Termination of Employment UAE: A Comprehensive Guide

Termination of Employment Dubai UAE

Termination of the job can be a stressful time for both the employer and the employee in the UAE. The knowledge of legal framework and your rights are twin pillars to end in a smooth, decent, and process outcome. This article gives a detailed view of how to handle UAE labour law termination cases. Highlighting employee benefits and the methods for resolving disputes according to UAE Labour Law.

In this article, we are going to explore the various scenarios of termination. Also, the duties of both employers and employees as well as go through the details of gratuity pay and severance packages and lastly the strategies for resolving possible disputes. With this information, you will be able to handle the UAE labour law termination process more confidently.

Types of Termination under UAE Labour Law

In accordance with the Labour Law, several forms of UAE labour law termination. Understanding these categories is crucial:

  • Termination by Employer with Notice: This is the most common scenario and can be found in contracts with unlimited terms. Employers may dismiss an employee’s job by giving the 30 days written notice. With a legitimate reason highlighted under the jurisdiction of the Labour Law.
  • Termination by Employer without Notice: This applies to special cases when an employee’s action demands an immediate termination. For instance: insubordination, hostile behavior, and presenting of false information during the application process. The employer will also write down the reason for termination for future reference.
  • Termination by Employee with Notice: Employees who would like to leave their jobs can give a written resignation of their service (which is usually 30 days) complying with the employment contract. The employee has to fulfill all their duties and they should put in their efforts to satisfy the requirement during this notice period.
  • Termination by Mutual Consent: It is a friendly termination of employment. The parties amicably agree on terminating the contract on a particular date. This could be through a settlement package of a severance, and/or unpaid salary allowances that were due in prior months.
  • Termination by Operation of Law: This forced dissolution is an effect of the unexpected occurrences. Which are beyond the reach of both of the parties. This means scenarios such as the company going bankrupt, the conclusion of an employee’s contract, or the end of a project that they were hired to work on for a fixed term. In such cases, the mode of termination would go according to the unique situation and the specific clauses in the work contract.

Termination Procedures and Notice Periods

The employment laws regulate the UAE labour law termination process which includes different procedures and notice periods. Here, we describe some key points:

  • Notice Periods: Employers will have to give employees respective written notice (30 days) upon termination of their contract. The notification can also be longer, as this may be defined in the individual employment contract.
  • End of Service Benefits: During the notice period, the company remains obligated to compensate the employee with wage and benefits as discussed in the contract. Such allowances cover the basic salary, housing (if applicable), transportation and any other allowances agreed upon for the employee.
  • Gratuity Payment: Employees whose contract has been terminated are entitled to receive a gratuity payment. As required by the Labour Law. This translates to one lump sum payment for the services rendered to the company. The calcutation of Gratuity pay is by multiplying the Basic salary of Last Pay by the total number of service years.
  • Severance Pay: Sometimes employees will be eligible to get extra severance allowance in addition to the gratuity payment. The terms of severance payment might emerge among the provisions of the employment contract. Or be negotiated after the UAE labour law termination has already been started.
  • Paperwork: The employers have to give termination certificates to their employees. The termination notice should be concise and state precisely the reason and date of termination. It acts as an important record for the employee. It is always in demand during the time of the future employment application.

Compliance with these predetermined steps and notification intervals are very important. These requirements for both employers and employees in order to avoid drawing a legal UAE labour law termination process.

Employee Rights in Termination

The Labour Law exists to protect the rights of the workers in the case of UAE labour law termination. Understanding these rights empowers them to navigate the process fairly:

  • Right to Fair Termination: Termination of an employee without a valid reason specified under the Labour Law is prohibited. Employees shall have an opportunity to appeal their unjust termination at the Ministry of Human Resources & Emiratisation, if they hold a belief that their employer’s claims are falsified and discriminatory. The MOHRE will examine the case to determine the ruling.
  • Right to Notice: The employees have to receive a written notice of termination that is as per their employment contract or that is above the required minimum by the Law (30 days).
  • Right to End-of-Service Benefits and Severance Pay: It is the right of workers to receive gratuity payments (calculated by length of service and basic salary), as well as in certain circumstances severance payments upon dismissal. Such payments are for financial compensation for the severance service and loss of income upon the termination.
  • Right to Compensation: Wrongful dismissal cases (e.g., dismissal without valid reason or during sickness leave) may reward employees with compensation for lost wages and moral damage. MOHRE will evaluate the situation and decide what compensation should receive.
  • Right to Legal Action: Workers who feel a violation to their rights during their sacking may take their employers to court. This could entail filing a complaint with the MOHRE or hiring a lawyer to represent in a court of law.

Knowing the rights of employees and going through a legal counsel if they have any doubts or feel their rights were breached during the dismissal process is crucial.

Employer Responsibilities in Termination Cases

An employer has no right to terminate someone’s job contract without grounded reasons and well-documented in the labour law.

Terminations should follow the established regulation. Such as giving notice within the legal number of days. Insufficient notification, wrong process or a lack of valid reason may result in penalizations for the employer. For instance, fines and/or the reinstatement of the employee.

Maintaining Financial Obligations:

  • Notice Period Pay: Companies have to to continue to pay the employee’s salary and benefits to them until during the notice period. Such benefits include salary, housing allowance (if any), transportation allowance, and all the earnings that are in the employment contract.
  • Gratuity Payment: This amount is the basic salary multiplied by the total years of service with the company. Every contract type (limited or unlimited) is regulated by its own formula and exceptions which apply to a specific reason for dismissal.
  • Severance Pay: Under certain circumstances employers have to give an employee additional severance pay. The terms have to be in the contract or employment agreement or during the negotiating exit process.

Documentation and Transparency:

  • Issuing Termination Certificate: Employer have to deliver the signed employment termination certificate within ten days of the termination date to the employee. The document should indicate the purpose and termination date. This document serves as an important document that may be used for any future employment application.
  • Maintaining Confidentiality: The employer has to endlessly protect the confidentiality about the reason for termination. As well as not to share the employee’s weaknesses unless dealing with the information was made necessary. This role safeguards their privacy and credibility as well.

Handling Termination Disputes: Strategies and Legal Recourse

Termination under UAE Labour Law

Employment disagreements are frequently for some misunderstandings between employers and employees. Here is an overview of strategies and legal recourse available under UAE Labour Law:

Strategies for Amicable Resolution:

  • Open Communication: This has become the norm for both parts. Employers should state the reason for dismissal and should welcome any concerns. As well, employees need to voice their grievances calmly and try to grasp the viewpoint of the employer.
  • Negotiation: If there is a fair cause for resolution, this situation can even open up a dialogue. This could include adding a courtesy period, giving extra outflows or offering a positive reference.

Seeking Assistance from the Ministry of Human Resources & Emiratisation:

  • Mediation: The MOHRE provides mediation services in which a third-party helps the communication and formulation of terms of agreement that work well between the worker and employer. As such, this process is an economically advantageous approach to resolving conflicts.
  • Complaint Filing: In case the mediation does not work, workers can lodge their complaints with the MOHRE. This authority will investigate the case and apply the UAE Labour Law and make its conclusion. It may be a long process which may result in reinstatement, wage replacement, or other remedies.

Legal Recourse:

  • Seeking Legal Representation: There can be several advantages of having a UAE Labour Law specialist lawyer to listen to. A counsel or a lawyer may just guide on the validity of the term, any potential claims and alternative courses.
  • Court Proceedings: As the final option, either party may file the dispute to be considered by the court. Sometimes, it happens slowly, and involves a lot of resources.

Be ready to send documents such as your Employment Agreement, Performance Evaluation, any communication about termination, and evidence of payment, if you have any.

Termination During Probationary Period: Rights and Procedures

The Labour Law creates definite legal bindings and policies in UAE labour law termination during probation period. Here is a breakdown for both employers and employees:

  • Probationary Period: The probationary period is the contract clause that determines the length of time in which the employer could assess the employee’s compatibility with the job. The process is hopeful which lasts between 3-6 months but for a distinct contract plus separate position it can extend longer.
  • Employer’s Rights: It remains at the employer’s discretion to dismiss an employee without a notice or a detailed reason regardless of the fact that the contract is during the probation phrase. On the other hand, it is much better to document the remarks or concerns related to performance problems that appeared during the probation period.
  • Employee’s Rights: On cases of UAE labour law termination during probation period, the employee is still entitled to their basic salary for the weeks worked and any accrued vacation pay. Such employees would not be eligible for the gratuity payouts unless they had spent one year in total as a service at the company (including the probationary period).
  • Notice Period: Although not mandatory during probation, notice (for instance a few days) is still good practice. Such a practice is usually implemented to unsuccessful probationers who have otherwise been performing satisfactorily.
  • Challenging Termination: Employees can still file a complaint during probation period if they believe the reason is discriminatory or was given due to fabricated reasons. Still, where an employer challenges a termination preceding the probation session, the burden of proof might be weightier.

Realizing these rights and these procedures contribute to the fair and equitable treatment of people during the probationary period and the employer in particular and the employee as well.

Understanding End-of-Service Benefits and Severance Pay

The UAE Labour Law depicts that employees have a legal right to receive financial aid as a result of contract termination by either employer or employee. This compensation comes in two forms: End-of-Service Benefits (EOSBs) and Severance Pay:

End-of-Service Benefits (EOSB):

  • Mandatory Payment: Any worker who has spent at least 30 working days in the company will have to receive an EOSB allowance as soon as the termination comes into force.
  • Calculation: You obtain EOSB by multiplying the basic salary by the number of years of service with the company. The formulas of payrolls are divided for those who are getting monthly-based and daily-rate salaries.

Monthly-paid employees: Basic Salary x Total Service Years x (21/365)

Daily-rated employees: Daily Wage x Total Service Days x (30/4)

The method could be different, depending on the type of the job contract and the reason for dismissal.

Severance Pay:

Termination compensation is for some employees but not for all. Here are some common scenarios where severance pay might be applicable:

  • Without Fault dismissal before completion of employment period (E.g., redundancy due to company restructuring).
  • In certain cases, the termination could take place during the probation (the organization did not specify the circumstances).

There is no magic instrument to cut and calculate severance which varies class to class. The quantity depends on the employee’s salary, remaining contract period, and reason of dismissal.

Common Terminology and Definitions Related to Termination

It is very important that employers and employees know about the legal terminology of the process because this knowledge will be useful:

  • Termination: Legal conclusion of employment contract.
  • Unlimited Contract: A job contract without the pre-stated ending date.
  • Limited Contract: The employment contract signed for a determined period. It is important to note that UAE labour law termination limited contract is different than the unlimited contracts.
  • Notice Period: The notice period that an employer requires to provide an employee before termination (minimum 30 days).
  • Gratuity Payment: A lump sum payment of an employee at the time of resignation, calculated as basic salary multiplied by total years served.
  • Severance Pay: In addition to the main financial compensation, the employee can also receive other payments in some cases (for example, the faultless termination of the contract before its completion).
  • Termination with Notice: A notice of termination is provided in writing by the employer, with a valid reason.
  • Termination without Notice: Dismissal by the employer without notice for substantial offense done by the staff.
  • Mutual Consent Termination: Agreement on termination between employer and employee which involves a mutually acceptable settlement.
  • Operation of Law Termination: Termination of an agreement due to unanticipated events by either party (e.g., company liquidation).
  • End of Service Benefits: All benefits that an employee has on termination includes gratuity pay, unused vacation pays and owed salary.
  • Probationary Period: The period of time where the company can evaluate the employee’s performance and fitness for the job is the probationary period. Dismissal during probation may undergo different procedures.
  • Ministry of Human Resources & Emiratisation (MOHRE): The government body responsible for supervising the labour relations and arbitrating the problems between employers and employees.

The understanding of these terminology will help both parties to proceed with the utmost clarity and protect their rights.

UAE Labour Law Termination Benefits

As UAE Labour Law allows to have other benefits in the termination package, it is up to the specific circumstances. Here are a few examples:

  • Accrued but Unused Vacation Pay: Employees get payment for the vacation days that they have saved up during the years that they worked there.
  • Outstanding Salary: It is imperative to pay salaries for the actual worked months until the termination date. This should cover the basic pay, allowance, and all possible benefits that were part of the employment agreement.
  • Travel Allowance: For instance, an employer might be lawfully required to cover the repatriation costs (travel costs back to the employee’s mother country) if the termination occurs before the expiration of the contract period and the employee was on a visa which was sponsored by the company.
  • Non-Compete Clause Buyout: For instance, if the employment contract specifies a prohibition from engaging in an identical occupation with a competitor in a specified time after firing, the employer may agree to provide buyout incentives. The employee shall give up the right to work for competitors within a certain geographical area and receive a financial compensation in return.

It is necessary to mention that these are only some examples, and the actual UAE labour law termination benefits may vary according to your contract, which is dependent on the individual situation.

Frequently Asked Questions

Here are some commonly asked questions regarding termination under UAE Labour Law:

What are the valid reasons for termination by the employer?

Among the effective reasons are lack of performance (shown by multiple warnings and plans for improvement), severely misbehaving or staff rule violation, contract violation and lack of good faith.

How much notice does an employer need to give for termination?

It is stipulated in the contract that for UAE labour law termination unlimited contract without fault a minimum 30-days written notice is necessary. Notice periods may apply for extension if the agreement set out a specific time. On the other hand, daily-rate workers are more likely to get less than the notice period.

What happens during the notice period?

The Employee continues working as usual and receiving their usual pay and benefits. The employer does not have the right to assign additional functions that are not a part of the existing job duties.

Am I entitled to gratuity pay?

If you complete a year of working service, you are entitled to gratuity pay upon termination. The amount depends on your basic salary, total service years, and the type of contract (limited or unlimited).

What is the difference between gratuity pay and severance pay?

Gratuity pay is legally mandatory. Severance pay applies only when termination of an employee without fault, when the contract is prior to its termination or redundancy.

Can I challenge an unfair termination?

Indeed, you can file a claim with the MOHRE if you think the UAE labour law termination was based on elements that are unjustified or breaching your rights.

What documents should I get upon termination?

The reason and date of termination would be specified in the termination certificate. It is vital that you do save these files for your next job applications.

Conclusion

By understanding your rights and obligations under UAE Labour Law, you can navigate the process more smoothly and minimize potential disputes.

Remember, the details in your individual employment contract and the specific circumstances surrounding the termination will also play a role.  If you face any uncertainties or require further guidance, consulting with a lawyer specializing in UAE Labour Law is highly recommended.

Do you have further questions about termination under UAE Labour Law? You can contact us for general inquiries!

Neelisha Khandhway

Neelisha-Khandhway-imgNeelisha KhandhwayAn Associate member of institute of company Secretaries of India with around 6 years of experience in india and uae in providing Company Secretarial, Legal and Corporate Governance services including Compliance, Risk Management, Due Diligence, Anti-Money Laundering (AML), Drafting and vetting of Agreements.

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