Employment Contract Termination in UAE: Legal Grounds, Notice Period & Employee Rights under Labour Law

Termination of an employment contract in the UAE private sector should follow the rules set out under the UAE Labour Law. Whether the contract ends because of expiry, mutual agreement, resignation, dismissal, incapacity, or employer insolvency, both employers and employees should understand the notice requirements, lawful grounds for termination, and the employee’s rights at the end of service.

If a contract is terminated without following the legal process, the employer may face labour complaints, compensation claims, or disputes over notice period, final settlement, and employee rights. This is why employment contract termination in the UAE should always be handled carefully and with proper documentation.

Also read: Final Settlement in UAE Under Labour Law

When Can an Employment Contract Be Terminated in UAE?

Under UAE Labour Law, an employment contract may be terminated in several situations, including:

• Expiry of contract term: where the contract period ends and is not renewed or extended
• Mutual agreement: where both employer and employee agree in writing to end the employment relationship
• Termination by either party for a legitimate reason: subject to written notice and legal requirements
• Death or permanent incapacity of the employee: supported by the relevant official or medical evidence
• Death of the employer: where the contract is directly linked to the employer’s person or business continuity is not possible
• Employer insolvency or exceptional closure scenarios: subject to the applicable legal process

Notice Period for Termination of Employment Contract in UAE

Under Article 43 of the UAE Labour Law, either party may terminate the employment contract for a legitimate reason by giving written notice. The notice period should be not less than 30 days and not more than 90 days, depending on what is agreed in the employment contract.

During the notice period, the employee remains entitled to full contractual pay and should continue to perform their duties unless both parties agree otherwise.

• Full pay during notice: the employee remains entitled to salary and contractual rights during the notice period
• Compensation in lieu of notice: if one party does not serve all or part of the notice period, compensation may become payable
• Job search leave: if the employer terminates the employee, the employee may be entitled to one day of unpaid absence per week during notice to search for another job, subject to the applicable rules
• Mutual adjustment: the notice period may be shortened by agreement, provided legal rights are not prejudiced

Also read: Limited vs Unlimited Contract in UAE

Termination Without Notice Under UAE Labour Law

Termination without notice is only allowed in specific situations defined by the law. An employer cannot dismiss an employee without notice unless one of the legal grounds under Article 44 applies and the required process is followed.

Employer’s Right to Terminate Without Notice

Examples of cases where an employer may terminate without notice include situations where the employee:

• submits false identity details or forged documents
• causes serious material loss to the employer through grave error
• violates workplace safety instructions despite proper warning
• fails to perform basic contractual duties after written investigation and warning
• reveals confidential business information causing loss or damage
• is found under the influence of alcohol or drugs during work, or commits an act violating public morals at the workplace
• physically assaults the employer, manager, or coworkers
• is absent without lawful reason for the legally specified period
• misuses position for personal gain

Notification and Investigation Requirements

Before relying on immediate termination, the employer should conduct the required written investigation and follow the legal process. In certain cases, the employer must also notify MoHRE within the required time after becoming aware of the incident.

When Can an Employee Leave Without Notice?

Under Article 45, an employee may leave work without notice in specific cases where the employer breaches the contract or the law. This may include situations where the employer fails to meet key contractual or legal obligations, provided the employee follows the required notification process.

• the employer breaches contractual or legal obligations
• the employee notifies MoHRE of the breach within the required period
• the employer does not rectify the breach after being notified

Arbitrary Dismissal and Unlawful Termination

If an employee is dismissed because they filed a serious complaint with MoHRE or brought a valid labour claim, the dismissal may be treated as arbitrary. In such cases, the employee may file a complaint and seek legal remedies through the proper channels.

If the dispute is not resolved through MoHRE, the matter may proceed to court, and compensation may be awarded depending on the circumstances of the case and the damage suffered by the employee.

Important Employer Considerations Before Termination

• review the employment contract and notice clause carefully
• check whether the reason for termination is legitimate and documentable
• follow written investigation procedures where misconduct is involved
• calculate notice pay, leave balance, gratuity, and final settlement correctly
• issue the required termination documents and update labour records properly

How Payroll Middle East Can Help

Termination of employment in the UAE often affects notice pay, final settlement, leave balance, payroll calculations, and labour compliance. Payroll Middle East supports employers with practical HR and payroll coordination so that contract termination, notice handling, and settlement processing are managed more accurately and in line with UAE requirements.

If your business needs support with employment contract termination, HR services, payroll calculations, or employee final settlement processing, our team can assist you.