UAE Final Settlement Guide 2025: Complete Calculation Reference

Final settlement encompasses all payments owed to an employee when their employment ends, whether through resignation, termination, contract expiry, or other circumstances.

Key Points

• Mandatory payment under UAE Labor Law
• Must be paid within 14 days of termination
• Includes multiple components based on entitlements
• Calculated differently based on termination type
• Employee can file MOHRE complaint if not paid

Standard Components

Possible Deductions

Eligibility

• Minimum 1 year of continuous service
• Applies to termination, resignation, or contract expiry

Calculation Formula

First 5 years of service:

Gratuity = (Basic Salary / 30) x 21 x Years of Service

Beyond 5 years:

Gratuity = [(Basic Salary / 30) x 21 x 5] + [(Basic Salary / 30) x 30 x (Years - 5)]

Cap

Maximum gratuity = 2 years' total salary

Resignation Reduction (Unlimited Contracts Only)

For employees on unlimited contracts who resign:

Note: Since 2022, all new contracts are fixed-term. Full gratuity applies.

Calculation

Leave Payment = (Basic Salary / 30) x Unused Leave Days

Key Points

• Calculated on basic salary only
• Includes all accrued, unused leave
• Pro-rata for partial year
• Maximum carryover as per company policy

Example

Basic salary: AED 10,000
Unused leave: 20 days

Leave payment = (10,000 / 30) x 20 = AED 6,667

When Payable

Calculation

Notice Pay = (Monthly Salary / 30) x Notice Period Days

Standard Notice Periods

Example 1: Standard Termination (Employer Initiated)

Employee Details:

• Basic salary: AED 12,000
• Total salary: AED 18,000
• Service: 4 years, 6 months
• Unused leave: 25 days
• Notice period: 30 days (served)
• Contract: Fixed-term

1. Gratuity:
   Daily basic = 12,000 / 30 = AED 400
   Gratuity = 400 x 21 x 4.5 = AED 37,800

2. Unused Leave:
   Leave pay = 400 x 25 = AED 10,000

3. Notice Period:
   Served - no payment

TOTAL FINAL SETTLEMENT = AED 47,800

Example 2: Long Service (7 Years)

Employee Details:

• Basic salary: AED 15,000
• Service: 7 years
• Unused leave: 30 days
• Notice period: 60 days (served)

1. Gratuity:
   Daily basic = 15,000 / 30 = AED 500
   First 5 years: 500 x 21 x 5 = AED 52,500
   Next 2 years: 500 x 30 x 2 = AED 30,000
   Total gratuity = AED 82,500

2. Unused Leave:
   Leave pay = 500 x 30 = AED 15,000

TOTAL FINAL SETTLEMENT = AED 97,500

Example 3: Termination During Probation

Employee Details:

• Basic salary: AED 10,000
• Service: 4 months (probation)
• Unused leave: 8 days accrued

1. Gratuity:
   Not eligible (less than 1 year)
   Gratuity = AED 0

2. Unused Leave:
   Daily basic = 10,000 / 30 = AED 333
   Leave pay = 333 x 8 = AED 2,667

TOTAL FINAL SETTLEMENT = AED 2,667

Permitted Deductions

Not Permitted

• Arbitrary deductions
• Penalties without documentation
• Charges not agreed in contract
• Deductions exceeding 50% of dues

Employer Obligations

If Settlement Not Paid

1. Contact employer: Request payment
2. Written demand: Document the request
3. MOHRE complaint: File within 2 years
4. Mediation: MOHRE attempts resolution
5. Labor court: If mediation fails

Time Limit

Labor claims must be filed within 2 years of termination date.