Terminating an Employment Contract in the UAE

Changing a job can be a tedious process due to the heavy amount of paperwork involved and when this is burdened with the intricacies of a contract, its complexity increases by multi-fold. If you are working in the UAE and are bound by an employment contract, then you need to assess the different nooks and crooks so that the termination process is as smooth as possible.

The legalities of a contract can seem difficult to apprehend for a common layman, but with our detailed explanation of the same, we hope we will be able to help you out. We are going to understand how termination works in case of both a limited and unlimited contract as well as what are the consequences that take place when a contract is terminated by the employers versus when the same is terminated by the employee. So, without further ado, let’s get into it.

Overview of Employment Contract Termination in the UAE

First of all, you need to understand the types of employment contracts that exist in the UAE so that you get an idea of how things work. Primarily, there are two types of employment contracts in the country, limited and unlimited contract.

The process of termination has its fair share of similarities and dissimilarities in both of them depending upon whether it was a resignation, or end of the contract or arbitrary dismissal. Take the help of a reliable and trustworthy law firm for resolving any issue that you might face with the termination of your employment contract.

Process of Termination in Limited Employment Contract

A limited employment contract is a type of employment contract that has a specified starting and ending date and usually lasts for two years. This type of contract comes with a notice period whose duration may last anywhere from one month to three months. At the conclusion of the duration of the contract, the employer and the employee may or may not renew the contract. Renewal requires the mutual agreement of both parties.

A limited contract can be terminated on many grounds. For instance, it can be terminated naturally when the contract expires and is not renewed by the employers and employees. The same can happen when both parties agree to end it before the end date. If the employer or the employee commits any violation as mentioned in under Article 120 of the UAE Labour Law, then that can also lead to the termination of the employment contract.

Both the employer and employee hold the right to terminate the original or renewed contract, given they comply with the legal requirements of the contract. This may include the following:

  • Providing a written notice about the termination at least one month in advance but not more than three months in advance.
  • Giving adequate compensation to the other party to a level that was previously agreed upon through mutual approval. However, his compensation shouldn’t exceed the gross wages of three months.
  • Honouring the obligations of the contract for the entire duration of the notice period.

Process of Termination in Unlimited Employment Contract

In the case of an unlimited employment contract, even though the starting date is known, there is no clearly pre-defined end date. As such, these types of contracts are more flexible and fluid, and henceforth, popular among the employees.

Termination in this type of contract happens when both the employer and the employee reach a mutual agreement to terminate the contract.

The notice period is similar to that of the limited employment contracts and one party can also choose to terminate the contract as long as they honour the obligations for the tenure of the notice period and abide by the legal notice requirements. Failure to do so will lead to legal consequences on grounds of early unilateral termination.

Speaking of unilateral termination, let us understand the circumstances wherein a single party can terminate without serving a notice period. It should be noted that the UAE Labour Law allows a single party to terminate the employment contract in accordance with the law. How so? Let’s find out.

Termination of Employment Contract without a Notice by the Employer

The circumstances wherein an employer can terminate the employment contract without the consent of the employee and/or providing notice in order to deprive him or her of the benefits of end of service benefits are as follows:

  • If the employee was appointed under a probation period and the act of dismissing occurred took place during or at the end of the said period.
  • If the employee violates the safety of the workplace by ignoring instructions that are either mentioned in writing at conspicuous places or informed verbally to those who are unable to read.
  • If the employee submits duplicitous certificates and other related documents or adopts a false nationality or identity.
  • If the error(s) made by an employee is significant that it causes material loss on the employer’s part. For this to be effective, the employer must inform the labour department of the incident within 48 hours of gaining knowledge about the incident.
  • If the employee was absent for more than seven successive days or more than 20 intermittent days in a single year without any lawful justification.
  • If the employee is found under the influence of either prohibited drug or alcohol during working hours.
  • If any secret of the business is divulged by the employee that may endanger the reputation or position of the business.
  • If an act of assault is committed by the employee against the employer or any other colleague.
  • If a competent court awards final judgement against the employee in question in regards to offence prejudicing honesty, honour or public morals.
  • If the employee fails to perform the basic duties of work that are mentioned in the employment contract.
  • If the employee fails to act upon any warning given to him or her relating to his work profile.

Let us now shift gear to see the same situation from the perspective of an employee.

Termination of Employment Contract without a Notice by the Employee

The circumstances wherein an employee can terminate the employment contract without the consent of the employee and/or providing notice are as follows:

  • If the employer has not been able to meet the legal or contractual obligations towards him or her. For instance, let’s say the employer has not been able to pay wages for 60 continuous days.
  • If a court complaint is filed against the employer for failing to provide job security. For instance, if the business has stayed inactive for more than two continuous months.
  • If the final ruling for a labour complaint referred to the labour court by the Ministry of Human Resources & Emiratisation goes in favour of the employee.

Termination of Employment Contract for Arbitrary Dismissal

An arbitrary dismissal refers to a situation wherein the employer either terminates the employee or forces him or her to resign without any proper reasons.

As per Article 122 of the UAE Labour Law, the arbitrary termination of an employee happens when he or she is fired for reasons not related to work or when he or she filed a legit complaint against the employer, which triggers the employer to terminate him or her instead maliciously.

The lawful reasons for arbitrary dismissals are mentioned in Article 120 of the UAE Labour Law, which we have discussed above. Whenever an employee is illegally or unfairly dismissed, he or she reserves the right to complain to the Ministry of Human Resources and Emiratisation. The issue will be resolved amicably by the minister. However, if the minster is unable to reach an amicable settlement, then the case will be referred to the respective court.

However, don’t worry since the UAE Labour Law has taken care of such situations. If arbitrary dismissal is proven to be true, then the court can order the employee to compensate the employee under Article 123 of the UAE Labour Law.

While figuring out the compensation, the court would take into account the following aspects:

  • Duration of the employment
  • Type of work
  • Degree of damage incurred to the employee
  • Investigation of the work conditions

In any case, the compensation can’t exceed the amount of three months’ worth of the employee’s wage. This is calculated based on the last wage that the employee is entitled to. You also need to remember that alongside the compensation, you can also claim notice period dues and end of service benefits or any other unpaid dues that you were entitled to from your employer. It should be noted that you will be eligible to receive your complete salary for your notice period as well.

A 30-day grace period starting from the date of cancellation of the work visa is also granted to the employee after the process of termination. In this period, he or she can try and obtain a permit for a new residence or even leave the country temporarily or permanently. However, if the employee is an illegal resident, he or she would be liable to be deported, fined, or both.

It should also be noted that those employees who are terminated or dismissed for reasons that are mentioned in Article 88 and 120 of the UAE Labour Law, they will be terminated immediately and he or she can’t claim the end of service gratuity or a notice of termination or any other related payment.


The UAE Labour Law safeguards the interest of both the employers and employees when it comes to the termination process of limited and unlimited employment contracts. We strongly advise you to take the help of a legal team if you face any problem in resolving issues related to your termination. Make sure to preserve all work-related documents with you since they would come handy while fighting your case.

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