Terminating employment in the United Arab Emirates (UAE) requires adherence to specific legal procedures and contractual obligations. If you’re either an employee or employer, understanding the legal framework is crucial to ensure a smooth and compliant process. This guide breaks down the key aspects of ” Termination of Employment in UAE “.
Understanding Notice Periods
The notice period is a fundamental part of the termination process, ensuring that both parties—employer and employee—are aware of the impending end of the employment relationship.
Employer’s Notice
Employers are generally required to provide a notice period before terminating an employee. The duration of this period is typically specified in the employment contract. However, if it’s not mentioned, UAE labor law governs the length of the notice period. Here are some key points:
- Standard Notice Period: The default notice period under UAE labor law is 30 calendar days unless the contract specifies otherwise.
- Impact of Employee’s Position: Senior positions may require longer notice periods as specified in the employment contract.
- Length of Service Consideration: Longer-serving employees may be entitled to a longer notice period depending on the terms agreed upon in the employment contract.
Employee’s Notice
Employees also have the responsibility to provide notice before resigning from their position. The conditions are as follows:
- Contractual Obligation: Employees must adhere to the notice period outlined in their contract.
- Standard Period: Typically, the employee’s notice period is also 30 days, but this may vary based on contract terms.
- Failure to Provide Notice: If an employee fails to provide adequate notice, they could be held liable for compensation equivalent to the notice period’s salary.
Valid Reasons for Termination
Termination can happen for various reasons. However, the UAE labor law stipulates specific grounds upon which employment can be legally terminated.
Legitimate Reasons for Termination
- Poor Performance: If an employee is consistently underperforming and fails to meet the job expectations, employers can terminate their contract. Adequate warnings and performance reviews should be documented to avoid disputes.
- Misconduct or Breach of Contract: Any form of misconduct, including theft, dishonesty, or violating company policies, can be grounds for termination. Breaching the employment contract, whether by breaking confidentiality clauses or failing to adhere to work duties, also justifies dismissal.
- Incompetence: Employees who demonstrate an inability to perform their roles or meet job requirements can be lawfully terminated. Evidence of incompetence is essential to protect the employer from claims of unfair dismissal.
- Redundancy: Economic downturns or restructuring efforts may force employers to terminate employees due to redundancy. In this case, the employer must show that the termination is due to business needs, not personal reasons.
- Illness or Disability: If an employee suffers from a prolonged illness or disability and is unable to fulfill their duties, termination is possible. Employers must demonstrate that reasonable accommodations were attempted before taking this step.
Unlawful Reasons for Termination
It’s important for employers to avoid terminating employees for reasons that are illegal under UAE labor law. These include:
- Discrimination: Termination based on race, nationality, gender, religion, or other discriminatory grounds is unlawful.
- Maternity: Female employees cannot be terminated due to pregnancy or maternity leave.
- Retaliation: Dismissals in retaliation for whistleblowing or filing complaints against the company are prohibited.
Termination Procedures
When terminating employment, both parties must follow specific legal procedures to avoid disputes or legal consequences.
Written Notice
- Requirement: The termination must be communicated in writing. Verbal terminations do not suffice.
- Content: The written notice should clearly state the reason for termination and the effective date of termination. This provides transparency and helps avoid potential misunderstandings.
- Delivery Method: It’s advisable to deliver the notice in a way that provides proof of receipt, such as via email with acknowledgment, or a formal letter delivered by registered mail.
Settlement Agreement
In some cases, employers and employees may opt for a mutual agreement regarding the termination. A settlement agreement typically covers:
- Severance Pay: Agreed compensation paid to the employee, which may exceed legal entitlements, depending on negotiations.
- Outstanding Benefits: All accrued leave, overtime, or bonuses must be settled. The agreement should specify these amounts.
- Confidentiality or Non-Compete Clauses: Employers may include clauses restricting employees from sharing sensitive company information or working with competitors for a specified period post-termination.
Final Pay and Benefits
Employers must ensure that all outstanding payments are settled by the end of the employment relationship. The employee’s final pay typically includes:
- Accrued Leave Entitlement: Employees are entitled to compensation for any unused leave.
- Overtime: Any overtime hours worked but unpaid must be included in the final settlement.
- Bonuses or Incentives: If applicable, bonuses or commissions earned should also be accounted for.
End-of-Service Gratuity
End-of-service gratuity is a crucial entitlement for employees in the UAE. It serves as a lump sum payment based on the employee’s length of service.
Eligibility Criteria
- Minimum Service Requirement: Employees must have completed at least one year of continuous service to be eligible for gratuity.
- Resignation Impact: Employees who resign after more than one year but less than five years of service are entitled to a reduced gratuity, typically two-thirds of the full amount.
Calculation of Gratuity
- Basic Salary Basis: Gratuity is calculated based on the employee’s basic salary, excluding allowances or bonuses.
- Formula:
- First 5 years: 21 days of basic salary for each year of service.
- After 5 years: 30 days of basic salary for each additional year.
Non-Eligibility
Employees terminated for misconduct are not eligible for end-of-service gratuity. This includes cases of theft, dishonesty, or gross negligence.
Important Considerations for Employers and Employees
Several legal requirements and considerations must be addressed to ensure a lawful and smooth termination process.
Visa Cancellation
- Employer’s Responsibility: If the employee is on a UAE work visa, it’s the employer’s responsibility to cancel the visa after termination.
- Required Timeframe: Visa cancellation should be initiated immediately after termination and must be completed within 30 days.
- Impact on Employees: Once the visa is canceled, the employee is typically required to leave the country or secure a new sponsor.
Notification to MOHRE
Employers must notify the Ministry of Human Resources and Emiratization (MOHRE) of any terminations within 30 days. This ensures that the termination is registered and legal.
Labor Disputes and Claims
In the event of a dispute, employees and employers have the right to file a complaint with the Ministry of Human Resources and Emiratization or the labor court. Common disputes include:
- Unpaid Salaries or Benefits: Employees may claim unpaid salaries, gratuities, or other entitlements.
- Unlawful Dismissal: Employees may challenge their dismissal if they believe it was unjust or based on discriminatory reasons.
Final Words
Termination of employment in the UAE is governed by clear laws and procedures, ensuring that both employers and employees are treated fairly. By adhering to the notice period, understanding the grounds for termination, following the required procedures, and consulting legal experts when necessary, both parties can ensure a smooth and compliant termination process.
