Terminating an employee in the UAE requires strict adherence to Federal Decree-Law No. 33 of 2021 (the "UAE Labour Law"). Failure to follow the correct procedures—regarding notice periods, end-of-service benefits, or documentation—can result in legal action, financial penalties, and claims of arbitrary dismissal .

Below is a comprehensive guide to legally terminating an employment contract under UAE Labour Law, including specific steps, required documentation, and potential legal pitfalls.

How to Legally Terminate an Employee Under UAE Labour Law: A 2026 Guide

Terminating an employment contract in the UAE is not merely an HR formality; it is a legal process governed strictly by Federal Decree-Law No. 33 of 2021. Whether you are dismissing for poor performance, redundancy, or gross misconduct, the law mandates specific notice periods, documentation, and financial settlements. Getting it wrong can expose an employer to lawsuits for arbitrary dismissal, compensation claims, and administrative fines from the Ministry of Human Resources and Emiratisation (MoHRE).

Here is a detailed breakdown of how to terminate an employee legally in the UAE.

1. The General Rule: Notice of Termination (Article 43)

In most standard termination scenarios, neither party can end the contract instantly. The law requires a written notice period to be served.

• Duration: The notice period must be no less than 30 days and no more than 90 days .

• Format: The notification must be in writing (email or physical letter) and state the reason for termination if required by the contract.

• During Notice: The employee is entitled to their full wage for the notice period. If the employer initiates the termination, the employee has the right to take one unpaid day per week to search for a new job, provided they notify the employer three days in advance .

• Payment in Lieu: If the employer wishes the employee to leave immediately (gardening leave), they must pay the employee the wage equivalent of the entire notice period.

Important: If an employer fails to serve the correct notice, the employee is entitled to compensation equal to the wage for the full notice period .

2. Termination for Cause: Dismissal Without Notice (Article 44)

An employer may terminate an employee without notice (summary dismissal) if the employee commits a serious violation. However, due process is critical here. The law requires a written investigation before termination .

Valid grounds for immediate dismissal without notice include:

• Fraud/Misrepresentation: Adopting a false identity or submitting forged documents.

• Material Loss: Causing significant financial loss or deliberately damaging property (must be reported to MoHRE within 7 working days).

• Safety Violations: Violating workplace safety instructions that were displayed in writing.

• Non-performance: Failing to perform basic duties despite two written warnings.

• Confidentiality: Disclosing industrial or trade secrets for personal gain.

• Absenteeism: Absence without legitimate reason for more than 20 non-consecutive days or 7 consecutive days in a year.

• Assault: Committing verbal or physical assault against a manager or colleague.

• Substance Abuse: Being under the influence of drugs or alcohol during work hours .

Procedure for Article 44 Termination:

1. Conduct a Written Investigation: Document the evidence of the violation.

2. Issue Warnings (if applicable): For performance/absence issues, two warnings must be issued before dismissal.

3. Notify MoHRE: In cases of financial loss, notify the ministry within 7 days.

4. Serve Written Notice: Provide a termination letter citing the specific article and reason.

5. Settle Entitlements: Even in summary dismissal, the employee retains their end-of-service gratuity (unlike the old law) unless the employer suffers a proven financial loss that can be deducted .

3. The Financial Settlement: End-of-Service Benefits (Article 51)

Regardless of whether the employee resigned or was dismissed (except in limited specific fraud cases), the employer must pay the End-of-Service Gratuity (EOSB) if the employee has completed one year of continuous service .

Calculation Table:

Formula: (Basic Salary / 30) x Days Entitled

Additional Mandatory Payouts:

• Unpaid Salary: Any pending wages for worked days.

• Unused Annual Leave: Compensation for all accrued but untaken leave days.

• Repatriation Ticket: The employer must pay for the employee's flight ticket to their home country (unless the employee secures a new job in the UAE within the grace period) .

Payment Deadline (Article 53):

All termination benefits (final settlement) must be paid to the employee within 14 days from the date of the contract's termination. Failure to pay within this window exposes the employer to legal penalties .

4. The Danger of "Arbitrary Dismissal" (Article 47)

A termination is considered arbitrary (unlawful) if the employee is fired because they filed a serious complaint with MoHRE or initiated a valid lawsuit against the employer .

Consequences:
If a court finds the dismissal arbitrary, the employer will be ordered to pay compensation to the worker. While the court assesses the damage, the compensation is capped at the employee's wage for three months .

Note: The definition of arbitrary dismissal has narrowed under the new law. It no longer includes the vague "not related to work" clause, focusing primarily on retaliation for legal complaints . However, if you fire someone without a "legitimate reason," you may still face breach of contract claims.

5. Probation Period Terminations

Terminating an employee on probation has specific rules:

• Notice Period: The employer must provide 14 days' written notice for termination during probation .

• Non-compete: Employers can require the employee to serve the notice period.

• Ban on Employment: If an employee resigns during probation (not due to employer breach) or abandons work, they may be banned from obtaining a work permit for one year . However, if the employer terminates the worker during probation without fault of the worker, the employee is free to join another employer immediately.

6. Procedural Checklist for Employers

To ensure compliance and avoid labor disputes, follow this step-by-step checklist:

1. Issue Written Warning(s): For performance or misconduct (unless it is a gross violation under Article 44).

2. Serve Formal Notice: Provide the employee with a written termination letter specifying the notice period start/end date.

3. Calculate Settlement: Compute the EOSB (21/30 days), leave balance, and notice pay.

4. Process Cancellation: Initiate the cancellation of the employee's work permit and visa through the MoHRE and ICP systems.

5. Sign Settlement: Have the employee sign an acknowledgement of receipt of the final settlement (ideally before a notary or via MoHRE to prevent future claims).

6. Final Payment: Transfer the dues within the 14-day deadline .

Conclusion

Terminating an employee in the UAE is a process of checks and balances. The law heavily favors written documentation and due process. An employer who fails to pay gratuity within 14 days, fails to provide a notice period, or cannot prove a "legitimate reason" for dismissal will likely lose in a labor court.

Always consult with a legal professional or a MoHRE representative before finalizing a termination, especially in cases involving potential arbitrary dismissal claims. You can consult with us.