay entitlements.
If an employee believes they have been wrongfully dismissed, they can file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE). If the complaint is not resolved amicably, it can be referred to the Labour Court.
If the court finds that the dismissal was arbitrary, it may order the employer to pay compensation to the employee. The amount of compensation is determined by the court, taking into account the employee's salary, length of service, and the extent of the damage incurred. The compensation amount cannot exceed three months' gross salary. This compensation is in addition to the employee's other entitlements, such as notice period pay and end-of-service gratuity.
