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Notice periods in the UAE

Employment termination law in the UAE

Post-termination restraints in the UAE

Employment waivers in the UAE

Transfer of undertakings in the UAE

Mitigate risk with CXC’s end-to-end employment solutions

End of employment contract in the UAE

Managing the end of employment contracts in the UAE requires employers to navigate various legal obligations, including notice periods, severance pay, and post-termination restrictions. Properly managing these processes ensures smooth transitions while protecting both businesses and employees from potential legal disputes.

End of contract law in the UAE

The UAE labour laws outline specific requirements for termination, including minimum notice periods and severance entitlements based on an employee’s length of service.

Other key legislation around end of employment includes:

Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations: This law applies to private sector employees in the UAE (excluding the DIFC and ADGM free zones). It outlines termination procedures, notice periods, severance pay, and post-termination restrictions.
Cabinet Resolution No. 1 of 2022: This resolution provides additional regulations and clarifications on employment contracts, termination conditions, and end-of-service benefits.
DIFC Employment Law No. 2 of 2019 (as amended): Governs employment matters within the Dubai International Financial Centre (DIFC) and has different termination and end-of-service benefit rules.
ADGM Employment Regulations 2019 (as amended): Applies to employees working in the Abu Dhabi Global Market (ADGM) and includes distinct provisions on termination and benefits.

Employers also need to navigate non-compete clauses, employee waivers, and business transfers, where compliance with legal frameworks is crucial to avoid risks.

In this guide, we will explore the key aspects of the end of employment processes in the UAE, providing businesses with insights into legal obligations and best practices for handling workforce transitions effectively.

Notice periods in the UAE

Employers in the UAE must comply with legal requirements regarding notice periods when an employee resigns or is terminated. The UAE Labour Law sets clear guidelines on notice durations, ensuring a fair transition for both parties. Understanding these rules can help businesses manage workforce changes effectively while maintaining compliance.

Resignation notice period in the UAE

Employees who wish to resign must provide a mandatory notice period in the UAE of at least 30 days, as per the UAE Labour Law. However, for employees under DIFC employment regulations, the required notice period varies depending on their length of service:

1–5 months of employment: 2 weeks’ notice.
Up to 5 years of employment: 1 months’ notice.
More than 5 years of employment: 90 days’ notice.

Employees serving a resignation notice period in the UAE are expected to fulfil their duties unless an agreement is reached for early release. Failure to provide the required notice could result in financial penalties or loss of benefits.

Termination notice period in the UAE

Employers terminating an employee must also provide at least 30 days’ notice, unless the contract specifies a longer period. In cases of termination without cause, failing to meet the required notice can lead to legal claims or additional compensation. Employees dismissed for gross misconduct are not entitled to notice or end-of-service benefits.

Probationary and notice periods in the UAE

During probation, the minimum notice period in the UAE is reduced:

Employers terminating an employee: 14 days’ notice.
Employees resigning to join another UAE-based company: 30 days’ notice.
Employees resigning to leave the UAE: 14 days’ notice.

Additionally, employers can request the new hiring company to cover recruitment costs if an employee switches jobs during probation.

Severance pay in the UAE

Employees who have completed at least one year of service are entitled to severance pay. The compensation is calculated as follows:

First five years: 21 days’ wage per year of service.
Beyond five years: 30 days’ wage per additional year.

Severance pay is based on the employee’s final basic salary and is capped at two years’ total wages for foreign employees. Importantly, severance pay and notice period compensation in the UAE are separate, and notice pay does not affect end-of-service benefits.

Employers should ensure compliance with these regulations to avoid disputes and financial penalties. By adhering to fair worker protection programs in the UAE, businesses can maintain positive employee relations and uphold labour law requirements.

Employment termination law in the UAE

Managing employee exits in compliance with UAE labour regulations is essential for businesses operating in the region. Employers must be aware of the legal grounds for termination, required notice periods, and entitlements to avoid disputes and ensure fair treatment of employees.

Grounds for termination in the UAE

Under employment termination law in the UAE, an employment contract may be terminated by either the employer or the employee for legitimate reasons, provided proper notice is given in writing. Grounds for termination include:

Performance or behavioural issues.
Redundancy due to restructuring.
Bankruptcy or insolvency of the employer.
Failure of the employee to renew their work permit.

Employers must document and communicate these reasons clearly to protect against potential legal claims.

Termination process in the UAE

When terminating employment, employers must issue a formal employment termination letter in the UAE, outlining the reason for termination, the notice period, and any benefits or entitlements owed to the employee. It is important to comply with the labour law during termination of employment to prevent disputes and ensure a smooth transition.

Resignation in the UAE

Employees also have the right to resign by providing written notice as per their contract. During probation, an employee must provide 14 days’ notice, or 30 days if they are moving to another employer within the UAE. Employers may not coerce or retaliate against an employee for resigning.

Termination pay in the UAE

Employees who have completed at least one year of service are entitled to benefits on termination of employment in the UAE, including severance pay. Severance pay is calculated as:

21 days’ wage per year for the first 5 years of service.
30 days’ wage per year for service beyond 5 years.

Severance pay for foreign employees is capped at two years’ salary. Additionally, employees terminated unlawfully may claim up to three months’ compensation.

Staying up to date with new UAE labour rules for terminating employees is crucial for businesses to mitigate risks and ensure compliance with employment laws.

Post-termination restraints in the UAE

Employers in the UAE often seek to protect their business interests by including restrictive covenants in employment contracts. These post-termination restrictions help safeguard confidential information, client relationships, and workforce stability. However, their enforceability depends on compliance with UAE labour laws, ensuring that restrictions are reasonable in scope, duration, and geographical reach.

Non-compete clause in the UAE

A non-compete clause in the UAE is designed to prevent an employee from joining a competitor or starting a competing business after leaving their job. Under UAE labour law, these clauses are enforceable if they are limited to a reasonable duration, geographic area, and scope of work. Typically, in the UAE, a non-compete clause in an employment contract should not exceed 6 to 12 months and should only apply within the emirate where the employee worked.

However, enforcing a non-compete clause in the UAE can be challenging. Unlike some jurisdictions where injunctive relief is available, UAE law does not provide for court-ordered restrictions on employees working for competitors. Instead, employers may seek damages for breaches, provided the restriction is clearly outlined in the employment contract and does not impose excessive penalties.

Non-solicitation of clients’ clause in the UAE

A non-solicitation clause prevents former employees from approaching their previous employer’s clients to offer competing services. While non-solicitation clauses are permitted, they must align with reasonable timeframes and business needs. In the UAE, a typical customer non-solicitation clause lasts 6 to 12 months and applies only to clients with whom the employee had direct contact.

Similar to non-compete clauses, enforcing non-solicitation agreements can be complex. Courts may assess whether the restriction is proportionate and justified to protect the employer’s legitimate business interests.

Non-solicitation of employees’ clause in the UAE

A non-solicitation of employees’ clause prevents former employees from poaching colleagues from their previous employer. This type of restriction is generally permissible in the UAE, provided it is not overly broad or excessive in duration. While courts are less likely to scrutinise employee non-solicitation clauses, they may still rule them unenforceable if they are deemed unreasonable.

Employers may include a liquidated damages clause in the employment contract, setting a pre-agreed penalty for violating post-termination restrictions. However, UAE courts have the authority to reduce penalties they consider excessive under the Civil Code.

While post-termination restraints are common in UAE employment contracts, enforcing them requires careful drafting. Employers should ensure that restrictions are clear, justified, and proportionate to avoid potential legal disputes. Seeking legal advice when drafting restrictive covenants can help businesses protect their interests while staying compliant with UAE employment laws.

Employment waivers in the UAE

Employment waivers play a role in managing employer-employee relationships, particularly in matters of dispute resolution and contractual obligations. While waivers in the UAE are commonly used, their enforceability remains a complex issue. Employers should carefully consider the legal implications before relying on waiver agreements to settle employment disputes or financial obligations.

Types of employment waivers in the UAE

In the UAE, employment waivers are often included in settlement agreements to resolve disputes, waive claims, or relinquish certain employee rights. The most common types of waivers include:

End-of-service settlements: Employees may be asked to sign a waiver confirming receipt of all due payments, such as gratuity, outstanding salaries, and benefits.
Non-compete and confidentiality waivers: Employees may agree to waive certain rights related to post-employment restrictions in exchange for financial compensation or other considerations.
Compensation or benefit waivers: In some cases, employees may voluntarily waive their right to bonuses or specific financial entitlements.
Fines waivers: In certain situations, employers may seek to have administrative fines waived in the UAE when resolving disputes with government authorities related to employment violations.

Waiver enforcement in the UAE

The enforceability of employment waivers under UAE law has not been extensively tested in court. While the concept of estoppel may apply—preventing an employee from bringing up an issue again after settling it—there is no explicit legal framework governing employment waivers.

Employers should note that:

Courts may scrutinise waivers, especially if they are deemed unfair or forced upon employees.
UAE labour law prioritises employee rights, making it difficult to waive statutory entitlements, such as gratuity or unpaid wages.
Liquidated damages clauses within waiver agreements are subject to review, and excessive penalties may be reduced under the Civil Code.

Given the uncertainty surrounding the enforceability of waivers in the UAE, employers should draft them carefully and seek legal advice to ensure compliance with UAE labour laws. Properly structured waivers can provide clarity and reduce legal risks while maintaining fair employment practices.

Transfer of undertakings in the UAE

In the UAE, there are no automatic transfer principles governing business transfers. Unlike in some other jurisdictions where employees may transfer seamlessly in a corporate transaction, UAE law does not provide for an automatic continuation of employment when a business changes ownership. Instead, employees must go through a termination and rehire process, making it essential for employers to handle transitions carefully to remain compliant with labour laws and protect workforce stability.

Since the transfer of undertakings in the UAE is not covered under specific legislation, businesses must ensure that employment contracts, residence visas, and work permits are properly addressed during a transfer. In an asset sale, employees are not automatically transferred to the new employer; instead, their existing employment is terminated, and they must be rehired under new contracts. This process involves settling all employee rights, including end-of-service gratuity and any other contractual entitlements before they commence employment under the new entity.

For a smooth transition, employers should consider the following:

Notifying employees: Clear communication with employees about their termination and rehire terms is crucial to avoid legal complications and maintain morale.
Settling employee dues: Employees must receive their full end-of-service benefits, including gratuity, before termination, ensuring compliance with UAE labour laws.
Processing visas and work permits: Employees require new residence visas and work permits under the new employer, which may involve administrative processing times that need to be factored into transition planning.
Drafting new employment contracts: Ensuring that new contracts align with UAE labour law and reflect agreed terms is essential to avoid disputes.

Given these complexities, employers handling a business transfer should seek expert legal and HR guidance to manage risks and ensure compliance with UAE regulations.

Mitigate risk with CXC’s end-to-end employment solutions

There are many different ways an employment contract can come to an end. But whatever the situation, you need to understand the rules that cover the end of employment in the UAE — or you could end up facing legal issues.

Our solutions ensure your business is protected from risk when a relationship with a worker comes to an end — whatever the reason. We can also help you to avoid missed opportunities by re-deploying talent where possible.

Read about EoR services

FAQ's

How does termination of employment work in the UAE?

Termination of employment in the UAE can happen when either the employer or employee ends the contract with the required notice, when a fixed-term contract expires, by mutual agreement, or in certain cases without notice.

For most private-sector employees, either party can terminate the employment contract for a legitimate reason by giving written notice. The notice period agreed in the contract must generally be between 30 and 90 days.

Employment can also end when the contract expires, the parties agree to end it, the business closes permanently or other circumstances recognised under UAE labour law apply.

Dismissal without notice is more limited and should only be used where the legal requirements are met, particularly in serious misconduct cases. Termination may also be unlawful if it occurs because the employee submitted a serious complaint to MOHRE or brought a valid claim against the employer. In that situation, a court may award compensation of up to three months’ wage, in addition to the employee’s notice and end-of-service entitlements.

When employment ends, the employer also needs to deal with final salary, unused annual leave, notice pay where applicable, end-of-service benefits and cancellation of the employee’s work permit and residence arrangements.

What procedural steps must employers follow when terminating employment in the UAE?

Employers should confirm the reason for termination, give written notice where required, complete any disciplinary process, calculate the employee’s final payments and cancel the relevant employment and immigration records.

For an ordinary termination, the employer should give written notice in line with the employee’s contract and the statutory 30 to 90-day notice range. The employee normally continues working and receiving full salary during that period.

Misconduct requires a different process. Before imposing a disciplinary sanction, including dismissal, the employer must generally notify the employee of the alleged violation in writing, hear their response, review their defence and document the outcome. The employee must then be told in writing what sanction has been imposed and why. Dismissal without notice under Article 44 requires a written investigation and a written, reasoned dismissal decision delivered to the employee. It is only available for the specific grounds listed in the Labour Law.

An employer must generally initiate a disciplinary investigation within 30 days after discovering the violation and impose any disciplinary penalty within 60 days after completing the investigation and establishing the violation.

Employers with 50 or more workers must also have written internal rules covering disciplinary procedures and termination.

Once employment ends, HR should complete final payroll and the work permit or visa cancellation process within the required timeframe. The employer must generally pay the employee’s outstanding wages and other contractual and statutory entitlements within 14 days after the contract ends.

What is the notice period for termination of employment in the UAE?

The notice period in the UAE must generally be at least 30 days and no more than 90 days, with the exact period stated in the employment contract.

The same contractual notice period normally applies to both employer and employee, unless a different arrangement benefits the employee.

The employee remains employed during the notice period and is entitled to their full salary based on their last wage. If either side does not work or give the required notice, they may have to pay compensation equal to the salary for the missing notice period.

If the employer gives notice, the employee is also entitled to take one unpaid working day per week during the notice period to look for another job, provided the employer is given at least three days’ notice.

Different rules can apply during probation and where employment is terminated without notice for reasons specifically allowed under UAE labour law. During probation, an employer must generally give at least 14 days’ written notice. An employee who wishes to move to another UAE employer must generally give at least one month’s written notice, while an employee leaving the UAE must generally give at least 14 days’ written notice.

What must employers pay at the end of employment in the UAE?

When employment ends in the UAE, employers generally need to pay outstanding salary, payment for unused annual leave, notice pay where applicable, end-of-service gratuity or Savings Scheme entitlements, and any other amounts due under the employment contract.

Unused annual leave is generally paid based on the employee’s basic salary.

Eligible expatriate employees may also be entitled to end-of-service gratuity, while UAE nationals are normally covered through the applicable pension and social security system. Employees enrolled in the UAE’s alternative end-of-service Savings Scheme receive the amounts contributed for them under that scheme instead of traditional gratuity for the period covered.

The employer must pay all outstanding wages, other entitlements and gratuity within 14 days after the employment contract ends.

For expatriate employees leaving the UAE, employers may also need to cover repatriation costs unless the employee joins another employer or another exception applies.

When is severance pay required in the UAE and how is it calculated?

Eligible expatriate employees are generally entitled to end-of-service gratuity after completing at least one year of continuous service, unless they are covered by the alternative Savings Scheme. The traditional statutory formula applies primarily to full-time foreign employees. Gratuity for employees working under other recognised work models is calculated in accordance with the implementing regulations.

Traditional severance pay in the UAE is calculated using the employee’s last basic salary, not total salary:

First 5 years: 21 days of basic salary for each year of service.

After 5 years: 30 days of basic salary for each additional year.

Less than 1 year: no statutory gratuity.

Employees who have completed at least one year also receive a proportional amount for part of a year. Unpaid absence is excluded when calculating service.

The total traditional gratuity is capped at two years’ wage.

UAE nationals are generally covered by pension and social security rules instead, so the traditional expatriate gratuity formula does not apply to them in the same way.

How do fixed-term contracts end in the UAE?

A fixed-term employment contract in the UAE can end when its agreed term expires, by mutual agreement, or earlier if either party terminates it in line with UAE labour law and the contract’s notice provisions.

If the employee and employer simply allow the agreed term to expire, the contract can end without the employer having to create a separate dismissal reason.

If both parties continue the employment relationship after expiry without signing a new agreement, the contract is treated as extended under the original terms, apart from its original duration.

A fixed-term contract can also end before its expiry date. In that case, the employer or employee generally needs to follow the agreed notice period and other termination requirements rather than assuming the fixed end date prevents an earlier exit.

HR should still complete final payroll, unused leave calculations and any end-of-service benefits when the contract finishes. Renewed or extended periods count towards the employee’s continuous service.

What post-employment restrictions can employers use in the UAE?

Employers in the UAE can use non-compete, confidentiality and other post-employment restrictions, but a non-compete must be limited and linked to a genuine business need.

A non-compete may be used where the employee’s role gives them access to the employer’s clients or trade secrets. The clause should specify the type of work, geographical area and duration, and the restriction cannot last more than two years after employment ends.

The restriction should not be broader than necessary to protect the employer’s legitimate interests.

A non-compete generally does not apply where the employment ended because of the employer’s breach of its legal or contractual obligations. The parties can also agree in writing after termination not to apply the restriction.

Confidentiality clauses can continue protecting trade secrets, client information and other confidential business information after the employee leaves.

How does gratuity change when an employee resigns in the UAE?

Under the current UAE Labour Law, an eligible expatriate employee who resigns after completing at least one year of continuous service generally receives the same statutory gratuity formula used for other qualifying terminations.

This means traditional gratuity is generally calculated at 21 days of basic salary per year for the first five years and 30 days per year after that.

The old rules that reduced gratuity to one-third or two-thirds when an employee resigned under an unlimited contract belonged to the previous UAE Labour Law. Those reductions should not be used for current private-sector employment governed by Federal Decree-Law No. 33 of 2021.

Employees with less than one year of continuous service are not entitled to statutory gratuity. Employees enrolled in the alternative Savings Scheme receive their accumulated employer contributions and investment returns instead for the period covered by that scheme.

How do employers manage end-of-employment compliance in the UAE?

Employers should manage the end of contract in the UAE by checking the termination reason, notice period, employee entitlements, work permit or visa cancellation and final payment deadline before confirming the employee’s last day. For an ordinary termination, HR should check the written notice period and calculate the employee’s salary through the final date. Misconduct cases need the required disciplinary process and documentation before dismissal.

Payroll should calculate outstanding salary, unused annual leave, notice pay where applicable and gratuity or Savings Scheme entitlements. These amounts should generally be settled within 14 days after the contract ends. For expatriate employees, HR also needs to coordinate cancellation or transfer of the work permit and residence status and check whether repatriation costs apply.

Employers operating in DIFC, ADGM or other Free Zones should also check whether separate local employment rules apply rather than assuming the federal process is identical everywhere.

How can CXC help companies manage employee termination compliantly in the UAE?

CXC helps companies manage employee termination in the UAE by checking the local requirements, coordinating notice and offboarding, calculating final pay and end-of-service benefits, and supporting the employment documentation needed when an employee leaves.

For employees engaged through CXC, our local team can help manage notice periods, unused annual leave, final salary, gratuity or other end-of-service payments and the employment administration linked to the employee’s departure. For expatriate employees, termination can also involve work permit and residency steps, which need to be coordinated with the employee’s final working date and payroll.

CXC can also support cases that require additional care, such as disciplinary termination or employees working under different UAE employment jurisdictions. This gives international HR teams local support through the termination process without having to manage every UAE employment and offboarding requirement internally.

Speak to our team to learn more about managing employee terminations in the UAE with CXC.

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