Termination of Employment in UAE

An employment contract is an agreement between an employer and employee for a definite or indefinite term, under which the employee agrees to work for the employer and to be managed and supervised by the employer for which the employee receives remuneration from the employer. Termination refers to the end of a worker’s employment relationship with a company.

In United Arab Emirates (UAE), there needs to be a justifiable reason for Termination of Employment of a worker otherwise compensation must be paid if an employer doesn’t have a valid reason.

Written consent must be obtained from the employee before terminating a contract.

The following factors are reasons for terminating UAE employment contracts:

  • By mutual agreement of the Parties
  • Expiry of the contract’s term where the parties do not agree to renew
  • Upon notice
  • Employee death or permanent disability
  • Where the employee is convicted of a crime and sentenced to three months or more in jail
  • When the employer’s business is permanently shut down

Both the employer and the employee have the right to end the employment relationship at any time after the contract is signed, by giving a proper written notice at least thirty days before the end of the relationship.

The duration of notice for employees:

  • One week – if the person is employed for more than six months but less than a year.
  • Two weeks – if the employee has been with the company for at least a year.
  • 1 month – if the employee has been with the company for at least five years.

If an employee is partially disabled and can perform different duties that are consistent with his current health condition, the employer must transfer the employee to another job with those other duties and pay him the remuneration normally paid by the employer.

In the following situations, the employer may terminate the worker without giving notice:

  • With a false identity or nationality or presenting fake certificates or documents, the employer may discharge the employee without giving prior notice.
  • Placed on probation and terminated either during or at the end of the probationary period.
  • Commits a mistake that causes the employer to suffer a significant financial loss, provided that the employer notifies the labour department of the incident within 48 hours of becoming aware of its occurrence.
  • Disobeys instructions regarding workplace safety.
  • Fails to perform his fundamental obligations under the contract.
  • Found guilty by a court of a crime against integrity, honesty, or public values.
  • Assaults the employer, the manager in charge, or any of his coworkers during working hours.
  • Discloses any confidential information of the company.
  • Discovered intoxicated or under the influence of a narcotic drug during working hours.
  • Absent from work without an excuse for more than 20 consecutive days in a single year or more than seven consecutive days.

Remuneration for employees at the end of Service

Employees are entitled to payment for their services when their employment is terminated by any party.

Employees who have worked continuously for at least one year are eligible for end-of-service compensation after their employment ends.

Compensation is determined as follows:

  • 21 days of compensation for the first five years of service.
  • 30 days pay for every additional year of service.
  • The overall compensation does not exceed two years’ worth of pay.

No compensation is paid when an employee resigns. If an employee is terminated without notice and for a specific act of misbehaviour, there is no forfeiture.

If the employee’s employment is terminated owing to their death, or the end of a fixed-term contract. The employee’s heirs will receive the gratuity payment in the event of the employee’s passing.

When a company has a retirement, insurance, or a similar scheme. The employee who is entitled to a retirement pension may choose to be treated under the said pension, severance pay, or insurance plan, depending on which option is more advantageous to him.

This blog is based on Federal Law no.8 of 1980