How to handle redundancy in the United Arab Emirates
Reviewed by Mellow Editorial Team, HR & payroll content team
Redundancy in the UAE is governed by Federal Decree-Law No. 33/2021, which does not use the word "redundancy" but treats it as a legitimate termination ground when handled correctly. Get the process wrong and an employer faces arbitrary dismissal claims, penalty wages and potential labour court proceedings.
What the law actually says about redundancy
UAE labour law does not have a standalone redundancy framework the way some common-law jurisdictions do. Instead, termination for business reasons — restructuring, role elimination, financial difficulty — falls under the general termination provisions of Federal Decree-Law No. 33/2021.
A lawful termination requires a genuine business reason, proper notice, and full payment of all entitlements. If a court or the Ministry of Human Resources and Emiratisation (MOHRE) finds the reason was pretextual, the dismissal can be reclassified as arbitrary, triggering compensation of up to three months' gross salary on top of everything else owed.
The practical upshot: document your business rationale clearly before you act.
Notice periods and how they work
Notice must be given in writing. The statutory minimum is 30 days, and the contract may specify longer — up to 90 days under most standard contracts. Both periods are legally valid; whichever is longer in the contract applies.
During the notice period the employee continues to receive their full salary and benefits. You can agree to pay in lieu of notice, but that requires the employee's written consent or a contractual provision allowing it. Simply stopping someone working without paying out the notice period is not lawful.
One practical point: the notice clock starts from the date the written notice is formally given, not from the date you had the internal decision meeting.
Calculating end-of-service gratuity
Every expatriate employee who completes at least one year of continuous service is entitled to end-of-service gratuity. The calculation is based on basic wage only — allowances (housing, transport, etc.) are excluded.
- First five years of service: 21 days' basic wage per completed year
- Beyond five years: 30 days' basic wage per completed year
- Overall cap: the total gratuity cannot exceed two years' total basic wage
An employee who resigns after fewer than three years receives one-third of the gratuity entitlement. After three but fewer than five years, they receive two-thirds. After five years, the full amount applies. In a redundancy situation, where the employer is terminating, the employee typically receives the full entitlement regardless of tenure, provided they have completed the minimum one year.
UAE and GCC nationals employed under the GPSSA pension scheme are not entitled to gratuity in the same way — their end-of-service protection comes through the pension system instead.
WPS and final settlement obligations
Under the Wage Protection System, final settlement must be processed through WPS. This includes the last month's salary, any accrued but untaken annual leave (employees are entitled to 30 calendar days per year after one year of service), any unpaid expenses, and the gratuity amount.
The law requires final settlement to be paid within 14 days of the termination date. Missing that window can expose you to administrative fines and strengthens any claim the employee brings.
Before processing final settlement, it is worth reconciling:
- Exact last working day and notice period compliance
- Leave balance (taken versus accrued, including any partial year)
- Any salary advances or company loans that need offsetting — check your contract terms, because not all deductions are permissible without prior written agreement
- Gratuity calculation verified against the actual basic wage in the most recent contract
Practical steps to reduce legal risk
Document the business case. Keep a written record of why the role is being eliminated — financial reports, restructuring plans, org-chart changes. This is your primary defence against an arbitrary dismissal claim.
Issue notice correctly. Written, dated, delivered to the employee personally or through a verifiable channel. Keep a copy.
Do not substitute redundancy for performance management. If the underlying reason is underperformance, using a restructuring label creates inconsistency that a labour court will notice.
Give the employee their MOHRE rights. Employees can file a complaint with MOHRE within one year of termination. They are entitled to do so, and many do. Having clean documentation makes conciliation faster and cheaper for everyone.
Consider the visa timeline. Once employment ends, the employee's residence visa will need to be cancelled. You are responsible for initiating that process. The employee then has a grace period to find new employment or leave the country — currently 60 days for most work permit holders, though this can vary. Factor this into your offboarding timeline so neither party is caught out.
This article contains general information only and is not a substitute for qualified legal advice on any specific situation.
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