Table of Contents
- What Is Arbitrary Dismissal in the UAE?
- When Can an Employment Contract Be Terminated?
- Compensation for Arbitrary Dismissal
- Not Every Termination Is Arbitrary Dismissal
- Termination Without Notice Under UAE Labour Law
- Financial Dues After Resignation in the UAE
- End-of-Service Gratuity in the UAE
- How Is End-of-Service Gratuity Calculated?
- Are Old Unlimited Contract Gratuity Reductions Still Applicable?
- Can Employers Deduct Amounts from Final Settlement?
- Notice Period Pay After Resignation or Termination
- Unpaid Salary and Final Settlement Delay
- Documents Needed for Arbitrary Dismissal or Final Settlement Claims
- How to File a Labour Complaint in UAE
- Can an Employer Force an Employee to Resign?
- Employer Compliance Tips
- How HHS Lawyers and Legal Consultants Can Help
- FAQs
- Final Overview
Arbitrary dismissal and unpaid final settlement dues are among the most common labour disputes in the UAE. Employees may face sudden termination, unpaid salary, delayed gratuity, unpaid leave salary, or pressure to resign without receiving their legal entitlements. Employers, on the other hand, must ensure that termination and final settlement procedures comply with the UAE Labour Law.
Under the current UAE Labour Law, Federal Decree-Law No. 33 of 2021 and its amendments, termination must follow the employment contract, notice requirements, and applicable legal procedures. If an employee is terminated because they filed a serious complaint with the Ministry of Human Resources and Emiratisation or filed a valid lawsuit against the employer, the termination may be treated as unlawful or arbitrary dismissal.
This article explains arbitrary dismissal in the UAE, employee rights after termination or resignation, end-of-service gratuity, notice period pay, unpaid salary, and the steps employees can take if their employer refuses to pay final dues.
What Is Arbitrary Dismissal in the UAE?
Arbitrary dismissal refers to unlawful termination of employment where the employer dismisses an employee for a prohibited reason. Under Article 47 of the UAE Labour Law, a termination may be considered unlawful if the employer terminates the employee because the employee filed a serious complaint with MOHRE or filed a lawsuit against the employer, and the validity of the complaint or lawsuit is proven.
This protection is important because employees should not be punished for exercising their legal rights. For example, if an employee files a legitimate complaint for unpaid salary, illegal deductions, unsafe working conditions, or breach of contract, and the employer terminates the employee because of that complaint, the employee may have a claim for arbitrary dismissal compensation.
Related reading: Arbitrary Dismissal: Employee Contract Termination by Employer
Need Labour Law Help?
Dubai's Expert Advice at Your Fingertips.
When Can an Employment Contract Be Terminated?
Under the current UAE Labour Law, an employment contract may end for several reasons. These may include mutual agreement, expiry of the fixed-term contract, resignation, termination by either party with notice, termination during probation, employer closure, death, incapacity, or other legally recognised reasons.
Either party may terminate the employment contract for a legitimate reason, provided that written notice is given and the notice period is observed. The notice period must generally be not less than 30 days and not more than 90 days, depending on the employment contract and applicable law.
Termination should be documented properly. Employers should avoid verbal termination, unclear dismissal reasons, or forcing employees to resign without proper written records. Employees should also avoid signing resignation letters, settlement forms, or waivers unless they understand the legal effect.
Compensation for Arbitrary Dismissal
If arbitrary dismissal is proven, the employer may be ordered to pay compensation to the employee. The compensation is assessed based on factors such as the nature of the work, the harm suffered by the employee, and the employee’s length of service.
The compensation for arbitrary dismissal cannot exceed three months’ wage calculated on the basis of the employee’s last wage. This compensation is separate from other labour entitlements that may still be due to the employee.
An employee may also claim:
- Unpaid salary;
- Payment in lieu of notice, where applicable;
- Accrued but unused annual leave salary;
- End-of-service gratuity;
- Unpaid commission or contractual benefits, if proven;
- Any other final settlement dues under the contract or UAE Labour Law.
You should know: What to Do If Salary Is Not Paid in UAE
Not Every Termination Is Arbitrary Dismissal
It is important to understand that not every termination is automatically arbitrary dismissal. Under the current UAE Labour Law, arbitrary dismissal is mainly linked to retaliatory termination because the employee filed a serious complaint with MOHRE or filed a valid lawsuit against the employer.
However, even if the termination does not qualify as arbitrary dismissal, the employee may still have other claims if the employer failed to pay salary, notice period, leave salary, gratuity, or other final settlement dues.
Termination Without Notice Under UAE Labour Law
There are limited cases where an employer may terminate an employee without notice. These are generally serious misconduct cases under Article 44 of the UAE Labour Law. Employers should not use this route casually because wrongful reliance on termination without notice may lead to labour claims.
Examples may include:
- Submitting false identity documents or forged certificates;
- Causing serious material loss to the employer, subject to legal reporting requirements;
- Violating written workplace safety instructions;
- Failing to perform fundamental duties despite warnings;
- Disclosing confidential business information causing loss or unlawful advantage;
- Being intoxicated or under the influence of prohibited substances during work;
- Assaulting the employer, manager, or colleagues during work;
- Unjustified absence for the legally specified period;
- Using the position unlawfully for personal benefit;
- Joining another establishment without following applicable rules.
Before terminating without notice, employers should conduct a proper internal review, keep written evidence, and follow the required legal procedure. Employees who believe Article 44 was misused may file a complaint and claim unpaid dues.
Financial Dues After Resignation in the UAE
An employee who resigns may still be entitled to several financial dues, depending on length of service, contract terms, notice period, salary records, and whether the employee completed at least one year of continuous service.
Common financial dues after resignation may include:
- Unpaid salary up to the last working day;
- Accrued annual leave salary;
- End-of-service gratuity, if eligible;
- Notice period pay, if the employer waives notice or fails to follow the agreed terms;
- Reimbursements or approved expenses;
- Commission, bonus, or incentives if contractually due and proven;
- Any other contractual benefits owed to the employee.
An employee who resigns before completing one year of continuous service is generally not entitled to end-of-service gratuity. If the employee has completed one year or more, gratuity may be payable according to the current UAE Labour Law calculation.
End-of-Service Gratuity in the UAE
End-of-service gratuity is one of the most important final settlement entitlements for eligible expatriate employees in the UAE private sector. It is calculated based on the employee’s basic wage, not the total salary including allowances.
Allowances such as housing, transport, food, travel, mobile allowance, and other benefits are generally not included in the basic wage calculation unless the employment contract or applicable rules provide otherwise.
How Is End-of-Service Gratuity Calculated?
For a full-time employee who has completed one year or more of continuous service, gratuity is generally calculated as follows:
- Less than one year of service: No end-of-service gratuity is payable.
- One to five years of service: 21 days’ basic wage for each year of service.
- More than five years of service: 30 days’ basic wage for each additional year after the first five years.
- Maximum limit: The total gratuity should not exceed two years’ wage.
Fractions of a year may be calculated proportionately if the employee has completed at least one year of continuous service. Unpaid absence days may be excluded from the calculation where legally applicable.
Are Old Unlimited Contract Gratuity Reductions Still Applicable?
Old UAE labour law rules previously distinguished between limited and unlimited contracts and applied different gratuity reductions in some resignation cases. These older rules are no longer the correct basis for current private sector employment under the new UAE Labour Law framework.
Private sector employment contracts are now generally fixed-term contracts. Therefore, employees and employers should avoid relying on outdated calculations based on unlimited contracts, one-third gratuity, or two-thirds gratuity rules from the old law.
Can Employers Deduct Amounts from Final Settlement?
An employer may only deduct amounts from the employee’s final settlement where the deduction is legally permitted, contractually supported, or properly documented. Employers should not make arbitrary deductions without evidence.
Possible deductions may relate to:
- Employee loans or advances;
- Overpaid salary;
- Unreturned company property;
- Contractual obligations supported by written agreement;
- Other legally permitted deductions.
If the employee disputes the deduction, the matter may be raised before MOHRE or the competent labour court.
Notice Period Pay After Resignation or Termination
The notice period is an important part of resignation and termination. The employee and employer must usually continue the employment relationship during the notice period unless both parties agree otherwise.
If either party fails to observe the required notice period, payment in lieu of notice may become payable. The exact amount depends on the employment contract, salary, and remaining notice period.
Employees should resign in writing and keep proof of submission. Employers should confirm acceptance, last working day, handover requirements, and final settlement arrangements in writing.
Unpaid Salary and Final Settlement Delay
Delayed final settlement is a common labour dispute in the UAE. Employers should settle salary, gratuity, leave salary, notice pay, and other dues within the legally required timeframe. Employees should request a written final settlement statement and check whether the calculation is correct before signing.
If the employer delays or refuses payment, the employee may file a labour complaint with MOHRE and provide documents supporting the claim.
Documents Needed for Arbitrary Dismissal or Final Settlement Claims
Employees should collect and preserve documents before filing a complaint. Useful documents may include:
- Employment contract;
- Offer letter and salary details;
- Termination letter or resignation letter;
- MOHRE complaint records, if any;
- Salary slips and bank statements;
- Leave records;
- Warning letters or disciplinary notices;
- Emails, WhatsApp messages, and HR communications;
- Final settlement statement;
- Proof of unpaid salary, commission, bonus, or deductions;
- Any document showing retaliation after a complaint or lawsuit.
How to File a Labour Complaint in UAE
If the employee and employer cannot resolve the dispute amicably, the employee may file a complaint with MOHRE. MOHRE may attempt to settle the dispute between the parties. If settlement is not possible, the case may be decided by MOHRE in certain low-value claims or referred to the competent court depending on the amount and nature of the dispute.
Labour complaints may involve:
- Arbitrary dismissal compensation;
- Unpaid salary;
- Delayed final settlement;
- End-of-service gratuity;
- Leave salary;
- Notice period pay;
- Illegal deductions;
- Work permit or contract issues;
- Employer refusal to cancel visa or complete exit formalities.
Employees should act quickly because labour claims are subject to legal time limits. Delaying the complaint may weaken the case or affect the ability to recover dues.
Can an Employer Force an Employee to Resign?
An employer should not force an employee to resign to avoid paying termination benefits or arbitrary dismissal compensation. If an employee resigns under pressure, coercion, threat, or improper conduct, the employee may need to prove the circumstances through written evidence, witnesses, messages, or other documents.
Employees should avoid signing resignation letters if they do not genuinely wish to resign. If pressure is applied, the employee should seek legal advice and consider filing a complaint before signing final settlement documents.
Employer Compliance Tips
Employers can reduce the risk of arbitrary dismissal and final settlement disputes by following clear HR procedures and keeping written records.
- Use updated fixed-term employment contracts;
- Keep accurate salary, leave, and attendance records;
- Document performance issues and warnings properly;
- Do not terminate employees in retaliation for complaints;
- Calculate gratuity and final settlement correctly;
- Issue written termination or acceptance of resignation;
- Pay final dues within the required timeframe;
- Take legal advice before dismissing an employee who has filed a complaint.
How HHS Lawyers and Legal Consultants Can Help
HHS Lawyers & Legal Consultants assists employees and employers with UAE labour law disputes, arbitrary dismissal claims, unpaid salary, resignation disputes, termination matters, end-of-service gratuity, final settlement calculations, and labour court proceedings.
Our team can review the employment contract, assess whether dismissal may be arbitrary, calculate final dues, prepare legal notices, file MOHRE complaints, negotiate settlement, and represent clients before the competent authorities and courts.
For legal advice on arbitrary dismissal, resignation dues, or employment disputes, contact HHS Lawyers & Legal Consultants or speak to our labour lawyers in Dubai.
FAQs
What is arbitrary dismissal under UAE Labour Law?
Arbitrary dismissal may occur when an employer terminates an employee because the employee filed a serious complaint with MOHRE or filed a valid lawsuit against the employer.
How much compensation can an employee claim for arbitrary dismissal?
If arbitrary dismissal is proven, compensation may be awarded up to a maximum of three months’ wage, based on the employee’s last wage.
Can an employee claim gratuity after resignation in the UAE?
Yes, an employee who has completed at least one year of continuous service may be entitled to end-of-service gratuity even after resignation, subject to UAE Labour Law.
Is gratuity payable if the employee resigns before one year?
No. If the employee resigns or leaves before completing one year of continuous service, end-of-service gratuity is generally not payable.
How is end-of-service gratuity calculated in UAE?
Gratuity is generally calculated as 21 days’ basic wage for each year of the first five years, and 30 days’ basic wage for each additional year after five years, capped at two years’ wage.
Are old unlimited contract gratuity reductions still applicable?
No. The old unlimited contract rules and resignation reductions are no longer the correct basis for current private sector employment under the new UAE Labour Law framework.
Can an employer deduct money from final settlement?
An employer may only deduct amounts that are legally permitted, contractually supported, or properly documented. Disputed deductions may be challenged through MOHRE or court.
What should I do if my employer does not pay final settlement?
You should request a written final settlement statement, keep salary and contract records, and file a complaint with MOHRE if the employer refuses or delays payment.
Can an employer force an employee to resign?
No. A resignation should be voluntary. If an employee is forced to resign, they may need evidence such as messages, emails, witnesses, or documents to support a labour complaint.
How can HHS Lawyers help with arbitrary dismissal and resignation dues?
HHS Lawyers & Legal Consultants can review the termination or resignation, calculate dues, file labour complaints, negotiate settlement, and represent employees or employers in labour disputes.
Need Labour Law Help?
Dubai's Expert Advice at Your Fingertips.
Final Overview
Arbitrary dismissal and unpaid resignation dues should be handled carefully under the current UAE Labour Law. Employees should understand their rights to salary, notice period, leave salary, gratuity, and compensation where applicable. Employers should ensure that termination, resignation, and final settlement procedures are legally compliant and properly documented.
If you need legal support with arbitrary dismissal, resignation dues, unpaid salary, end-of-service gratuity, or labour disputes in the UAE, contact HHS Lawyers’ labour lawyers in Dubai for professional assistance.
