Employment Contract Termination: No More Penalty for Early Resignation Under New UAE Law"

The new Federal Decree-Law No. 33 of 2021 (the UAE Labour Law) fundamentally changed the rules for terminating fixed-term contracts (the replacement for limited contracts), particularly eliminating the statutory financial penalties for early termination.

🚫 New UAE Law: Termination of Employment Contract (2025 Update)

The new UAE Labour Law (Federal Decree-Law No. 33 of 2021) has replaced the concept of "unjust dismissal" compensation and the automatic financial penalty for resigning early from a limited contract. The system now focuses entirely on the Notice Period.

1. Contract Type: Fixed-Term is the Standard (Article 8)

Old Law (Articles 115, 116)	Current Law (Article 8)
Limited Contracts and Unlimited Contracts were the two types.	All new contracts must be Fixed-Term (maximum 3 years, renewable).
Termination required penalties for non-compliance.	Termination is achieved by serving the mandatory Notice Period (30-90 days).

2. Employer Termination (Replaced Old Article 115)

The concept of a maximum 3-month statutory compensation for "unjust dismissal" under Article 115 is gone.

Old Law Rule (Article 115)	Current Law Rule (Article 43 & 47)
Compensation: If dismissed without reason (and not Article 120), the worker received up to 3 months' total salary (or the remaining contract period, whichever is shorter).	Compensation: Compensation for unfair or arbitrary dismissal is NO LONGER capped at 3 months. The amount is determined by the court, taking into account the employee's nature of work, duration of service, and the damage incurred, but the law no longer specifies the 3-month cap.
Notice: Limited Contracts had no mandatory notice period for employer termination.	Notice: The employer must provide the worker with a minimum of 30 days' notice for early termination, up to 90 days if stipulated in the contract.

3. Employee Resignation (Replaced Old Article 116)

The requirement for the employee to compensate the employer with 45 days' pay (or half of the last 3 months' remuneration) for resigning early from a limited contract is ABOLISHED.

Old Law Rule (Article 116)	Current Law Rule (Article 43 & 45)
Penalty: Employee paid a compensation penalty of up to 45 days' remuneration for early resignation.	Penalty: NO STATUTORY PENALTY. The employee's obligation is solely to give the employer the contractually agreed-upon written notice (min 30 days, max 90 days).
Compensation Basis: Compensation was calculated on Total Remuneration (including allowances).	Final Dues: Compensation is generally calculated based on Total Remuneration, but the focus is on payment in lieu of notice (if notice is not served), not a penalty fee.

4. Compensation for Personal Circumstances

Old Law Rule (Question 10)	Current Law Rule (Article 43)
Resignation for personal matters (new job/family issues) required compensation to the employer.	Resignation for personal matters (new job/family issues) ONLY requires the serving of the notice period. Compensation to the employer for contract breakage is eliminated, provided the notice is served.

Conclusion

The new law shifts the focus from financial penalties to contractual commitment via the notice period. If an employee or employer terminates the contract and serves the full notice period correctly, there is no compensation due to the other party (except for end-of-service gratuity and final salary). If they fail to serve notice, the compensating party pays the remuneration (Total Salary) for the remaining notice period.

 

Termination of Employment Contract in UAE – Frequently asked Questions

1. When the contract is terminated?

It is terminated in the following cases:

If both parties agree on its termination, provided that the worker's consent is given in writing, If the limited contract expires, unless tacitly or expressly extended. If the employer resigned the worker or the worker submitted his resignation in the unlimited contracts, provided that each of them shall notify the other according to the law.

2. Is the contract terminated by worker's or employer's death? - Article (114).

Employment contract shall not be terminated by employer's death, unless the subject of the contract is connected with his own person. But the contract is terminated by worker's death or his total disability, on a condition of providing an approved medical certificate for the same.

3. If the worker's disability is partial, is the employment contract terminated?

If the disability is partial, he can perform other works according to his health condition -an employer shall , according to a request from the worker , shall shift the worker to another position suitable to the worker .. and to pay him the salary given at such position.

* Example: a worker is injured.. His injury is partial as per a medical report.. The worker then requested from the employer to shift him from his current position (builder) to another one suitable with his health condition (guard) - there, the employer shall pay the worker a monthly salary of (guard ) , not a salary of his last position ( builder).

The Ministry of Labour take steps to prevent abuse of sponsorship system in UAE



Saqr Gobash Saeed Gobash, Minister of Labour-



Expats allowed to find jobs after contract ends
The Ministry of Labour will take steps to prevent abuse of the sponsorship system.In a statement to the Federal National Council yesterday, Saqr Gobash Saeed Gobash, Minister of Labour, defended the sponsorship system saying that it was legal and common in many countries, but under different names.

Admitting the existence of abuses of the system and illegal practices, Gobash pledged actions will be taken to stop these abuses and illegal practices.He was responding to a question raised by Yousuf Obaid Ali Al Nuaimi, a representative from Ras Al Khaimah, who called for free labour movement and cancellation of costly sponsorship system.Gobash said the labour ministry will soon issue a decision allowing workers, whose contracts ended, to join new jobs if the market is in real need of them.

Gobash said that the move approved by the Cabinet will address certain negative impacts of the sponsorship system for foreign workers.One day earlier, Al Nuaimi told Gulf News the sponsorship system for foreign workers must be scrapped within three to five years to stop misuse of the system and allow free movement of workers.

He added the existing labour sponsorship system, according to a study, costs the country about Dh50 billion a year to host more than four million foreign workers. The representative rejected the labour minister's statement, which he said fell short of answering many queries he raised.He demanded that the minister show up in person at a later session to address these issues.

The representative suggested that before abolishing the costly system, rules must be enforced to protect rights of workers and employers."Eventually, all foreign workers must be under the jurisdiction of one authority — the Ministry of Labour. Workers must be allowed to change jobs smoothly once a contract ends and no employer should be allowed to withhold workers' passports," Al Nuaimi said.

He added employers' rights must also be guaranteed, citing the right of every business to protect information it regarded as commercially sensitive.

According to an estimate, the average annual cost of hosting a worker is about Dh55,000.

Gobash, however, said the ministry will respect the contracts signed between workers and employers. ‘The ministry [of Labour] will not intervene between workers and employers during the period of these contracts, unless a party failed to abide by its obligations. After the job contract ends, each party to it will be free to determine the new relationship they wish to enter either with the same party or a third party. There will be no restrictions as long as no violation of the law is made."

Cost of workers in UAE

The minister also stressed commitment to guarantee any rights of the employers and restore the government's full control of the labour market.

The cost of a skilled worker is Dh144,000 and the cost of an unskilled worker is Dh33,000, according to Dr Mouawiya Al Awad, Director of the Institute for Social and Economic Research at Zayed University.The overall average annual administrative and recruitment costs per worker are estimated at Dh2,674. For skilled workers the cost is Dh3,404 while it is Dh2,296 for unskilled workers

Canadians entering UAE to apply for entry permits starting 2011 January 2

Abu Dhabi: Starting January 2, Canadians will have to obtain a pre-arranged visa to enter the UAE, official sources said yesterday, amid souring ties between the two countries.Visas will be required for tourism and business purposes but Canadians living in GCC countries can enter the UAE on their residence visa, an Interior Ministry official told Gulf News.The new requirement announced by the UAE's embassy in Ottawa comes amid an increasingly bitter spat centred on landing rights for UAE airlines.

The dispute has already cost Canada access to a military air base that is a crucial link in the supply line for its mission in Afghanistan.

Previously Canadians, like travellers from 34 countries including the United States and much of Europe, were able to obtain a visa on arrival to the UAE under a visa waiver system. More than 25,000 Canadians are living in the UAE, an official estimated.

The visa waiver policy will no longer apply to Canada because relations had dipped to a point where they were "neither healthy nor hopeful", the Associated Press quoted an official source in Abu Dhabi as saying. "The visa waivers are granted to countries with a special relationship ... built on economic and other areas of close and growing cooperation," the source said.

"The current status of relations with the government in Canada compared with other countries on the visa waiver programme is at a much lower level. ... It isn't fair to include it with countries with which we have a healthy and productive relationship."

Another official told Gulf News that the decision is in response to the Canadian government's insistence on visas for Emiratis wanting to travel to Canada. The UAE embassy in Ottawa was instructed to announce the decision to Canadian officials; he said.The official added that this decision has no negative impact on the bilateral relations between the two countries. The UAE has ratcheted up the pressure on Ottawa after failing to secure additional landing rights for Emirates and Etihad airlines.

UN Council setback

The UAE last month also moved to bar Canada from using the Mirage air base that was expected to play an important role in the drawdown of Canadian troops and equipment from Afghanistan.A UAE official told Gulf News earlier the UAE lobbied against Canada's bid for a non-permanent United Nations Security Council seat. Canada pulled out of the race after falling behind rivals in an early round of voting in what was seen as a significant setback for the G-7 economic power.— With additional inputs from Abdullah Rasheed, Abu Dhabi Editor and AP

Aviation dispute

•October 10: The UAE is disappointed that despite intensive negotiations over the last five years the UAE and Canada have been unable to arrive at an agreement on expanding the number of flights between the two countries.

•October 11: Canadians barred from military base, a crucial link in the supply line for its mission in Afghanistan.

•October 14: Official source announces UAE lobbied against Canada's bid to win a seat on the United Nations Security Council because of its anti-Arab policies.

•November 9: UAE cancels visa waiver policy for Canadians, in a tit for tat move.

UAE WPS Update: No More Grace Period, Penalties are Automatic

This article describes the initial implementation and mechanism of the Wages Protection System (WPS) in the UAE, primarily based on the Ministerial Resolution No. 788 of 2009.

While the fundamental purpose and mechanism of WPS remain the same—it is still an electronic system to ensure timely payment of wages—the deadlines, consequences, and specific penalties have been significantly updated and made much stricter since 2009, especially under the new Federal Decree-Law No. 33 of 2021 (the UAE Labour Law) and subsequent Ministerial Resolutions.

Here is the updated status, focusing on the current rules for late payment and penalties:

💰 UAE Wages Protection System (WPS): Mandatory Compliance & Strict Penalties

#WPS #WageProtection #MoHRE

The Wages Protection System (WPS) remains the mandatory electronic salary transfer system in the UAE private sector, ensuring workers receive their agreed-upon wages on time. The Ministry of Human Resources and Emiratisation (MoHRE), in coordination with the Central Bank of the UAE (CBUAE), strictly enforces this system.

Key Current Requirements & Deadlines

Requirement	2009 Rule (Article)	Current (2025) Rule (MoHRE/WPS)
Transfer Deadline	Within two weeks of the due date.	Wages must be paid via WPS within a maximum of 15 days from the due date specified in the employment contract.
Defining Late Payment	Delaying payment for more than one month of the due date.	Payment is considered delayed if not transferred within 15 days of the due date.
Compliance Exemption	Exemption periods based on the number of workers (100+, 15-99, etc.).	No general exemptions. WPS coverage is mandatory for all private sector companies registered with MoHRE, regardless of size.

🛑 Current Consequences and Penalties for WPS Violations

The consequences for non-compliance are much faster and more severe today than the 2009 penalty of simply denying new work permits. Penalties are now automated and escalate rapidly:

Delay/Violation Type	Current MoHRE Action/Penalty
17 Days Delay	Automatic Suspension of New Work Permits: The company is immediately blocked from hiring new employees.
30 Days Delay (or More)	Legal Escalation and Further Bans: * The Public Prosecution may be notified for further legal action (for companies with 50+ workers). * The ban on new work permits may extend to all companies owned by the same partners (for repeat violators).
60 Days Delay (Worker Right)	If a worker's salary is delayed for 60 days or more, the employee has the legal right to terminate their contract immediately and join a new employer without being penalized or banned, and is entitled to full end-of-service dues and compensation.
Failing to Register in WPS	Companies not registered in WPS may face fines starting from AED 5,000 per worker.
Fines for Non-Payment/Delay	Administrative fines start from AED 1,000 per employee (up to AED 20,000 maximum fine).
Repeat Violators	Companies that repeatedly violate WPS rules may face downgrade to the lowest classification (Category 3), which impacts their ability to conduct business with government entities.

Note on Expenses

The rule stated in the 2009 article remains absolutely firm: The employer is responsible for all expenses incurred upon joining WPS (bank fees, service charges, etc.). Employers are strictly prohibited from deducting any WPS-related costs from workers' wages.