What Are the Rules for Termination and End-of-Service Benefits in Dubai?

 Termination of employment in Dubai is governed by the UAE Labor Law, which sets out the rights and obligations of both employers and employees when an employment relationship is ended. Whether you are resigning, being dismissed, or having your contract expired, it’s essential to understand the rules surrounding termination, as well as your rights to end-of-service benefits. Below is a comprehensive guide on what to expect in terms of termination and end-of-service benefits in Dubai.

1. Types of Employment Termination

Employment can end in various ways under UAE law. These include:

  • Resignation by Employee: When an employee chooses to leave their job voluntarily.
  • Termination by Employer: When the employer decides to end the employee’s contract.
  • Mutual Agreement: Both the employee and employer agree to terminate the contract.
  • Contract Expiry: If the employee is on a fixed-term contract, the contract may come to an end upon completion of the agreed period.
  • Dismissal for Cause: When the employer terminates the employee due to gross misconduct or violation of company policies.
  • Termination Due to Illness: If an employee is unable to work due to prolonged illness or injury, either the employer or the employee may choose to terminate the contract.

2. Notice Period and Procedures

Under UAE Labor Law, if you are terminating the contract (whether resigning or being dismissed), there are specific procedures and notice periods to follow:

  • Resignation by Employee: Employees must provide a notice period to their employer, typically 30 days. However, this can vary depending on the terms of your employment contract. If an employee fails to serve the required notice, they may be required to compensate the employer by paying the equivalent of the unserved notice period.
  • Termination by Employer: Employers are also required to provide a notice period, which is generally 30 days. However, in cases of dismissal for gross misconduct, no notice period is required. Additionally, an employer cannot terminate an employee's contract without valid grounds or in retaliation for filing a complaint.
  • Fixed-Term Contracts: If you are employed under a fixed-term contract, it automatically ends at the expiration of the contract term. However, early termination by either party may incur penalties unless mutually agreed upon.

3. Grounds for Dismissal

There are two main categories for dismissal under UAE Labor Law:

  • Unjustified Dismissal: If an employer terminates an employee's contract without a valid reason, such as performance issues, the employee is entitled to compensation, including end-of-service benefits. This could also include severance pay.

  • Justified Dismissal: An employer can terminate an employee without compensation if the employee has committed serious misconduct, such as theft, fraud, violence, insubordination, or other serious breaches of company policy. However, the employer must follow due process and provide evidence of the misconduct.

4. End-of-Service Benefits (Gratuity)

One of the most important aspects of termination is the employee’s entitlement to end-of-service benefits, commonly referred to as gratuity. Under UAE law, employees are entitled to gratuity after completing one year of service or more, regardless of whether they resign or are dismissed.

Here’s how end-of-service benefits are calculated:

  • For employees who have completed 1 to 5 years of service: Gratuity is calculated as 21 days’ basic salary for each year of service.
  • For employees with more than 5 years of service: The gratuity increases to 30 days’ basic salary for each year of service after the first five years.
  • Partial Year: If an employee has worked for more than 6 months but less than a full year, they are entitled to a proportionate amount of gratuity.
  • Exclusion of Allowances: Gratuity is calculated based on your basic salary, excluding allowances, bonuses, and overtime.

Example Calculation:

  • If your basic salary is AED 10,000 and you’ve worked for 3 years, your gratuity would be:
    • 21 days’ salary x 3 years = 63 days of salary.
    • 63 days x AED 10,000 / 30 = AED 21,000.

5. Resignation vs. Termination

While both resignation and termination end an employment relationship, there are different consequences in terms of entitlements:

  • Resignation: If an employee voluntarily resigns, they may be entitled to end-of-service benefits (gratuity) as long as they have completed at least one year of service. However, if an employee resigns before completing one year of service, they may not be entitled to gratuity, although they are still entitled to other benefits, such as unpaid salary, unused leave, etc.

    • Penalty for Early Resignation: If an employee resigns within the probation period or before completing the contract term (in the case of a fixed-term contract), they may be required to pay a penalty (usually equivalent to the cost of recruiting and training the employee).

  • Termination by Employer: If an employer terminates the contract without valid grounds (unjustified dismissal), the employee is entitled to the full gratuity and other benefits. If termination is for a justifiable reason, the employer may not be required to pay compensation, but end-of-service benefits (gratuity) will still apply.

6. Final Salary and Settlement

Upon termination, employees are entitled to receive their final salary, which includes:

  • Any unpaid salary up to the termination date.
  • Payment for unused annual leave.
  • End-of-service benefits (gratuity).
  • Any other dues under the contract or company policies.

Employers are required by law to settle the final payment within 14 to 30 days from the termination date, depending on the circumstances.

7. Compensation for Unlawful Termination

If an employee believes they have been wrongfully dismissed or their termination was unjust, they have the right to file a complaint with the Ministry of Human Resources and Emiratisation (MOHRE). If the issue is not resolved, the employee can escalate the case to the Dubai Labor Court.

In such cases, the employee may be entitled to compensation for the loss of income, as well as any other damages resulting from the termination.

8. Employment Visa and Residency Status

If you are employed on a work visa in Dubai, your employer is responsible for canceling your employment visa after termination. You will need to transfer your visa to a new employer or leave the country. If you are terminated, the employer must cancel your visa within 30 days of the termination date.

  • Grace Period: If your employment is terminated, you are granted a 30-day grace period to either find a new job or leave the country. During this period, you can transfer your visa to a new employer if applicable.

9. Non-Compete Clauses and Post-Employment Restrictions

Some employment contracts in Dubai may include a non-compete clause, which restricts the employee from working for competitors or starting a similar business for a certain period after leaving the company. It’s essential to review your contract for such clauses, as these may impact your future employment options.

10. Dispute Resolution

If any disputes arise concerning termination, compensation, or other employment matters, employees have the right to seek assistance through MOHRE or the labor courts. Legal representation from labour lawyers in Dubai can help ensure that your case is handled appropriately, and your rights are protected during the dispute resolution process.

In Conclusion:

Termination and end-of-service benefits are key aspects of your employment rights in Dubai. Whether you are resigning, being dismissed, or having your contract expire, it’s essential to understand your rights to a fair notice period, final salary, and end-of-service benefits (gratuity). Employers must adhere to the legal procedures, and employees are entitled to fair compensation for their work. If you believe your termination was unlawful or if you are not receiving the benefits you’re entitled to, it’s advisable to seek legal advice from labour lawyers in Dubai to ensure that your rights are fully protected

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