Under UAE Labour Law, eligible private-sector employees may receive several end-of-employment entitlements, including end-of-service gratuity, unpaid salary, payment for accrued but unused annual leave, and notice-period compensation where applicable. These benefits are separate from one another and should be calculated based on the circumstances of the employment termination.
For eligible full-time foreign employees, end-of-service gratuity is calculated using the last basic wage: 21 days’ basic wage for each year of service during the first five years and 30 days for each additional year, provided the employee has completed at least one year of continuous service. The total gratuity is capped at the equivalent of two years’ wage.
Under Article 53 of Federal Decree-Law No. 33 of 2021, the employer must pay the employee’s wages and other applicable end-of-contract entitlements within 14 days from the date the contract ends.
Benefits of Employment Termination in the UAE
When a private-sector employment relationship ends, the employee’s final settlement can include several different amounts.
The exact entitlement depends on factors such as:
- The employee’s nationality and employment category
- Whether the employee is full-time or part-time
- Length of continuous service
- Basic wage at the end of employment
- Whether notice was served
- Accrued but unused annual leave
- Outstanding salary or other contractual payments
- The reason and legal basis for termination
- Whether any lawful deductions apply
Termination benefits should therefore not be treated as one single payment.
A typical final settlement may contain:
| Final-settlement item | What it covers |
|---|---|
| End-of-service gratuity | Statutory gratuity for eligible employees |
| Final salary | Salary earned up to the contract end date |
| Unused annual leave | Payment for accrued leave that remains unused, where applicable |
| Notice-period compensation | Payment for an unserved notice period, where applicable |
| Other contractual/statutory dues | Other amounts legally or contractually owed |
The employee’s final settlement is the combined value of the applicable entitlements, rather than gratuity alone.
Who Is Entitled to End-of-Service Gratuity in the UAE?
Under Article 51 of Federal Decree-Law No. 33 of 2021, a foreign full-time employee who has completed at least one year of continuous service is entitled to end-of-service gratuity when employment ends.
Employees who have completed less than one year of continuous service are generally not entitled to statutory gratuity.
An employee who has completed at least one year may also receive a proportionate gratuity for a fraction of a year after the first year, subject to the applicable rules. Periods of unpaid absence are excluded when calculating the period of service for gratuity purposes.
UAE nationals are subject to the applicable pension and social-security framework rather than the foreign-worker gratuity calculation under Article 51.
Resignation Affect on Gratuity
Under the current UAE private-sector framework, completing the required period of continuous service is the key eligibility condition for the statutory gratuity calculation.
The previous system under which resignation could reduce gratuity based on length of service should not be applied to employment relationships governed by the current Federal Decree-Law No. 33 of 2021.
UAE End-of-Service Gratuity Calculations
For an eligible full-time foreign employee, gratuity is calculated using the employee’s last basic wage, not the total salary including allowances.
The statutory formula is:
| Length of service | Gratuity |
|---|---|
| Less than 1 year | No statutory gratuity |
| First 5 years | 21 days’ basic wage for each year |
| After 5 years | 30 days’ basic wage for each additional year |
| Maximum gratuity | Not more than 2 years’ wage |
What Salary Is Used for Gratuity?
Gratuity is calculated on the employee’s last basic wage, excluding allowances such as housing and transportation.
For example, if an employee receives:
- Basic salary: AED 6,000
- Housing allowance: AED 2,000
- Transport allowance: AED 1,000
- Total salary: AED 9,000
The gratuity calculation is based on the AED 6,000 basic salary, rather than the AED 9,000 total package.
UAE Gratuity Calculation Example
Suppose an employee has:
- Basic salary: AED 6,000
- Continuous service: 4 years
First, calculate the daily basic wage:
AED 6,000 ÷ 30 = AED 200 per day
The employee receives 21 days for each year during the first five years:
AED 200 × 21 = AED 4,200 per year
For four years:
AED 4,200 × 4 = AED 16,800
The employee’s estimated statutory gratuity would therefore be AED 16,800, before considering any applicable adjustments or lawful deductions.
Gratuity Example After Five Years
Suppose the same employee has completed 7 years of continuous service.
First five years:
AED 200 × 21 × 5 = AED 21,000
Remaining two years:
AED 200 × 30 × 2 = AED 12,000
Total:
AED 21,000 + AED 12,000 = AED 33,000
The applicable two-year cap must then be checked against the resulting amount.
What Other Payments Are Included in the Final Settlement?
End-of-service gratuity is only one part of the final settlement.
Unpaid Salary
Any salary earned but not yet paid up to the end of the employment contract should be included in the final settlement.
This can include salary for the final working period and other wages that have already become due.
Unused Annual Leave
An employee may be entitled to payment for accrued annual leave that remains unused when employment ends.
Unused leave is separate from the gratuity calculation. It should not simply be added to the years of service when calculating gratuity.
The calculation of leave compensation can depend on the employee’s wage and the applicable legal rules.
Unpaid Overtime
If overtime has been properly established but remains unpaid, it may form part of the amounts owed to the employee.
Employees should retain attendance records, overtime approvals, timesheets, emails, messages and payslips where an overtime dispute exists.
Other Contractual or Statutory Entitlements
Depending on the employment relationship, the final settlement may also include other amounts that have become due under the employment contract or applicable legislation.
UAE Labour Law – Notice Pay
The UAE Labour Law generally requires either party wishing to terminate an employment contract to provide written notice to the other party.
The notice period agreed in the employment contract must generally be at least 30 days and no more than 90 days.
What Happens If the Notice Period Is Not Served?
If either party terminates the employment relationship without observing the required notice period, the party responsible for the unserved notice must generally pay compensation to the other party equivalent to the employee’s wage for the whole notice period or the remaining part of it.
This is commonly referred to as notice pay or payment in lieu of notice.
For example, if an employee has a 60-day contractual notice period but only works 20 days, the unserved portion is 40 days. The applicable compensation is assessed based on the wage corresponding to those 40 days.
Notice Pay VS Gratuity
Notice pay and gratuity are separate entitlements.
| Payment | What it relates to |
|---|---|
| Gratuity | Length of qualifying service |
| Notice pay | Unserved contractual/statutory notice period |
| Unused leave payment | Accrued annual leave remaining at termination |
| Final salary | Salary earned but not yet paid |
| Other dues | Other applicable contractual or statutory entitlements |
An employee may therefore be entitled to more than one of these payments when employment ends.
How Long Does an Employer Have to Pay Final Dues?
Under Article 53 of Federal Decree-Law No. 33 of 2021, the employer must pay the employee’s wages and other entitlements due under the Labour Law, implementing regulations, employment contract or applicable establishment rules within 14 days from the date the contract ends.
The 14-day period applies to the settlement of applicable end-of-contract entitlements.
A final settlement may therefore need to account for:
- Final unpaid salary
- End-of-service gratuity
- Accrued annual leave
- Notice-period compensation where applicable
- Other outstanding statutory or contractual amounts
What Can Be Deducted From Final Settlement?
An employee’s final payment does not necessarily mean that every amount is paid without adjustment.
The law permits certain deductions in circumstances where the employee owes amounts to the employer or where a deduction is otherwise legally permitted.
Examples can include certain:
- Outstanding loans or advances
- Overpayments
- Amounts established as legally recoverable
- Other deductions permitted under the Labour Law and applicable procedures
Employers should not make arbitrary deductions from gratuity or other final dues; any deduction must have a lawful basis and comply with the applicable requirements.
Employees should request a clear written breakdown where deductions are made from a final settlement.
What Happens to Gratuity If You Resign?
Resignation does not automatically eliminate an eligible employee’s statutory gratuity entitlement under the current private-sector Labour Law.
If the employee has completed at least one year of continuous service and meets the applicable eligibility requirements, gratuity is calculated under Article 51 using the prescribed basic-wage formula.
The employee should still comply with the applicable notice requirements unless a lawful exception applies.
This means two separate questions should be considered:
- Is the employee eligible for gratuity?
- Has the employee properly served the required notice period?
The answer to one does not automatically determine the other.
What Happens If the Employer Terminates the Employee?
The employee’s entitlements depend on how the termination occurs and the legal basis for it.
An employment contract may end in several circumstances, including:
- Written agreement between the parties
- Expiry of the contract
- Termination by either party in accordance with the applicable notice rules
- Termination without notice in circumstances permitted by law
- Other circumstances recognised under the Labour Law
Where termination involves misconduct or another ground allowing dismissal without notice, the employer must comply with the applicable statutory conditions and procedures.
Termination without notice should therefore not automatically be treated as unlawful or lawful simply because the employer used that description. The specific facts and legal basis matter.
Unlawful Termination Compensation
Termination benefits and compensation for unlawful termination are not necessarily the same thing.
The Labour Law provides specific rules for termination, including situations where an employee may be dismissed without notice and circumstances in which a termination may give rise to a legal claim.
If an employee believes the termination was unlawful or that the employer failed to comply with the required procedure, the issue may be raised through the applicable labour-dispute process.
The employee should preserve:
- Termination letter
- Employment contract
- Notice correspondence
- Emails and messages
- Performance or disciplinary records
- Salary slips
- Final-settlement calculation
- Any other documents relating to the termination
Alternative End-of-Service Benefits Scheme
The UAE has also introduced an optional alternative end-of-service benefits system for eligible private-sector employees and workers.
Under this system, participating employers make contributions into approved investment funds on behalf of enrolled employees. The scheme operates differently from the traditional gratuity system.
Employees already covered by the scheme may therefore need to determine:
- Whether their employer enrolled them
- When participation started
- What gratuity had accrued before enrolment
- What contributions were made under the alternative scheme
- Which payment rules apply when employment ends
The traditional gratuity calculation should not automatically be applied to an employee whose employment benefits are governed by the alternative scheme.
Domestic Workers Are Governed by a Different Law
The rules in this article concern employees covered by the UAE private-sector Labour Law, Federal Decree-Law No. 33 of 2021.
Domestic workers are excluded from that law and are governed by a separate framework under Federal Decree-Law No. 9 of 2022 Concerning Domestic Workers.
This distinction matters when calculating termination benefits because the rules for domestic workers should not simply be copied from the general private-sector framework.
Likewise, employees working in jurisdictions with their own employment legislation, such as the DIFC or ADGM, should check the applicable regime before relying on the federal Labour Law.
What You Should Check Before Signing a Final Settlement
Before signing a document confirming that all employment dues have been received, employees should review the settlement calculation carefully.
Check whether it includes:
| Item | What to verify |
|---|---|
| Final salary | Salary paid through the contract end date |
| Gratuity | Correct service period and last basic wage |
| Annual leave | Accrued unused leave |
| Notice pay | Any unserved notice period |
| Overtime | Any established unpaid overtime |
| Deductions | Legal basis for each deduction |
| Other dues | Contractual or statutory amounts |
| Payment date | Whether the 14-day deadline is being observed |
An employee should avoid confirming that all dues have been received if the amounts have not actually been paid or the settlement contains an unresolved discrepancy. A written breakdown can help identify errors before a dispute escalates.
Unpaid Final Dues and Employee Rights
If an employer does not pay the employee’s final salary, gratuity or other applicable entitlements within the required period, the employee can seek resolution through the UAE labour-dispute process.
The Ministry of Human Resources and Emiratisation (MOHRE) may examine an employment dispute and attempt to resolve it amicably. Where the dispute cannot be resolved through the applicable process, it may proceed to the competent court.
Before filing a complaint, the employee should gather the documents supporting the claim and calculate each disputed amount separately.
For example:
Claim = unpaid salary + gratuity + unused leave + notice pay + other applicable dues − lawful deductions
Keeping each component separate makes it easier to identify where the disagreement actually lies.
How Al Ramsy Advocates Can Help With Termination Benefits
Termination disputes often involve several calculations at the same time. A disagreement may concern the employee’s basic salary, length of service, notice period, unused leave, deductions or the legality of the termination itself.
Al Ramsy Advocates can assist employers and employees with UAE employment matters, including termination, employment contracts, unpaid wages, end-of-service benefits and labour disputes.
Legal support may include:
- Reviewing the employment contract and termination documents
- Checking the employee’s gratuity calculation
- Reviewing the basic salary used for gratuity
- Assessing notice-period obligations and notice pay
- Reviewing unused annual leave and other final dues
- Examining deductions from the final settlement
- Advising employers on termination procedures
- Assisting employees with disputed termination benefits
- Supporting clients through applicable MOHRE procedures
- Representing clients in employment litigation where required
Where a dispute cannot be resolved through the relevant administrative process, Al Ramsy’s Employment Litigation Lawyers can assist with the legal proceedings and related employment claims.
Frequently Asked Questions About UAE Labour Law Termination Benefits
How is unused annual leave paid when leaving a job in the UAE?
Unused accrued annual leave may form part of the employee’s final settlement when employment ends. The amount should be calculated according to the applicable UAE Labour Law and the employee’s accrued leave entitlement.
Is notice pay based on basic salary or total salary in the UAE?
Notice pay is generally calculated based on the employee’s wage for the applicable notice period, unlike end-of-service gratuity, which is calculated using the employee’s basic wage. The exact amount depends on the circumstances of termination and the notice period that was served or remains outstanding.
What should be included in a UAE final settlement?
A final settlement may include unpaid salary, end-of-service gratuity where applicable, payment for accrued unused annual leave, notice pay where applicable, and other contractual or statutory entitlements, subject to lawful deductions. Employers must generally pay wages and other end-of-contract entitlements within 14 days of the contract ending.
How much gratuity do employees get after 5 years in the UAE?
An eligible full-time foreign employee who completes five years of continuous service receives gratuity calculated at 21 days of the last basic wage for each of those five years. The calculation is based on basic wage rather than the employee’s total salary package.
Is gratuity calculated on basic salary or total salary in the UAE?
End-of-service gratuity is calculated using the employee’s last basic wage, excluding allowances such as housing and transport.
How many days does an employer have to pay final settlement in the UAE?
The employer must pay wages and other applicable end-of-contract entitlements within 14 days from the date the employment contract ends.
What payments are included in a UAE final settlement?
A final settlement can include unpaid salary, end-of-service gratuity, payment for accrued unused annual leave, notice-period compensation where applicable, and other contractual or statutory entitlements. The exact components depend on the employee’s circumstances.
Do employees get gratuity if they resign in the UAE?
An eligible foreign full-time employee who has completed at least one year of continuous service can qualify for statutory gratuity when employment ends, including where the employee resigns, subject to the applicable legal conditions. Notice obligations remain a separate issue.
What happens if an employer does not pay gratuity after termination?
An employee can raise the unpaid entitlement through the applicable UAE labour-dispute process. The Ministry may attempt an amicable settlement before the dispute proceeds further under the applicable procedure.
Conclusion
UAE labour law termination benefits are not limited to end-of-service gratuity. Depending on the circumstances, an employee’s final settlement may include gratuity, unpaid salary, accrued annual leave, notice-period compensation and other contractual or statutory entitlements.
For eligible full-time foreign employees, gratuity is calculated using the last basic wage, with 21 days for each year during the first five years and 30 days for each additional year, subject to the statutory eligibility requirements and maximum cap. Employers must generally settle the employee’s wages and other applicable end-of-contract entitlements within 14 days of the contract ending.
Because the amount due can depend on the employee’s service period, basic salary, notice arrangements, leave balance and reason for termination, the final settlement should be reviewed as a complete calculation rather than treating gratuity as the only termination benefit.
