How do you terminate an employee in the United Arab Emirates in 2026?
Every expatriate employee in the UAE who completes 1 year earns a statutory gratuity at 21 days of basic wage per year for the first five years, rising to 30 days beyond that, with a hard ceiling of 24 months of basic wage. Get the grounds or the calculation wrong and the employer owes both gratuity and an additional compensation award.
· United Arab Emirates guide
Illustration · Dubai, United Arab Emirates
Every expatriate employee in the UAE earns an end-of-service gratuity once they complete 1 year of continuous service. The rate is 21 days of basic wage per year for the first five years. After five years it rises to 30 days per year. The total is capped at 24 months of basic wage, no matter how long the employee has worked. (Federal Decree-Law No. 33 of 2021)
After probation, the contract sets the notice period. It must be between 30 days and 90 days. Both employer and employee owe the same period. During probation (up to 6 months), only 14 days written notice is needed. All final pay, including gratuity, salary, accrued leave, and notice pay, must be settled within 14 days of the last working day.
You must have a valid reason to terminate. Recognised grounds include poor performance, serious misconduct, genuine redundancy, and contract expiry. A court-found retaliatory dismissal adds a compensation award of up to 3 months of last wage on top of gratuity.
What are the valid grounds for termination in the UAE?
You can terminate a fixed-term or indefinite contract by giving the contractual notice period. You need a legitimate reason. Recognised grounds are poor performance after written warnings, serious misconduct, genuine redundancy, and expiry of a fixed-term contract. (Article 43, Federal Decree-Law No. 33 of 2021)
A dismissal without a valid reason does not cancel the termination. It does open the employer to an additional compensation claim on top of all other entitlements.
Protected categories where termination is prohibited or restricted include: pregnancy and maternity leave (dismissal during maternity leave is void), an employee who has filed a valid complaint with the Ministry of Human Resources and Emiratisation (MOHRE) and whose dismissal appears retaliatory, and employees on sick leave during the annual 15 days fully-paid plus 30 days half-paid sick leave period under Article 31 of the Decree-Law.
Fixed-term contracts carry an additional constraint: ending the contract early without cause exposes the employer to compensation for the remaining term, up to three months' wages, unless the contract includes a mutual early-termination clause. Indefinite contracts are ended by giving the contractual notice period.
Grounds for summary dismissal without notice
Article 44 of the Decree-Law lists grounds that allow the employer to dismiss immediately without notice or gratuity. These include: fraud or forgery of documents on hiring, causing material loss to the employer, disclosure of trade secrets, assaulting the employer or colleagues, being found intoxicated on duty, or a final criminal conviction for a crime involving honour or trust. Summary dismissal must be documented and filed with MOHRE within seven days of the decision.
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Confirm the valid ground
Anchor the dismissal to a recognised reason under Article 43 of the Decree-Law: poor performance after warnings, serious misconduct, operational redundancy, or contract expiry. Undocumented dismissals attract the highest compensation risk.
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Issue written notice
Give the contractual notice period in writing, confirming the last working day and whether the notice will be served or paid in lieu by mutual agreement. Full salary runs throughout.
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Calculate and confirm gratuity
Apply the two-rate formula on basic wage only, check the total against the monthly cap, and confirm the figure in writing before the last day. The employee should receive a written breakdown.
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File with MOHRE and settle final pay
All end-of-service entitlements, including gratuity, accrued leave, notice pay, and repatriation costs, must be settled within 14 days of the last working day. MOHRE complaint risk rises sharply if the deadline is missed.
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Cancel the visa and work permit
As the registered sponsor, initiate the residence-visa and work-permit cancellation through GDRFA promptly after the last day. Delayed cancellation creates immigration liability and can block the employee from transferring sponsorship.
How much notice must you give an employee in the UAE?
After probation, notice is set by the contract. The contract must set it between 30 days and 90 days. Both sides owe the same period. If the contract says 30 days, the employee also owes 30 days when they resign.
During probation (up to 6 months), the employer only needs to give 14 days written notice to end employment.
| Employment stage | Minimum notice (employer termination) |
|---|---|
| During probation (up to 6 months) | 14 days |
| Post-probation (contract minimum) | 30 days |
| Post-probation (contract maximum) | 90 days |
Full basic salary is payable throughout the notice period. Payment in lieu of notice is permitted by mutual agreement: the employer pays the notice-period salary and the employee is released immediately. If an employee fails to serve their full notice, the employer may deduct the equivalent salary for the unserved days from the final settlement.
Note: there is no income tax on employment earnings in the UAE. Final-pay settlements, gratuity, and notice pay are all received gross.
How is UAE end-of-service gratuity calculated?
Gratuity applies to any expatriate employee who completes at least 1 year of continuous service. For the first five years the rate is 21 days of basic wage per completed year. Beyond five years it rises to 30 days per year. Partial years accrue proportionally.
The total cannot exceed 24 months of basic wage, regardless of service length. Gratuity is based on basic wage only. Housing, transport, phone, and other allowances are excluded.
| Years of service | Gratuity rate |
|---|---|
| Less than 1 year | None |
| 1 year to 5 years | 21 days of basic wage per year |
| Beyond 5 years | 30 days of basic wage per year |
| Any tenure | Maximum 24 months of basic wage |
The daily wage for gratuity purposes is basic monthly salary divided by 30. A gratuity calculation works as follows: daily basic wage multiplied by the number of accrued gratuity days. For a seven-year employee, that is (21 days x 5 years) plus (30 days x 2 years) = 165 days of basic daily wage, subject to the 24 months-of-basic-wage ceiling.
Source: MOHRE, Federal Decree-Law No. 33 of 2021, Article 51
What gratuity is not
Gratuity replaces pension for expatriate workers. UAE nationals employed in the private sector are covered instead by the General Pension and Social Security Authority (GPSSA) and do not receive gratuity. The gratuity entitlement cannot be waived or reduced by contract; any clause attempting to do so is void under Article 51.
Gratuity on resignation vs. termination
Under the 2021 Decree-Law, the full gratuity formula applies whether the employee resigns or is terminated, as long as the service threshold is met. The earlier partial-reduction rule for employees who resigned before five years was abolished by the 2021 reform. Both routes now attract the same accrual rates.
Collective terminations and MOHRE notification requirements
The UAE has no formal collective redundancy consultation framework. There are no minimum consultation periods and no elected employee representatives. However, if you want to terminate multiple employees for operational reasons, you must notify MOHRE in advance. You cannot proceed until you have clearance.
Each individual dismissal must still have a valid reason. Each affected employee must receive their full gratuity and notice entitlements. Skipping MOHRE notification before a mass termination can result in sanctions and licence consequences.
MOHRE monitors workforce changes through the Wage Protection System (WPS) and the employer's registered workforce file. Large-scale terminations that fall outside normal attrition can trigger a MOHRE review. Employers in sectors with Emiratisation (Nafis) quotas face additional scrutiny: terminating an Emirati employee without MOHRE clearance risks compliance consequences under the Emiratisation programme.
Visa and immigration considerations apply in every UAE termination. The employer is the visa sponsor and is responsible for cancelling the employee's residence visa and work permit through the General Directorate of Residency and Foreigners Affairs (GDRFA). The process must be initiated promptly after termination and the employee typically has a short grace period to either transfer sponsorship to a new employer or leave the country.
There is no statutory requirement to consult employee representatives or a works council before individual or group terminations. The consultation obligation runs directly between the employer and the individual employee, and practically takes the form of documented performance or operational discussions before the notice is issued.
Mutual termination: ending the contract by agreement
Both parties can end the employment by mutual consent. They sign a written agreement setting the termination date, the gratuity amount, any extra payment, and the visa cancellation timeline. This is a valid exit route under the law.
Mutual termination is the standard clean-exit route for senior roles, managed exits, or restructuring. The employee keeps full gratuity and accrued leave. Any payment above the legal minimum is agreed between the parties.
To be valid, the agreement must be in writing, signed by both parties, and the employee must not have been under duress. MOHRE recommends using the official contract-termination form available on the platform, which provides a clear record for any subsequent gratuity claim or visa-cancellation filing.
Points to document in a mutual-termination agreement:
- Termination date and whether a notice period will be served or payment made in lieu
- Gratuity amount calculated against basic wage and confirmed as full and final
- Accrued annual leave paid out at the daily basic-wage rate
- Repatriation costs, which the employer must cover for an expatriate employee unless the employee is moving to another UAE employer
- Non-disparagement and reference terms, if agreed
- Visa cancellation timeline and any grace period agreed for the employee to arrange their affairs
There is no statutory cooling-off period after signing a mutual-termination agreement. Once executed, the agreement is binding. For this reason, employees typically request a brief review period, and employers should not pressure for an immediate signature at the termination meeting.
How Teamed runs UAE terminations
Teamed is your legal employer of record in the UAE for from $599 per employee per month, with zero FX mark-up in any currency. As the registered employer and visa sponsor, Teamed runs the full termination process. That includes gratuity calculation, notice issuance, and visa cancellation.
We handle the gratuity calculation, the MOHRE filing, visa-cancellation coordination, and final-pay reconciliation on one platform. Which employees to terminate, why, and when is always the client's decision.
Real HR and legal experts handle your UAE hires from the initial offer letter through every monthly payroll run, and through every termination. An actual person, not a pooled queue. There is no setup fee and no exit fee: employer cost passes through at cost, itemised on every invoice.
The split of responsibilities under EOR for UAE terminations:
| What Teamed handles | What the client decides |
|---|---|
| Gratuity calculation (basic-wage basis, two-rate formula, cap check) | Whether to terminate, on what grounds, and on what timeline |
| Notice period confirmation against the contract and statutory minimums | Whether to pay in lieu of notice by mutual agreement |
| MOHRE notification and clearance coordination | Whether to offer an ex gratia payment above statutory gratuity |
| Visa and work-permit cancellation through GDRFA | Communication with the wider team and the departing employee |
| Final payroll: gratuity, accrued leave, notice, repatriation costs | Reference wording and any non-disparagement terms |
| Mutual-termination agreement drafting and MOHRE form submission | Settlement vs. contested-dismissal strategy if a MOHRE complaint is raised |
Because Teamed is both the registered employer and the visa sponsor, any delay in gratuity payment or visa cancellation is Teamed's liability to manage, not yours. The 14 days final-pay deadline is tracked automatically against the last working day.
EOR payroll, contractor onboarding, and entity setup all live on one platform. An employee who joins through Teamed can graduate to your own UAE free-zone or mainland entity without switching systems. Run the Crossover Calculator to see the month the model flips. EOR is the right structure for a first UAE hire, until it isn't. Start from the UAE hiring overview.
Frequently asked questions
How is end-of-service gratuity calculated in the UAE?
Every expatriate employee who completes 1 year of service earns gratuity at 21 days of basic wage per completed year for the first five years, then 30 days per year beyond five, capped at 24 months of basic wage. Gratuity is calculated on basic wage only, excluding housing, transport, and other allowances. Partial years accrue proportionally.
How much notice is required when terminating an employee in the UAE?
Post-probation notice is set in the contract, within the statutory band of 30 days to 90 days. During probation, the minimum is 14 days written notice. The same notice period applies to both employer and employee.
When must final pay and gratuity be settled after UAE termination?
All end-of-service entitlements, including gratuity, final salary, accrued leave pay, and notice pay, must be settled within 14 days of the last working day under Article 53 of Federal Decree-Law No. 33 of 2021. Missing this deadline exposes the employer to MOHRE complaints and formal sanctions.
What compensation does an employee receive for wrongful termination in the UAE?
A court-found wrongful or retaliatory dismissal under Article 47 of the Decree-Law can attract additional compensation of up to 3 months of last wage on top of gratuity, notice pay, and accrued leave. The actual award is at the court's discretion based on the circumstances, nature of work, and length of service.
Can an employer dismiss without notice in the UAE?
Yes, summary dismissal without notice or gratuity is permitted under Article 44 of the Decree-Law for serious grounds: fraud, forgery of hiring documents, causing material loss, disclosing trade secrets, physical assault, being found intoxicated on duty, or a final criminal conviction for a crime involving honour or trust. Each ground must be documented and reported to MOHRE within seven days.
The UAE gratuity cap of 24 months of basic wage is not theoretical. A twelve-year employee hits it well before retirement. Employers who discount gratuity as a rounding error on the cost model are underestimating the exit liability, and that is before you add the 14 days settlement deadline that starts ticking from day one of termination.
In the UAE, every expatriate hire comes with a statutory gratuity clock running from day one at 21 days of basic wage per year.
Most employers price the monthly cost. Fewer model the exit liability before it compounds to the 24 months-of-salary ceiling.
The final-pay deadline is 14 days from last day. Miss it and MOHRE is one complaint form away.
