Termination of Employment in UAE

Understanding termination of employment processes in the UAE helps employers and workers foster healthy transition relationships. Under labour laws, responsibilities and liabilities fall on workers and employers terminating employment, and ignoring these can attract legal consequences. This guide provides a comprehensive insight into employment termination in UAE and how labour laws protect the rights of involved parties. Different contracts and their termination processes notice periods, possible severance pay and compensations are discussed.

What is Termination of Employment? Termination of employment means the end of a working relationship between an employer and a worker. Employment may be terminated by an employee, employer or both parties based on signed stipulations on contracts. Labour laws provide legitimate grounds for employment termination without any legal consequences for employees and workers and ignoring them may lead to;

• Employees pay employers compensation wages and attracting up to a year ban from working.
• Employers are being dragged to court and forced to reinstate employees or care for them like an employed worker until the latter gets their first pay from a new work.

Types of Employment Contracts

In the UAE, employment is categorized into two major contract types.

Definite/Limited-Term Contracts: This contract has the duration of employment pre-determined and specified, binding both employer and employee. Involved parties are expected to honour this contract and may desire to extend it when it runs its time. Seasonal and project-based employment are often solidified with definite contracts. 

Indefinite/Unlimited-Term Contracts: These are open-ended contracts with no specified termination time. They only end when the employer or employee decides to terminate it, often with a notice period. Indefinite employment is often long-term, mostly secured and comes with multiple employee benefits and paid leave.

The employer and employee can agree to work together for a mandatory minimum duration in an indefinite contract. The contract becomes open–ended once that minimum duration is reached and may be terminated by any of the parties instantly or later with a notice period.

 

*** Both Definite and Indefinite contracts may include a probation stipulation for employers to decide whether potential workers fit into their system.

Read More about Employment Contracts in UAE

Guiding Rules Regarding Termination of Employment in UAE

Labour laws have established rules surrounding contract terminations that bound working parties.

Legitimate Grounds for Termination

Legitimate grounds for terminating contracts in the country include;

• Mutual agreement by employer and worker, with the latter consent expressed in writing. Some workers (specifically non-national employees) may bear certain burdens for terminating employment under peculiar circumstances despite their employer’s consent.
• Expiration of the definite contract duration, unless both parties decide to extend it according to labour laws provisions.
• Convenience of a party ending an indefinite contract according to stated stipulations and labour law provisions regarding notices and valid termination grounds.

Health and Death Circumstances

• A contract remains active after the death of the employer unless the instituted agreement is directly connected to their existence. However, if an employee dies or is completely disabled with a medical certificate to prove such, the employment shall be terminated.
• If a worker is partially disabled but capable of working in another available sector, the employer must reassign them on request. Reassigned workers are eligible for the pay and benefits consistent with their new roles.
• Employers are not allowed to terminate employments of ailing and medically unfit workers before they exhaust their leave periods. All contractual agreements that oppose this labour-mandated law become null and void. Workers are entitled to 90 days per annum of sick leave. They receive full pay for the first 15 days, half wages for the next 45 days and no pay for the last 30 days.

Notice Periods

There are mandated binding notice periods following terminations of contracts by any party. Workers are entitled to full pay corresponding to their last wage in a notice period and must perform their assigned roles without slacking. See notice periods for different circumstances below;

• Definite Contracts: The notice period is as agreed by the employee and employer. Typically, there are no notice periods for definite employment. However, if a party decides to end the contract without valid reasons (arbitrary termination), they must compensate the other financially for the contract duration period of or as a court determines.
• Indefinite Contracts: A statutory notice period of 30 days must be respected by both parties, irrespective of who serves the termination letter.
• Immediate Termination: An employer or employee may have valid grounds to end a contract without notice and not suffer any liability or consequence. More of this is discussed in this guide.

 

Parties can’t waive a legitimate notice period, irrespective of their willingness to agree on it. However, they may extend this period on agreement. 

Failing to serve a termination notice on a party or reducing it triggers a mandatory “compensation in lieu of notice” whether the latter suffers losses or not. The compensation must correspond to the employee wage for either the full or reduced notice period.

Certificate of Service

Employers shall provide a certificate of service to their employees upon request free of charge after employment termination. The certificate should include commencement and end of service dates, total periods served, work nature, last wage and benefits. The worker must return all properties of the employer, including documents, tools, and certificates. 

A certificate of service will not be issued if the worker’s contract is terminated suddenly due to serious unethical reasons specified later in this guide.

Employment Termination by the Employee

All reasons mentioned in the ‘Legitimate Grounds for Termination’ heading above are valid for employees ending their contracts with an employer. As long as they adhere to the notice periods, they will not be prosecuted, forced to pay employers or stay unemployed afterwards. 

Sudden Contract Termination by Employee 

An employee may quit without notice on the following grounds;

• The employer refuses to honour their obligation as agreed in the contract or provided by UAE labour laws.
• The employer or their legal representative assaults the worker physically.

If an employee revokes a contract for any other reason without notice, they become liable for all losses the employer sustains. However, the compensation cannot be higher than 50% monthly salary for three months or the contract’s remaining period, whichever is smaller. This compensatory law won’t stand if the contract has a different stipulation.

Non-National Employee Termination of Contract

1. A non-national worker who abandons or terminates their definite contract before the stipulated time, even with their employer’s consent, cannot take up new work for one year. The countdown starts from the day they abandon their existing definite employment. A new recruiter is prohibited from knowingly employing such an employee within the prohibition period.
2. If a non-national terminates their indefinite contract and refuses to fulfil or reduce their notice periods, they cannot take up a new job for one year, even with their former employer’s consent. A recruiter must not knowingly employ such an individual.
3. The two prohibitions above do not apply to a non-national employee who obtained the Minister of Labour and Social Affairs approval before accepting other employment. However, the worker employee must consent to this move.

Employment Termination by the Employer

An employer may terminate a worker’s contract based on the three reasons specified in the ‘Legitimate Grounds for Termination’ heading. However, all notice periods and relevant benefits must be fulfilled. Other legitimate reasons employers may terminate employees’ contracts include;

• Performance-related issues.
• Misconduct and disciplinary actions.
• Redundancy and downsizing.
• Breach of contract.

Sudden Employment Termination by Employer

Here are legitimate reasons an employer may terminate worker employment without notice under labour laws;

1. The employee assumed a false nationality or identity or forged the certificates and relevant documents submitted for the recruiting process.
2. The worker was subjected to probation and is dismissed afterwards. 
3. The worker causes significant material losses to the employer, and the latter reports to the labour department within 48 hours of becoming aware of the incident. 
4. The employee disobeys written workplace safety instructions and requirements when fully aware of them. 
5. The employee defaults on their contractual basic duties and still fails to impress after receiving a written interrogation and warning of possible termination if such issues are repeated. 
6. The worker is convicted by a court of crimes relevant to dishonour, dishonesty and unethical practices. 
7. The employee reveals employer and workplace confidential details.
8. The employee is found drunk or under the influence during working hours.
9. The worker, without valid reasons, becomes absent from work for 20 non-consecutive days in a year or more than seven consecutive days

If an employer revokes an employee’s definite contract without notice for reasons not mentioned here, they must compensate the latter for any sustained damages. The compensation shall not exceed the wage of the employee for three months or the contract remainder period, whichever is smaller. However, this rule shall be overruled if other compensation stipulations exist in the contract.

Arbitrary Termination by Employer

Arbitrary termination of employment by an employer is deemed so if the reasons for the action are irrelevant to work. Personal grudges between an employer and their employees leading to contract termination by the former and other related issues are categorized as arbitrary layoffs. Workers are within their rights to file complaints and legal actions with appropriate labour authorities and a competent court for compensation.

See steps that may be taken against an employer under the UAE labour laws.

1. A competent court may order the employer to reinstate the worker and also mandate that the later be compensated for all incurred damages following the contract termination. The compensation cannot exceed the worker’s three months wage.
2. All gratuity, benefits and “compensation in lieu of notice” owed to the worker must be paid even after receiving the compensation in step 1.

Indefinite Contract Termination

An indefinite contract can be terminated at any time as long as the statutory 30-day period is respected between two parties. However, daily paid employees on indefinite contracts have two distinct notice periods following contract termination.

• One Week: A daily paid employee working for an employer for more than 6 months but less than a year.
• Two Weeks: A daily paid employee who has worked for an employee for more than one year.
• One Month: A daily paid worker that has worked for an employee for at least 5 years.

Employee Repatriation Expenses and Benefits After Employment Termination 

Repatriation 

Repatriation expenses under UAE labour laws cover the ticket and travel expenses of an employee and their family after contract termination. It may include the shipping of all personal belongings as covered in labour laws or employing entity policies.

• An employee is eligible for special benefits following employment termination if such was established in a contract or point of hire. Also, all repatriation costs, where viable, are handled by the employer. However, if a new employer recruits a worker with an active notice period following the latter contract expiration, then the new recruiter must handle all repatriation fees.
• If an employer does not pay a non-national repatriation fee or return them to their country, competent authorities shall step in for the latter at the former expense. However, if the worker is liable for the employment termination, then they shall handle their repatriation expenses. If the worker has no means to pay, then the authorities will do so without cost to the employer.
• If an employer covers a worker’s accommodation, then they must vacate within thirty days after employment termination. A worker must not stay beyond this grace period, or the Labour Department and relevant authorities will perform an eviction. A worker has the right to contest their accommodation stay beyond thirty days in a competent court.

Severance Pay

An employee who has completed one or more years of consecutive services with an employer is entitled to severance pay or mandatory compensation. Severance pay is calculated according to days of service, with non-paid absent days excluded from the calculation.

The calculation for severance pay is as follows;

1. 21 days’ wage for every year of the first five service years. i.e 21 x 5 = 105 days wage.
2. 30 days’ wage for any additional year after the first five years of service. However, the entire severance pay should not exceed two complete years. Hence, the max possible pay is 365 x 2 = 730 days.

Severance Pay is calculated on the last wage an employee earned before employment termination. The pay is independent of grant pensions and retirement benefits provided by the labour laws for certain employees.

An employer has the right to deduct debts owed by an employee from their severance pay.

FAQs about Termination of Employment in UAE

Q1. What Actions Can Employees Take when they Believe Their Employments was Unjustly Terminated?

Aggrieved employees who believe their termination is arbitrary and lacks validity can seek the intervention of specific labour authorities like the Ministry of Human Resources and Emiratization. The authority may refer the case to a law court if valid and task the employees to pay compensations and possibly reinstate the employee.

Q2. Are There Different Rules for Terminating The employment of UAE nationals and  Non-National?

There are unique rules for UAE nationals and expatriates, but they often crossover. Typically, employers may seek statutory approval from the Ministry of Human Resources and Emiratization (MOHRE) to terminate a UAE national’s employment. However, non-nationals or expatriates are subject to labour law provisions specific to their visa status.

Q3. Are There Any Restrictions on Rehiring a Terminated Employee in the UAE?

UAE labour law does not have any restrictions on rehiring terminated employees. However, both parties must ensure that they follow all established employment procedures to protect their rights in case of future issues.