Termination of Employment in UAE

In today’s times, the UAE is an attraction for individuals all across the globe for a lot of business and work-related opportunities. These individuals are bound by a robust legal framework to ensure fair treatment in the workplace. One of the provisions is related to the termination of employment, which will affect both, the employer and the employee. If you do not possess any knowledge regarding the UAE labor law of termination, read this blog until the end. Through this blog, we will be dealing with UAE Labour Law regarding termination in detail, covering essential details like the grounds for termination, procedures, entitlements, and more.

Understanding Termination Under UAE Labour Law

Termination, in its simplest form, means the end of the employment relationship between an employer and an employee. According to the Federal Decree-Law No. 33 of 2021 (the UAE Labour Law), any party can end the employment contract for any valid reason. In this law, there is mention of two different kinds of termination, such as:

Termination with Notice

This occurs when either the employee or the employer decides to end the employment contract by providing a notice period as per the terms of the contract.

Termination Without Notice

In the second case, the employer has the upper hand and they can terminate the employee without notice, usually due to gross misconduct or other serious violations of any law.

By providing legal rights to both the employee and the employer, the UAE Labour Law ensures that employees’ rights are protected during the termination process while also safeguarding the interests of employers.

Grounds for Termination Under UAE Labour Law

Now that you have understood the termination and its types, it is time to look at the reasons behind termination. We have categorized the reasons under valid and invalid grounds, have a look:

1. Valid Grounds for Termination

• Performance-Related Issues: The first reason behind valid termination can be the poor performance of the employee. If an employee is consistently failing to meet performance standards, provided the employer has documented these shortcomings and given the employee a chance to improve numerous times, they can be terminated.
• Misconduct: The second reason behind termination can be the misconduct of the employee. Gross misconduct such as theft, fraud, or violating workplace safety regulations can lead to no notice period termination.
• Redundancy: Another reason behind termination is sometimes a bit unlucky, but when companies go through economic reasons, restructuring, or redundancy, they may terminate employees.
• Contract Expiry: If an employee is on a fixed-term contract and it is not renewed, the termination occurs when the contract reaches its agreed-upon end date.

2. Invalid Grounds for Termination

• Discrimination: Terminating an employee based on race, gender, nationality, or religion is prohibited.
• Retaliation: Employees cannot be terminated for filing complaints against the employer or for participating in investigations into workplace issues.
• Health Reasons: Termination due to temporary illness, provided it doesn’t exceed the legally permitted sick leave, is also considered unlawful.

Termination Procedures and Requirements

No employer can terminate any employee on valid grounds without following the proper termination procedure by the UAE Labour Law. But what procedure does it outline? Let’s discuss:

1. Issuance of a Written Notice

In order to begin the termination process, the employer or employee must provide a written notice of termination. This notice should clearly state the reasons for termination and the effective date of the termination.

2. Compliance with the Notice Period

Any of the sides, whether the employee or the employer initiating the termination procedure must stick to the contractual or legal notice period. However, in case of gross misconduct, it is allowed to terminate without any notice.

3. Final Settlement

In the end, the employer has to comply with the rules that they must provide a final settlement, which includes any unpaid salary, unused annual leave, end-of-service gratuity, and any other outstanding benefits. All this should be done within 14 days of the termination date.

Notice Period for Termination

In the usual situations, the notice period for both employer and employee is at least 30 days according to the UAE Labour Law. But this is not always certain as it can be extended depending on the terms specified in the employment contract.

Notice Period Variations

The extension of the notice period generally happens particularly for senior or specialized roles as it requires time to find a suitable replacement. This can be extended to 60 or 90 days.

Waiving the Notice Period

In certain cases, the notice period can be waived. This generally happens when both parties can agree to waive the notice period mutually and the employee may receive payment instead of notice if the employer wishes for immediate termination.

UAE Labour Law Termination Benefits and Entitlements

At last, let’s shed some light upon entitled benefits after termination for employees who have completed at least one year of service:

1. End-of-Service Gratuity

Employees who have completed at least one year of service are entitled to an end-of-service gratuity. The gratuity is calculated based on the employee’s last drawn salary and is awarded as follows:

• 21 days of basic salary for each year of service for the first five years.
• 30 days of basic salary for each additional year after five years.

2. Unused Annual Leave

If an employee has any unused annual leave, then in that case they are entitled to compensation for that.

3. Unpaid Salary

All outstanding salary, including overtime, must be paid in the final settlement.

4. Compensation for Early Termination

If an employer terminates a fixed-term contract before its expiry without valid reason, the employee will be entitled to compensation of up to three months’ salary.

5. Health Insurance Continuation

Health insurance coverage of the employees will continue till the time they are on notice period. After that, the employer can cancel the employee’s insurance after termination has been completed.

Conclusion

So, this was all about termination in the UAE. We hope you have liked the information and will share it with your colleagues, friends, and family in the UAE to understand the intricacies of termination and the rights related to it. It is essential that the employees be aware of their rights, especially when it comes to valid and invalid grounds for termination.