Legal Disclaimer: This guide provides general information about UAE gratuity for resignation vs termination as of November 2025. It is not legal advice. For specific cases, consult MOHRE or a qualified employment lawyer.
Resignation vs Termination: How UAE Gratuity Differs in 2025
The single most important factor determining your UAE gratuity amount is who initiates the employment termination. If your employer terminates you, you receive 100% of your calculated gratuity. If you resign voluntarily before completing 5 years of service, you receive only 33.33% (1-3 years) or 66.67% (3-5 years) of the amount. After 5 years, resignation carries no penalty.
Understanding this distinction can mean the difference between receiving AED 20,000 or AED 6,667 for the exact same service period.
The Core Distinction
| Factor | Employee Resignation | Employer Termination |
|---|---|---|
| Who initiates | You (employee) | Employer or mutual agreement |
| Gratuity entitlement | 33.33% to 100% (based on service years) | 100% (full amount, no reduction) |
| Notice requirement | You provide notice (typically 30 days) | Employer provides notice (typically 30 days) |
| Payment timeline | 14 days from last working day | 14 days from termination effective date |
| Legal basis | Article 51, Decree-Law 33/2021 | Article 51, Decree-Law 33/2021 |
Employee Resignation: The Reduction Formula
When you voluntarily resign, Federal Decree-Law No. 33 of 2021 reduces your gratuity entitlement based on completed service years.
Resignation Gratuity Entitlement by Service Duration
| Service Completed | Percentage Received | What You Get | Example (AED 15,000 calculated) |
|---|---|---|---|
| Less than 1 year | 0% | Nothing | AED 0 |
| 1 to 3 years | 33.33% | One-third | AED 5,000 |
| 3 to 5 years | 66.67% | Two-thirds | AED 10,000 |
| 5+ years | 100% | Full amount | AED 15,000 |
Resignation Calculation Examples
Example 1: Resign after 2 years
- Basic salary: AED 8,000/month
- Service: 2 years
- Daily wage: 8,000 ÷ 30 = AED 266.67
- Full calculated gratuity: 266.67 × 21 days × 2 years = AED 11,200
- Resignation after 2 years (1-3 year bracket): 33.33% applies
- You receive: AED 3,733 (one-third of AED 11,200)
Example 2: Resign after 4 years
- Basic salary: AED 10,000/month
- Service: 4 years
- Daily wage: 10,000 ÷ 30 = AED 333.33
- Full calculated gratuity: 333.33 × 21 days × 4 years = AED 28,000
- Resignation after 4 years (3-5 year bracket): 66.67% applies
- You receive: AED 18,667 (two-thirds of AED 28,000)
Example 3: Resign after 6 years
- Basic salary: AED 12,000/month
- Service: 6 years
- Daily wage: 12,000 ÷ 30 = AED 400
- Full calculated gratuity: (400 × 21 × 5) + (400 × 30 × 1) = AED 42,000 + AED 12,000 = AED 54,000
- Resignation after 6 years (5+ bracket): 100% applies (no penalty)
- You receive: AED 54,000 (full amount)
Resignation Penalty Impact: Real Numbers
Scenario: Employee with AED 15,000 basic salary resigns after 2.5 years
Full calculation:
- 266.67 × 21 × 2.5 = AED 14,000 (if employer terminated)
Resignation reality:
- 14,000 × 33.33% = AED 4,667 (what employee actually receives)
Difference: AED 9,333 forfeited due to early resignation
Employer Termination: Full Entitlement
When your employer terminates your employment, you receive 100% of your calculated gratuity with no reductions.
What Counts as Employer Termination?
| Scenario | Gratuity Entitlement | Explanation |
|---|---|---|
| Company terminates before contract expiry | 100% | Employer-initiated, full gratuity applies |
| Company doesn't renew fixed-term contract | 100% | Non-renewal = termination, full amount |
| Redundancy or layoff | 100% | Business decision, not employee fault |
| Position eliminated/restructured | 100% | Company decision, full gratuity |
| Company closes or relocates | 100% | Force majeure, full entitlement |
| Termination by mutual agreement | 100% | Unless agreement specifies otherwise |
| Employee reaches retirement age | 100% | Treated as employer termination |
Termination Calculation Examples
Example 1: Employer terminates after 2 years
- Basic salary: AED 8,000/month
- Service: 2 years
- Daily wage: 8,000 ÷ 30 = AED 266.67
- Gratuity: 266.67 × 21 days × 2 years = AED 11,200
- Employer termination: 100% applies
- You receive: AED 11,200 (full amount, no reduction)
Compare to resignation: Same employee resigning = AED 3,733 (33.33%)
Difference: AED 7,467 more with employer termination
Example 2: Employer terminates after 7 years
- Basic salary: AED 15,000/month
- Service: 7 years
- Daily wage: 15,000 ÷ 30 = AED 500
- Years 1-5: 500 × 21 × 5 = AED 52,500
- Years 6-7: 500 × 30 × 2 = AED 30,000
- Total: AED 82,500 (full amount received)
Calculate Your Gratuity
Employment Details
Special Cases and Gray Areas
Case 1: Mutual Separation Agreements
Scenario: You and your employer mutually agree to end employment
Gratuity treatment:
- Default: Treated as employer termination (100% gratuity)
- Exception: If separation agreement specifically states reduced gratuity and you sign voluntarily
- MOHRE stance: Prefers full gratuity unless employee explicitly waives in writing
Best practice: Get separate written confirmation that you will receive 100% gratuity before signing any mutual separation agreement.
Case 2: Company Offers "Voluntary Redundancy"
Scenario: Company offers voluntary redundancy packages and asks for volunteers
Classification:
- If you volunteer: May be treated as resignation (reduced gratuity)
- If company selects you: Treated as employer termination (100% gratuity)
Critical question to ask: "If I volunteer, do I receive 100% gratuity or reduced resignation gratuity?"
Get it in writing before accepting any voluntary redundancy offer.
Case 3: Contract Non-Renewal
Scenario: Your fixed-term contract reaches its end date and employer doesn't renew
Classification: Employer termination (100% gratuity)
Reasoning: Employer's decision not to renew is functionally a termination decision.
Your entitlement: Full calculated gratuity regardless of service duration.
Case 4: You Decline Contract Renewal Offer
Scenario: Employer offers to renew your contract but you decline
Classification: Employee resignation (reduced gratuity if under 5 years)
Reasoning: Your decision to decline renewal is voluntary departure.
Your entitlement: Subject to resignation penalty (33.33% or 66.67% based on years served).
Case 5: Constructive Dismissal
Scenario: Employer makes working conditions intolerable, forcing you to resign
Classification: Should be employer termination (100% gratuity) if proven
MOHRE process:
- File complaint immediately after resignation
- Provide evidence of intolerable conditions (documented harassment, unpaid wages, unsafe environment)
- MOHRE investigates and may reclassify as employer termination
- If successful: Full gratuity plus possible compensation
Evidence needed:
- Written complaints to HR (emails, letters)
- Witness statements
- Documentation of violations
- Medical reports (if applicable)
Notice Period Requirements
Employee Resignation Notice
Standard notice period: 30 days (or as specified in contract)
Shorter notice:
- You must request in writing
- Employer may agree or refuse
- If you leave before notice ends: Employer can deduct unpaid notice period salary (but NOT from gratuity)
Longer notice:
- Some contracts require 60 or 90 days
- Cannot exceed 90 days under UAE law
- You must serve full notice or negotiate early release
Employer Termination Notice
Standard notice period: 30 days (or as specified in contract)
Payment in lieu of notice:
- Employer can pay you for notice period instead of requiring you to work
- You receive full notice period salary plus gratuity
Immediate termination:
- Allowed only for Article 44 gross misconduct
- Must provide written termination letter citing specific Article 44 violation
Financial Impact Comparison
Scenario: Employee with AED 12,000 basic salary
| Service Years | Full Calculated | If You Resign | If Employer Terminates | Difference |
|---|---|---|---|---|
| 1 year | AED 8,400 | AED 2,800 | AED 8,400 | AED 5,600 |
| 2 years | AED 16,800 | AED 5,600 | AED 16,800 | AED 11,200 |
| 4 years | AED 33,600 | AED 22,400 | AED 33,600 | AED 11,200 |
| 6 years | AED 54,000 | AED 54,000 | AED 54,000 | AED 0 |
Key insight: The resignation penalty disappears after 5 years of service. Once you complete 5 years, resignation carries no financial penalty.
Strategy Considerations
If You're Planning to Resign
Before 5 years of service:
-
Calculate your gratuity reduction:
- Under 3 years: You forfeit 66.67%
- 3-5 years: You forfeit 33.33%
-
Consider timing:
- If close to 3-year mark: Wait to reach 3 years to increase from 33.33% to 66.67%
- If close to 5-year mark: Wait to reach 5 years to eliminate penalty entirely
-
Negotiate with employer:
- Some employers will agree to "mutual separation" and pay 100% gratuity
- Get any agreement in writing before resigning
-
Calculate total financial impact:
- Reduced gratuity + lost salary during notice period
- Weigh against benefits of new opportunity
After 5 years of service:
- No penalty applies
- Resign freely without gratuity reduction
- Serve required notice period
If You're Being Terminated
Confirm termination is employer-initiated:
- Request written termination letter
- Verify letter states "termination by employer" or "non-renewal"
- Do NOT sign any document that says "mutual resignation" or "voluntary departure" unless you truly agree
Verify 100% gratuity:
- Request draft final settlement statement
- Confirm full gratuity calculation (no reduction)
- Compare to your own calculation
Know your notice period rights:
- You're entitled to work full notice period or receive payment in lieu
- Employer cannot force you to leave immediately without payment
Common Mistakes to Avoid
Mistake 1: Assuming "Mutual Agreement" Means Full Gratuity
Reality: Some employers use "mutual agreement" language but treat it as resignation (reduced gratuity).
Protection: Read separation agreement carefully. If it reduces gratuity, you're being treated as resigned. Negotiate or refuse.
Mistake 2: Resigning One Month Before 3-Year Mark
Impact: Receive 33.33% instead of 66.67% by leaving one month early.
Example:
- Service: 2 years 11 months
- Gratuity if you wait 1 month: 66.67% (AED 13,333)
- Gratuity if you resign now: 33.33% (AED 6,667)
- Loss: AED 6,666 for leaving 30 days early
Mistake 3: Accepting "Voluntary" Redundancy Without Clarity
Risk: Company classifies as resignation, applies reduction.
Protection: Get written confirmation that redundancy = 100% gratuity before accepting.
Mistake 4: Signing Final Settlement Too Quickly
Risk: Agreeing to reduced gratuity without realizing termination should give you 100%.
Protection: Always verify calculation independently before signing.
How to Verify Your Classification
Step 1: Request written termination details
Ask HR for official termination letter stating:
- Termination effective date
- Reason for termination
- Who initiated (employer or employee)
- Gratuity percentage (100%, 66.67%, or 33.33%)
Step 2: Review against this guide
Compare your situation to the tables in this article.
Step 3: Calculate your expected gratuity
Use the formula: (Basic Salary ÷ 30) × 21 days × Years 1-5 + (Basic Salary ÷ 30) × 30 days × Years 5+
Then apply appropriate percentage (33.33%, 66.67%, or 100%).
Step 4: Compare to employer's settlement statement
If amounts don't match, request written explanation.
Step 5: File MOHRE complaint if incorrect
Within 2 years of termination, file complaint at mohre.gov.ae.
Frequently Asked Questions
1. If I'm laid off in restructuring, is that resignation or termination?
Termination. Redundancy, layoff, and restructuring are employer decisions. You receive 100% gratuity.
2. What if my employer says "We're letting you go" but asks me to write a resignation letter?
This is termination disguised as resignation. Refuse to write a resignation letter. Request a proper termination letter from employer. If they insist, file a MOHRE complaint immediately.
3. I've worked 4 years 11 months. Should I wait one month to reach 5 years?
Yes, if possible. Waiting one month increases your gratuity from 66.67% to 100% (about 50% more money). Calculate the financial difference and decide based on your circumstances.
4. Can I negotiate with my employer to avoid the resignation penalty?
Yes. You can negotiate a "mutual separation agreement" where employer agrees to pay 100% gratuity. Get it in writing before submitting resignation.
5. What if I'm fired for poor performance?
You still receive 100% gratuity unless termination is under Article 44 gross misconduct (theft, violence, severe violations) with documented proof. Poor performance alone does NOT reduce gratuity.
6. Does the 5-year mark eliminate all penalties?
Yes. After 5 years of continuous service, resignation carries no penalty. You receive 100% of calculated gratuity whether you resign or are terminated.
7. If I give 3 months notice instead of 1 month, do I get more gratuity?
No. Gratuity amount is based on service years and termination type, not notice period length. Longer notice doesn't increase gratuity.
8. What counts as "mutual agreement" termination?
True mutual agreement requires written agreement signed by both parties explicitly stating terms. If employer pressures you to sign quickly or uses vague language, it may actually be termination or forced resignation.
Official Legal References
This guide is based on:
- Federal Decree-Law No. 33 of 2021 (Article 51: Gratuity Calculation and Reduction Rules)
- Cabinet Resolution No. 1 of 2022 (Implementing Regulations)
- MOHRE Circulars 2023-2025 (Termination Classification Guidance)
- Dubai Courts Labour Dispute Precedents (2024-2025)
- MOHRE Official Portal (mohre.gov.ae)
For termination classification questions or disputes:
- MOHRE Hotline: 600590000
- MOHRE Online Portal: mohre.gov.ae
- Consult employment lawyer for complex cases
Calculate Your Resignation vs Termination Gratuity
Use our calculator to see exactly how much you'll receive if you resign vs. if your employer terminates you.
Related Resources
- How to Calculate Gratuity in UAE: Complete 2025 Guide
- Gratuity Eligibility in UAE 2025: Who Qualifies for End-of-Service Pay
- UAE Labour Law 2025: Gratuity Entitlement Breakdown
- Service Years Calculation in UAE: How It Affects Gratuity
- How to File a Gratuity Dispute in UAE
For an instant end-of-service estimate, use our online gratuity calculator UAE.
Final Disclaimer: This guide reflects UAE labour law as of November 2025 and is for informational purposes only. It is not legal advice. Termination classification and gratuity entitlements depend on individual circumstances and MOHRE rulings. For specific cases or disputes, consult MOHRE or a qualified employment lawyer.
