UAE Labour Law 2026: The Definitive Guide to Terminations, Fines, and Gratuity

The UAE employment landscape has undergone its most significant shift in decades. With the full implementation of Federal Decree-Law No. 9 of 2024 and the 2025/2026 amendments to the 2021 Labour Law, both employers and employees must navigate a stricter, more transparent regulatory environment.

1. Termination Without Prior Notice (Article 44)

Under the current law, an employer may terminate an employee summarily (without notice) only under specific grounds of gross misconduct.

The 10 Grounds for Summary Dismissal:

1. False Identity/Forgery: Submitting forged documents or assuming a false identity.
2. Material Loss: Committing an error causing quantifiable financial loss (Employer must notify MoHRE within 7 working days).
3. Safety Violations: Breaching written safety instructions despite being aware of them.
4. Failure of Duties: Failing to perform basic tasks (Requires a written investigation and two (2) written warnings).
5. Disclosure of Secrets: Sharing confidential intellectual property that leads to material loss or personal gain.
6. Public Morals/Substance Abuse: Being intoxicated or committing immoral acts at the workplace.
7. Assault: Physical or verbal assault against colleagues or management.
8. Absence: Being absent without excuse for >20 non-consecutive days or >7 consecutive days in a year.
9. Abuse of Position: Exploiting a professional role for personal profit (2025 Amendment).
10. Unauthorized Employment: Working for another establishment without a legal permit (2025 Amendment).

Note on Suspension (Article 40): An employer may suspend an employee for up to 30 days during an investigation at half-pay. If found innocent, the employee must be reinstated with full back pay.

2. End-of-Service Benefits: The Dual System

As of 2026, the UAE operates two co-existing systems for terminal benefits. Employers can either stick to the traditional model or opt into the new investment-based scheme.

The Traditional Gratuity System

• Eligibility: Minimum 1 year of continuous service.
• Calculation: Based on Basic Salary only.
• 1–5 Years: 21 days' basic salary per year.
• 5+ Years: 30 days' basic salary for each additional year.
• Cap: Total gratuity cannot exceed two years' basic salary.
• Dismissal Rights: Even if terminated under Article 44, the employee retains their right to accrued gratuity.

The New Alternative Savings Scheme

Instead of a lump sum, employers can choose to pay monthly contributions into regulated investment funds (Cabinet Resolution No. 96 of 2023).

How the Savings Scheme differs from Traditional Gratuity:

• Payment Model: Traditional is a lump sum at the end; the Savings Scheme is a fixed monthly payment (5.83% for <5 years service; 8.33% for >5 years).
• Funding: Traditional is "unfunded" (on the company books); the Savings Scheme is "funded" and "ring-fenced" in external accounts, protecting it from company insolvency.
• Growth: Traditional is a static calculation; the Savings Scheme allows the fund to grow through professional investment returns.
• Employee Control: In the Savings Scheme, employees can choose their risk profile (Sharia-compliant, Capital Guaranteed, etc.) and add voluntary top-ups of up to 25% of their salary.
• Portability: The Savings Scheme allows employees to keep their fund invested or move it when changing jobs, rather than receiving a one-time payout.

3. Key Compliance Shifts (2024–2026)

• Dh1 Million Fines: Under Article 60 (Amended), fines for illegal employment, fictitious Emiratization, or closing a business without settling dues now range from Dh100,000 to Dh1,000,000.
• Statute of Limitations: The window to file a labor claim has been extended to two years from the date of termination (Article 54).
• Small Claims Resolution: Disputes valued at Dh50,000 or less are now settled by MoHRE or the Court of First Instance with no further right to appeal, ensuring rapid justice for minor claims.
• 14-Day Settlement: All dues (gratuity, leave salary, etc.) must be paid within 14 calendar days of termination.

Conclusion

The 2026 UAE labour environment prioritises worker protection and employer accountability. Whether you are managing a "Bankable Deal Folder" for a new project or auditing your existing HR records, staying aligned with these amendments is critical to avoiding the new, heavy penalties.

Disclaimer: This article provides a general overview and should not be construed as legal advice. Consult a qualified UAE legal expert for specific cases.

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