Final Settlement in the UAE: What Employers Must Pay

The final settlement is the last payment an employer makes to an employee, and the one most often argued about. It is where every earlier record comes due at once: the salary for the final weeks, the leave balance, the notice period, the gratuity and the ticket home. This guide sets out what the UAE labour law puts into a final settlement, which wage each part is calculated on, what an employer may deduct, and the deadline for paying it.

Who these rules cover

The rules come from Federal Decree-Law No. 33 of 2021 on the regulation of employment relationships, the UAE labour law, and its executive regulations, Cabinet Resolution No. 1 of 2022. They apply to private-sector employees on the mainland in every emirate. The DIFC and ADGM free zones have their own employment laws, and government employees and domestic workers are covered by separate rules.

The 14-day deadline

The employer must pay the employee's wages and all other entitlements within 14 days of the date the contract ends (Article 53). "All other entitlements" means everything the law, its resolutions, the employment contract and the company's own rules give the employee. The article makes no distinction by how the contract ended, so the same deadline applies whether the employee resigned, the employer ended the contract or the term simply ran out.

What goes into a final settlement

Each part of the settlement is calculated on a specific wage, and using the wrong one is the most common mistake:

Part of the settlement	Calculated on	Legal basis
Wages for days worked and not yet paid	The full wage	Article 53
Overtime worked and not yet paid	The basic wage, plus the overtime premium	Article 19
Unused annual leave	The basic wage	Article 29
Pay in lieu of notice, if notice was not worked	The full wage, at the last wage received	Article 43
End-of-service gratuity	The last basic wage	Article 51
The ticket home, where the employer owes it	The cost of the journey	Article 13

The full wage, in the law's definition, is the basic wage plus the allowances and benefits that come with the job. The basic wage leaves those out. A package of AED 6,000 basic and AED 2,000 in allowances is a full wage of AED 8,000 and a basic wage of AED 6,000. Our guide to basic salary under UAE labour law lists every entitlement each one drives.

Each part, in more detail

Unused annual leave. Every day of annual leave earned and not taken is paid when employment ends, on the basic wage, including the leave earned in the final, part year. Our guide to annual leave in the UAE covers how the balance builds up, and leave salary calculation in the UAE works through examples.

Pay in lieu of notice. The notice period in the contract must be between 30 and 90 days (Article 43). If either side ends the contract without working the notice, it pays the employee's wage for the notice period, or the part of it not worked, even if the other side suffered no loss. The wage here is the full wage, based on the last wage received. The notice rules for resignation, probation and dismissal are in our guide to the UAE notice period.

Gratuity. An employee with at least one year of continuous service earns 21 days of basic wage for each of the first five years and 30 days for each year after that, with part years counted pro rata and days of unpaid absence left out. The total cannot exceed two years' wage (Article 51). Our gratuity calculator works out the figure from the basic salary and the service dates.

Overtime. Overtime not yet paid is owed in the settlement, at the basic wage plus at least 25%, or plus at least 50% for hours between 10pm and 4am outside shift work; work on the rest day earns another day off or the day's basic wage plus at least 50% (Article 19).

The ticket home. The employer bears the cost of the employee's return to the place they were recruited from, or another place agreed between them (Article 13). The exceptions are where the employee has already joined another employer, or where the reason the contract ended is attributable to the employee.

A worked example

An employee on AED 6,000 basic and AED 2,000 in allowances leaves after 4 years and 3 months. The employer ends the contract and pays the 30-day notice instead of having it worked. The employee has worked 20 days of the final month without pay and has 8 days of annual leave unused. Using a 30-day month for the daily rates, as the gratuity calculation does:

Part	Calculation	Amount
Wages for 20 days	20 × (AED 8,000 ÷ 30)	AED 5,333
Unused leave, 8 days	8 × (AED 6,000 ÷ 30)	AED 1,600
Notice pay, 30 days	One month of the full wage	AED 8,000
Gratuity	4.25 years × 21 days × (AED 6,000 ÷ 30)	AED 17,850
Total before deductions		AED 32,783

The ticket home is added where the employer owes it. The same employee resigning and working the notice would receive the wages, the leave and the gratuity, without the notice pay.

What an employer may deduct

From wages, the law allows a closed list of deductions (Article 25), together never more than half of the wage:

Deduction	Condition
A loan to the employee	With the employee's written consent, without interest, within the monthly limit the law sets
Money paid to the employee by mistake	Up to 20% of the wage
Pension and insurance contributions	As the law requires
A savings fund approved by MOHRE	As the fund provides
Social projects	With the employee's written consent
Penalties under an approved penalty regulation	Up to 5% of the wage
Debts ordered by a court	Up to a quarter of the wage
Repairing damage to the employer's property	Up to 5 days' wage a month, more only with a court's approval

From the gratuity, the employer may deduct amounts the employee owes under the law or a court ruling, such as loans, overpayments and court-ordered debts (Article 51 and Article 29 of the executive regulations). Penalty and damage amounts can only be taken where the proper procedure was followed and no more than three months have passed since they fell due, unless agreed otherwise.

How the reason for leaving changes it

Resignation. The 2021 law has no reduction of gratuity for resignation. The one-third and two-thirds rules belonged to the old law and were repealed. An employee who resigns after a year or more earns gratuity on the same formula.

Termination by the employer. The employer pays the notice period, or the pay in lieu of it, on top of everything else. Where the employee was dismissed because they filed a serious complaint with MOHRE or a valid lawsuit against the employer, a court can also award compensation of up to three months' wage (Article 47).

Dismissal without notice. The law lists the grounds on which an employer may end a contract without notice, after a written investigation (Article 44). No notice period is then owed, and the employee may lose the ticket home where the reason is attributable to them. The article sets no forfeiture of gratuity, which is still calculated in the usual way, less lawful deductions; confirm a specific case with MOHRE.

The end of a fixed term. Nothing is reduced. The settlement is the wages, the leave, the gratuity and the ticket home.

Other duties at the end of employment

The employer must give the employee an experience certificate on request, free of charge, and must not hold on to the employee's official documents (Article 13). An employee living in accommodation the employer provides has 30 days after the end of service to leave it (Article 16). Where an employer has enrolled the employee in the voluntary end-of-service savings scheme, the scheme pays out the contributions and their returns within 14 days of the end of service, according to the UAE Government portal.

The unemployment insurance scheme is separate from the final settlement: the employee buys the policy and claims from the insurer within 30 days of losing the job, on its own conditions. It does not reduce what the employer owes.

The order of the last steps

Settle the dues, have the employee sign that they have received them, then cancel the work permit and the residence visa. MOHRE's cancellation service asks for a statement that the employee's rights and dues are paid and for the employee's signature acknowledging them, before the permit can be cancelled. The steps after the settlement are in our guide to employment visa cancellation in the UAE.

When the settlement is late

An employee who is not paid can file a labour complaint with MOHRE through its website or app, free of charge, or call the Labour Claims and Advisory Center on 80084 for advice. MOHRE first tries to reach an amicable settlement. For claims of up to AED 50,000, or where a party does not honour an agreed settlement, MOHRE can issue a decision that is binding and enforceable; either side can take it to court within 15 working days. Claims under the labour law must be brought within two years of the end of the employment relationship (Article 54, as amended by Federal Decree-Law No. 9 of 2024).

What employers need in place

Records that already hold the answer. The settlement is only as good as the attendance, overtime and leave records behind it. When they are kept as the work happens, the final settlement is a calculation rather than a negotiation.

Two wages, clearly held. Payroll needs both the basic wage and the full wage for every employee, because the settlement uses each in different places.

A monthly provision. Gratuity and unused leave build up from the first month. Providing for both monthly means the settlement is funded before it is due. Our UAE gratuity employer guide sets out how.

A deadline in the calendar. Fourteen days goes quickly when a clearance, a cancellation and a ticket are running at the same time.

For the wider picture, see our UAE labour law guide for employers.

The bottom line

A UAE final settlement is the wages to the last day and any unpaid overtime, unused leave on the basic wage, notice pay on the full wage where notice was not worked, the gratuity on the last basic wage and the ticket home, less lawful deductions, paid within 14 days of the contract ending. Resignation no longer reduces the gratuity.

When tamdeed runs the employment administration for a company, or employs the people itself, attendance, leave and payroll sit on one platform, so the final settlement is calculated from the same records that paid the employee every month. See HR outsourcing in Dubai, or for a company with no UAE entity, employer of record.

Sources: Federal Decree-Law No. 33 of 2021, Articles 1, 13, 16, 19, 25, 29, 43, 44, 47, 51, 53 and 54 (as amended by Federal Decree-Law No. 9 of 2024); Cabinet Resolution No. 1 of 2022, Articles 19 and 29; the UAE Government portal on end of service benefits and terminating employment contracts; MOHRE's labour complaint service. This guide is general information, not legal advice; confirm your own case with MOHRE or a qualified adviser.

Want final settlements calculated from the record, not from memory? Talk to tamdeed.