GCC Laws
Termination and Severence Pay

Termination and Severence Pay

Q. In which cases shall an employment contract terminate?

As per the UAE labor laws, following are the cases:

  • By mutual agreement of the Parties, provided that the worker's consent is given in writing.
  • Upon expiry of its term, unless it has been expressly or implicitly extended according to the provisions of this Law.
  • For the convenience of either party to an indefinite term contract, provided that the provisions of this Law concerning the notice and the valid grounds of termination without arbitrariness are adhered to
Also read: What is pay period?

Q. How does an employment contract end due to death or disability?

An employment contract doesn't end due to the employer's death unless it's linked to their person. The contract ends if the worker dies or is fully disabled, certified by the competent health authority. If partially disabled but capable of suitable work, the employer should assign them such work and pay a corresponding wage.

Q. What compensation is required if an employer revokes a definite-term employment contract for reasons other than those specified in the UAE labor laws?

As per the law, it is the employer’s duty to compensate the worker for any damage the he sustains, provided that the amount of compensation shall in no case exceed the aggregate wage due for a period of three months or the remaining period of the contract, whichever is shorter, unless otherwise stipulated in the contract. 

Q. What happens if a worker revokes a contract for specific reasons?

If a worker revokes a contract for reasons other than those in Article 121 of UAE labor law, they must compensate the employer for damages, up to half a month's wage for three months or the remaining contract period, whichever is shorter.

Q. What is the prescribed notice period for employees in the United Arab Emirates?

In the UAE, the notice period commonly ranges from 30 days to three months, depending on the terms agreed upon by the employer and employee.

Q. What if the worker is not able to fulfill the notice period in UAE?

If a worker in the UAE is unable to fulfill the notice period as per the law, they may be required to compensate the employer for the shortfall, unless the inability is due to a valid reason such as illness or other circumstances beyond their control.

Q. When is a worker's termination considered arbitrary?

A worker's termination is considered arbitrary if it's unrelated to the work. This includes terminations prompted by formal complaints filed by the worker with competent authorities or valid legal actions against the employer.

Q. Can an employer terminate a worker for medical reasons?

An employer can't lay off a worker for medical reasons before the worker exhausts all legally due leave periods. Any agreement contrary to this is void.

Q. Can a non-national worker change jobs with consent?

A non-national worker can change jobs before the specified periods if the Minister of Labor and Social Affairs approves it based on the original employer's consent.

Q. Is termination pay the same as severance pay?

A worker who has completed one or more years of continuous service shall be entitled to severance pay at the end of his employment. The days of absence from work without pay shall not be included in calculating the period of service. 

Q. How is severance pay calculated? 

The severance pay shall be calculated as follows: 

  • 21 days' wage for each of the first five years of service. 
  • 30 days’ wage for each additional year of service provided that the aggregate amount of severance pay should not exceed two year's wage. An employer may deduct any amounts owed to him by a worker from the latter's severance pay. 

Q. Does a worker get severance pay if they decide to voluntarily leave their job in the UAE? 

As per the laws, If a worker quits after 1-3 years, they get one-third of severance pay, for 3-5 years it's two-thirds, and after 5 years, they receive the full severance pay in the UAE.

Q. When does a worker lose their severance pay according to the UAE labor law? 

A worker loses their entire severance pay if:

  • If he is dismissed from service for any of the reasons specified in Article 120 hereof or if he abandons his employment in order to avoid being dismissed in accordance with that Article.
  • If he abandons his employment of his own accord, otherwise than in either of the two cases specified in Article 121 hereof, without notice (in the case of indefinite term contracts) or before completing five years of continuous service (in the case of definite term contracts).
Exploring Emirati Talent for Your Team?
Hire Emirati Talent Now!