How is end-of-service gratuity calculated in the UAE?

For full-time private-sector employees who complete at least one year of continuous service, gratuity is based on basic wage: 21 days' pay for each of the first five years and 30 days' pay for each additional year, subject to a cap set by the law. Employers should confirm the calculation for each case, especially where there are unpaid absences or part-time service.

Does the employee lose gratuity if they resign?

Under Federal Decree-Law No. 33 of 2021, an employee who completes at least one year of service is generally entitled to gratuity whether they resign or are terminated, unless a specific legal exception applies. The earlier reductions for resignation under the old law no longer apply in the same way.

What documents should an employer give a departing employee?

At minimum, the employer should provide a final settlement statement and, on request, a service certificate confirming the employment dates and role. Employers should also return any original personal documents held by the company.

Employee Exit Checklist UAE: Settlement, Gratuity and Visa

Q: Can an employer cancel a visa before paying the final settlement?

The work permit cancellation process typically involves the employee acknowledging their entitlements, and the final settlement must be paid within the deadline set by the labour law. Holding back dues or delaying cancellation to put pressure on the employee can lead to complaints and penalties.

An employee exit in the UAE involves four main stages: confirming the notice and last working day in writing, calculating and paying the final settlement including end-of-service gratuity, cancelling the MOHRE work permit and the residence visa with ICP or GDRFA, and completing practical offboarding such as asset return and access removal. Handling each stage in order, and on time, protects the company from labour complaints and keeps its MOHRE record clean. The checklist below walks through each step.

Why does a structured exit process matter?

Exits are where many labour disputes begin. A late settlement, an unclear gratuity calculation or a visa left uncancelled can lead to complaints to MOHRE, fines and even a block on the company’s ability to issue new work permits. A consistent process also protects the departing employee, who needs clear information to plan their next step, whether that is a new job in the UAE or a move abroad.

Step 1: How should notice and the last working day be handled?

Confirm the reason for exit

Exits generally fall into resignation, termination by the employer, mutual agreement, end of a fixed-term contract, or termination without notice in the limited cases allowed by the law. The reason affects notice, entitlements and documentation.

Put it in writing

Obtain or issue a written resignation or termination letter.
Confirm the notice period, which must follow the contract and fall within the range set by Federal Decree-Law No. 33 of 2021.
Agree whether the employee will work the notice period or receive pay in lieu.
Confirm the last working day and share it with payroll, IT and the PRO team.

Check for special protections

Some situations need extra care, such as termination during sick leave or maternity leave, or termination that could be viewed as arbitrary. If in doubt, take advice before issuing the letter.

Step 2: What goes into the final settlement?

The final settlement typically includes:

Unpaid salary up to the last working day.
Notice pay, if the notice period is not worked.
Accrued annual leave that has not been taken, paid on the basis set out in the law.
End-of-service gratuity, where the employee qualifies.
Other contractual dues, such as earned commission or bonus under the company’s written policy.
Repatriation cost, where the employer is responsible for the employee’s return ticket under the law.

Lawful deductions, such as an outstanding salary advance, can be applied if they meet the legal conditions and are clearly shown.

The settlement must be paid within the deadline set by the labour law after the employment ends. Because rules and interpretations evolve, confirm the current timeframe with MOHRE or your adviser.

Step 3: How is end-of-service gratuity calculated?

Under the current labour law, a full-time employee who has completed at least one year of continuous service is entitled to gratuity calculated on their last basic wage:

Length of service	Gratuity entitlement
Less than one year	No gratuity
First five years	21 days’ basic wage per year of service
Each year beyond five	30 days’ basic wage per year of service
Overall limit	Total capped by the law, based on the employee’s wage

A few practical points:

Use basic wage only, not allowances, unless the contract states otherwise.
Days of unpaid absence are generally excluded from the service period.
Part-time employees have their gratuity calculated in proportion to their working hours.
Some employers participate in approved alternative savings schemes, which change how end-of-service benefits are handled.

Document the calculation and share it with the employee before payment so any questions can be resolved early.

Step 4: How is the work permit and visa cancelled?

Visa cancellation in the UAE happens in two linked steps.

Cancel the work permit with MOHRE

The employer submits a cancellation request through MOHRE’s channels. The employee typically confirms the cancellation and acknowledges receipt of their entitlements. Make sure the employee is fully paid before or in line with this step, as required by law.

Cancel the residence visa with ICP or GDRFA

Once the work permit is cancelled, the residence visa is cancelled through ICP or, for Dubai-sponsored employees, GDRFA. The employee then has a grace period to leave the UAE or change status, for example by joining a new employer. Grace periods have changed in recent years and vary by visa category, so confirm the current rule before advising the employee.

Special cases

If the employee is moving to a new UAE employer, coordinate timings so they are not left without status.
If the employee has dependants on their visa, the dependants’ visas must also be cancelled or transferred.
If an employee stops attending work without notice, follow the correct MOHRE procedure for reporting work abandonment rather than taking informal action.

Step 5: What practical offboarding steps are needed?

Collect company laptop, phone, access cards, keys and documents.
Remove access to email, systems and premises on the last working day.
Arrange a handover of work, clients and passwords to a named colleague.
Cancel the employee’s health insurance once the visa is cancelled.
Remove the employee from WPS payroll after the final payment.
Conduct an exit interview to capture useful feedback.
Issue a service certificate on request, confirming dates of employment and role.
Update the HR file and archive records for the period required by law.

What are the most common exit mistakes?

Paying the final settlement late or in instalments without agreement.
Including allowances in some gratuity calculations but not others.
Forgetting to cancel the work permit, leaving the employee on the company’s WPS obligations.
Not cancelling dependants’ visas.
Holding the employee’s passport, which is not permitted.

Make every exit clean and compliant

A predictable exit process saves time, protects your reputation and reduces the risk of disputes. Our employee relations and exits service calculates final settlements and gratuity and manages offboarding, and our HR retainership keeps exit records in order. For work permit and visa cancellation, our group site Lumi Blue offers PRO and visa services.

To discuss a specific exit or set up a standard offboarding process for your company, contact Luminous Bluewaters Consultancy on +971 56 288 6878 or at [email protected].