Final pay and processing leavers in the United Arab Emirates
Reviewed by Mellow Editorial Team, HR & payroll content team
When an employee leaves your UAE business, their final pay must include any outstanding salary, accrued but untaken annual leave, and an end-of-service gratuity calculated under Federal Decree-Law No. 33/2021. Getting each element right — and in the right order — protects you from labour disputes and WPS compliance failures.
What triggers the final pay calculation
Final pay is due whenever an employment relationship ends: resignation, termination, end of a fixed-term contract, or mutual agreement. The calculation date is the last working day, not the date the employee hands back their access card or clears their desk.
You need four figures before you can run the calculation:
- Basic wage — the fixed component of salary, excluding allowances
- Total service length — in years and days, from the contract start date to the last working day
- Accrued but untaken annual leave days
- Any outstanding salary or allowances for the final partial month
Calculating the end-of-service gratuity
Gratuity is based on basic wage only, not total remuneration. The statutory rates under Federal Decree-Law No. 33/2021 are:
- 21 days' basic wage for each year of the first five years of service
- 30 days' basic wage for each complete year beyond five years
For service of less than a full year (but at least one year completed), the entitlement is prorated to the number of completed months. Employees who have not completed one full year are not entitled to gratuity.
The total gratuity payment is capped at two years' basic wage, regardless of how long the employee has worked for you.
Worked example. An employee with a basic wage of AED 10,000 per month (AED 333.33 per day) leaves after seven years of service:
- First five years: 21 days × AED 333.33 × 5 = AED 35,000
- Next two years: 30 days × AED 333.33 × 2 = AED 20,000
- Total gratuity: AED 55,000
Check this against the cap: two years' basic wage = AED 240,000. The gratuity is well below the cap, so AED 55,000 is payable.
One important distinction: in a resignation scenario, the law previously allowed a sliding scale reduction. Under Federal Decree-Law No. 33/2021, the employee is generally entitled to full gratuity on resignation after one completed year, so check the specific contract terms and any applicable ministerial decisions if you have legacy contracts in place.
Accrued annual leave payment
Employees earn 30 calendar days of annual leave per year of service. On termination, any accrued but untaken leave must be paid out as a cash equivalent. The calculation uses the employee's daily wage (total salary including allowances is typically used for leave pay — confirm this against your employment contract and internal policy, as practice can vary).
Prorate the accrual for any partial year in the final period. For example, an employee leaving six months into a new leave year has accrued roughly 15 days to be paid out.
Final salary and WPS requirements
Outstanding salary for the final partial month is straightforward: pay the daily rate multiplied by the number of days worked. Include any unpaid allowances, commissions, or bonuses contractually due.
All salary payments in the UAE — including final pay — must go through the Wage Protection System (WPS). This means the payment must be processed via an approved WPS agent (a bank, exchange house, or financial institution registered with the Ministry of Human Resources and Emiratisation). Your WPS file for the leaver's last payment should reflect their final employment status. Failure to process through WPS can trigger Ministry penalties and a freeze on your ability to issue new work permits.
UAE nationals and the GPSSA
If your leaver is a UAE or GCC national enrolled in the General Pension and Social Security Authority (GPSSA) scheme, their pension contributions cease on the last working day. You will need to notify GPSSA of the termination and settle any outstanding employer and employee contribution amounts. Gratuity treatment for nationals under pension schemes differs from the standard expatriate calculation — the pension scheme typically takes precedence, so verify the interaction with your GPSSA registration before making any gratuity payment to a national employee.
Practical checklist before you process
- Confirm the final working day and calculate service length to the day
- Extract the basic wage figure from the employment contract
- Calculate gratuity, checking against the two-years'-pay cap
- Calculate accrued and untaken annual leave
- Add outstanding salary and any contractual allowances
- Route the full final payment through WPS
- Issue a final payslip itemising each component
- Cancel the employee's visa and labour card through the relevant authority once payment is confirmed
Keeping a clear paper trail of each calculation — especially for gratuity — is important if a claim is later filed with the Ministry of Human Resources and Emiratisation or the Labour Court.
---
Run HR and payroll in UAE with Mellow
Mellow brings HR, payroll and 12 AI agents into one platform — built to handle UAE properly, with payroll included, from £4 per employee per month. The AI agents don't just answer questions; they generate contracts, run cost estimates and draft letters for you.
[Start a free trial →](/register)