Gratuity by Scenario: Resignation, Termination, Death & Probation in UAE

Pre‑2022 rule for resignation

Under the previous Labour Law (Federal Law No. 8 of 1980), employees who resigned received a reduced gratuity if they had served fewer than five years. An employee leaving after three years, for example, would receive only a fraction of their entitlement. That rule created enormous confusion and led to widespread disputes, with many employees unaware their resignation had cost them part of their gratuity.

That reduction was abolished in February 2022. Under the current law, resignation and termination are treated identically for gratuity purposes. An employee who resigns after three years gets exactly the same gratuity as an employee who is terminated after three years.

Current gratuity rule for resignation

Under Article 51 of Federal Decree-Law No. 33 of 2021: an expatriate employee who resigns and has completed at least one year of continuous service is entitled to full accrued gratuity. The formula is unchanged — 21 days of basic salary per year for the first five years, and 30 days per year thereafter, capped at two years' basic salary. Fractions of a year are pro-rated once the one-year threshold has been crossed.

Worked example - Resignation

Albert resigns after 3 years and 4 months of service. His basic salary is AED 9,000 per month. His daily rate is AED 9,000 ÷ 30 = AED 300.

• 3 full years × 21 days × AED 300 = AED 18,900

• 4 months pro-rated: (21 days ÷ 12 months) × 4 months × AED 300 = AED 2,100

• Total gratuity: AED 18,900 + AED 2,100 = AED 21,000

Under the old law, Albert would have received a reduced amount for resigning. Under the current law, he receives the full AED 21,000. The employer has 14 days from the contract end date to pay.

Common mistake

Some HR systems and payroll spreadsheets built before 2022 still apply the old gratuity reduction logic for resignations. If your gratuity calculator pre-dates the February 2022 law change, verify the output before processing any final settlement.

Standard termination (with notice or for legitimate reasons)

Where an employer terminates an employee's contract with the contractual notice period (minimum 30 days, maximum 90 days), or for a legitimate reason stated in the contract, the gratuity entitlement is exactly the same as for resignation. This means the full accrued amount per the Article 51 formula must be paid within 14 days.

Gross misconduct termination under Article 44

Article 44 allows an employer to dismiss an employee immediately and without notice for severe violations. These include actions such as assuming a false identity, committing theft, causing material losses to the employer, disclosing confidential business information, and being found intoxicated or under the influence of controlled substances at work.

A common misconception is that an Article 44 dismissal results in the automatic loss of gratuity. Under the current law, this is no longer true.

• Gratuity as a Vested Right: Gratuity is now treated as an earned benefit. Even in cases of gross misconduct, the statutory entitlement generally remains preserved.

• No Unilateral Forfeiture: An employer cannot simply decide to "cancel" the gratuity. To withhold or deduct from the payment to cover financial losses caused by the employee, the employer must generally obtain a court ruling or a settlement authorized by MOHRE. 

• The 14-Day Clock: Without a specific legal order to offset damages, the employer is still expected to settle all dues, including gratuity and within 14 days of the last working day.

Arbitrary or unlawful termination under Article 47

If a court determines that a termination was arbitrary or unlawful, the employee is entitled to their full gratuity plus additional compensation. Under Article 47, a dismissal is typically deemed "unlawful" if it is done in retaliation for an employee filing a legitimate complaint with MOHRE or commencing legal action against the employer.

In such cases, the court may award compensation of up to three months' basic salary, calculated based on the employee's last received wage. This compensation is assessed by the court based on the type of work and the extent of damages, and it is paid separately from and in addition to the standard gratuity entitlement.

Worked example - Standard termination

James has worked for seven years. Basic salary: AED 12,000/month. Daily rate: AED 400.

• First 5 years: 5 × 21 days × AED 400 = AED 42,000

• Years 6 to 7: 2 × 30 days × AED 400 = AED 24,000

• Total gratuity: AED 66,000

Two-year cap check: AED 12,000 × 24 = AED 288,000. 

AED 66,000 is well below the cap. The employer has 14 days from the contract end date to pay.

Key differences in gratuity for death of an employee

Under Article 15 of Federal Decree-Law No. 33 of 2021, when an employee dies, the employer must hand over all wages, financial entitlements, and end-of-service gratuity to the employee's family within 10 days of the date of death or from the date the employer becomes aware of the death, if it did not occur at work. This is a tighter window than the standard 14-day settlement rule and applies regardless of how long the employee served.

The second critical difference is the minimum service requirement. Under normal circumstances, an employee must complete at least one year of continuous service to be entitled to gratuity. In the case of death, that threshold does not apply. An employee who has worked for eight months and dies is entitled to gratuity calculated on those eight months of service, paid to their family.

Who is entitled to receive the gratuity payment?

The law gives employees the right to nominate a specific family member in writing to receive their entitlements in the event of death. If no written nomination exists, the payment is distributed to the legal heirs according to the applicable inheritance law. For most expatriates in the UAE, this means the payment becomes part of the deceased's estate, distributed according to Sharia principles or the law of their home country depending on the circumstances.

If the employer cannot identify or reach the legal heirs, the funds cannot simply be held indefinitely. The employer must deposit them with MOHRE or the relevant labour court, which then takes responsibility for locating the beneficiaries.

Additional compensation for work‑related death

If the death was caused by a workplace injury or occupational illness, the family is entitled to additional compensation on top of the gratuity. Under Article 37 of Federal Decree-Law No. 33 of 2021, that compensation is equal to 24 months of the employee's basic salary, with a floor of AED 18,000 and a ceiling of AED 200,000. This is calculated on the basic salary received before death and is distributed to the beneficiaries in addition to the gratuity and not instead of it.

The employer is also legally required to cover the costs of repatriating the deceased's body to their home country if the family requests it. While the law focuses on repatriation, it is standard practice for employers to cover local burial costs in the UAE if the family chooses that option instead.

Worked example - Death of an Employee

Ahmed passes away after 8 months of service. Basic salary: AED 8,000/month. Daily rate: AED 266.67.

• Pro-rated gratuity: (21 days ÷ 12 months) × 8 months × AED 266.67 = AED 3,733

• His family receives: AED 3,733 in gratuity + any accrued unpaid wages + unused annual leave pay

• If death was work-related: additional compensation of up to AED 200,000 (minimum AED 18,000)

The employer has 10 days. Beyond financial payments, the employer should actively assist the family in navigating the administrative process. This includes helping them obtain the attested death certificate and the court-issued heirship certificate, which are essential for MOHRE compliance and the legal release of final entitlements.

For HR teams

Zoho Payroll maintains a complete record of each employee's service start date, basic salary history, and unpaid leave. When an employee passes away, the final settlement figure — including pro-rated gratuity regardless of service length is calculated instantly. The 10-day deadline is tight; having the numbers ready on day one matters.

Core rule: no gratuity during probation

Probation in the UAE private sector is governed by Article 9 of Federal Decree-Law No. 33 of 2021. The maximum duration is six months from the date the employee starts work. It cannot be extended, and the same employer cannot put the same employee on probation twice.

Because gratuity requires a minimum of one year of continuous service, anyone whose employment ends during the probation period — whether by employer termination or employee resignation is not entitled to gratuity. There is no exception to this rule for probation.

What is owed: outstanding salary, accrued and unused annual leave days (if any), and reimbursement of any lawful expenses. Nothing more from a statutory perspective.

How probation period counts toward future gratuity

Although probation offers no gratuity entitlement on its own, the time spent on probation does not disappear if the employee passes probation and continues in employment. Those months count as part of continuous service for the purposes of all future gratuity calculations. An employee who passes a six-month probation and then works another five and a half years has a total of six years of continuous service for gratuity.

Notice requirements during probation

The notice requirements during probation are shorter and depend on the intended next step:

Recruitment Cost Protection: While employees leaving the UAE only owe 14 days' notice, Article 9(4) closes the loophole on "fake" departures. If a worker joins a new UAE firm within three months of leaving the country, the new employer must compensate the original firm for recruitment expenses.

Unauthorized Resignation Penalties: If a foreign worker leaves the UAE during probation without serving the required 14-day notice, MOHRE may deny that worker a new UAE work permit for one year from the date of departure. This restriction is not automatic; it is subject to MOHRE's assessment and certain exemptions but it is a real risk that employees should be clearly informed of.

Worked example — Departure during probation

Sara resigns after 5 months on probation at a Dubai company. 
Basic salary: AED 8,000/month. Daily rate: AED 266.67.

• Gratuity: AED 0 — less than one year of continuous service

• Owed at exit: outstanding salary + unused annual leave encashment (e.g. 4 days × AED 266.67 = AED 1,067)

• Notice: 14 days under Article 9(4) for an employee leaving the UAE

Had Sara stayed past probation and resigned at 13 months instead, her gratuity would have been (21 ÷ 12) × 13 × AED 266.67 = AED 6,067. That is exactly what the one-year threshold is worth.

HR note on contract documentation

Probation terms must be explicitly written into the employment contract to be enforceable. If the contract contains no probation clause, the employee is considered a confirmed permanent employee from day one. All full-contract notice and termination rules apply immediately. Never assume probation applies by default.