Leaving a job is never just about saying goodbye. Whether you’ve found a new opportunity, are planning to return home, or simply moving on to your next chapter, your final paycheck matters. In the UAE, this final payment—called a settlement—can be a helpful boost when you’re transitioning between jobs. But how exactly is it calculated? And what should you expect?
Understanding how your settlement is worked out can save you from confusion, delays, and potential disputes. Let’s break it down in simple terms.
What is a final settlement in the UAE?
A final settlement refers to the total amount an employer pays an employee when their contract ends. It includes unpaid salary, gratuity, unused leave days, and sometimes additional payments like bonuses or notice period compensation.
In the UAE, the settlement process is governed by the UAE Labour Law under the Ministry of Human Resources and Emiratisation (MOHRE). It applies to employees in both the private and public sectors.
Here’s what’s included in the settlement:
- Unpaid salary: If you’ve worked part of a month, you should receive your salary for those days.
- Leave encashment: If you haven’t used all your annual leave, the balance is converted into cash.
- Gratuity pay: A form of end-of-service benefit.
- Notice period pay: If either party chooses not to serve the notice period.
- Other dues: Bonuses, commissions, or any pending reimbursements.
How is gratuity calculated?
Gratuity is one of the most important parts of your settlement. It’s a lump sum given to employees who’ve worked at least one year with a company. The calculation depends on whether your contract was limited or unlimited before the 2022 labour law update (both are now replaced by fixed-term contracts, but older contracts may still apply for those who haven’t renewed yet).
Here’s a simple rule of thumb for full-time workers:
- 1 to 5 years of service: 21 days’ basic salary per year.
- More than 5 years: 30 days’ basic salary per year for the years beyond five.
Let’s say your basic salary is AED 5,000, and you worked for 4 years:
Gratuity = (21 days ÷ 30) x AED 5,000 x 4
= AED 3,500 x 4 = AED 14,000
Note: Deductions might apply if you resign before completing five years, but newer rules offer fairer treatment for employees, encouraging transparency and proper compensation.
Unused leave encashment
You’re entitled to encash any unused annual leave, which is generally 30 calendar days per year. The amount paid is based on your basic salary, not gross salary.
For instance, if you didn’t take 15 days of leave, and your basic pay is AED 4,000:
(15 ÷ 30) x AED 4,000 = AED 2,000
What about notice period salary?
The notice period in the UAE is typically 30 to 90 days, depending on your contract. If either party ends the contract without notice, they must compensate the other party with payment equal to the notice period.
For example, if your notice period is 1 month and your gross salary is AED 7,000, you may receive or owe AED 7,000 based on who initiated the termination and whether proper notice was given.
Settlement for resignation vs. termination
Resignation and termination may slightly impact your final payout:
- If you resign, and you’ve completed over one year, you’re entitled to gratuity. Earlier laws imposed reductions for resignations before five years, but these are less common now with updated contracts.
- If you are terminated, especially without cause, you’re entitled to full benefits and possibly additional compensation for arbitrary dismissal (subject to legal claim).
How long does it take to get the settlement?
Most employees receive their final settlement within 14 days of their last working day. However, this can vary based on the company’s policy, HR efficiency, and pending approvals.
Pro tip: Always request a detailed settlement breakdown from HR. Double-check the figures and clarify anything that feels unclear.
What if you don’t receive your full settlement?
If your employer delays or withholds your dues, you can file a complaint through the MOHRE’s official platform, either online or at a service center. Employers are required by law to release final settlements promptly, and failure to do so can lead to fines and legal consequences.
You can also explore useful services and guides on official portals to understand your rights and file claims when necessary.
Things to keep in mind before your last day
- Ensure all company property is returned to avoid deductions.
- Get written clearance or confirmation from HR.
- Collect your Experience Certificate for future job applications.
- Check that your gratuity is calculated based on your last drawn basic salary, not an earlier one.
- Keep a record of salary slips, leave balances, and bonus agreements, if any.
Free tools to estimate your settlement
Many platforms now offer online calculators to give you a rough idea of your settlement amount. These are especially helpful if you’re planning to resign or switch jobs and want to financially plan ahead.
You can find several online UAE settlement calculators by searching with terms like “UAE end of service calculator” or “UAE gratuity estimation tool.”
Conclusion: Walk away with confidence
Final settlements might sound complicated, but when broken down, they follow a logical formula. Knowing your rights, understanding the math, and preparing your paperwork in advance can help you move on from your job with peace of mind—and money in hand.
If you’re unsure about how your benefits are calculated, speak up early. Whether it’s your first job exit in the UAE or your fifth, knowing your settlement inside and out gives you the power to make a smart, informed move.
Also read: Gratuity Computation in UAE: What You Need to Know in 2025
