While calculating EOS, companies should include all the benefits as mentioned in the UAE Labor law and Employment agreement between the company and the employee

1. Final Settlement Calculations in UAE
Employees are an organization’s lifeline. Expatriates from a multitude of
locations live in the UAE, contributing to the Emirate’s economic growth and
prosperity. It is the employer’s responsibility to look after and settle an
employee’s end-of-service benefits, and this should be done in an accurately
and timely manner.
While calculating EOS, companies should include all the benefits as
mentioned in the UAE Labor law and Employment agreement between the
company and the employee.
Below are the components included in the Final Settlement Calculation.
1. Unprocessed Salary, if any: –
An employee is entitled to receive salary until the last working day.
If an employee resigns or gets terminated and the last working day is
10th Aug 2021 and the employee had received July 2021 salary, then the
employee should be paid for 10 days additional salary as part of the
final settlement calculation. If an employee resigns or gets terminated
and the last working day was 25th July 2021 and the employee had
received July 2021 salary, then 6 days of salary should be recovered
from the employee and be included in the final settlement calculation.
2. Unused Annual Leave or excess leave used: –
If the employee has worked for more than six (6) months, then the
employee will be paid for unused annual leaves which are accrued
till the last working day of the employee. If the employee has
used excess leave from the accrued leave till the last working day,
then the excess used day amount will be recovered while

2. calculating the final settlement.For more details about the leave policy in
the UAE, please follow the link UAE Leave
3. Repatriation ticket to home country: –
The employer should pay the employee for a one-way repatriation ticket
to the employee’s country of origin. This is applicable only if the
employee is travelling back to the country of origin. If a visa change is
happening within the UAE by changing visa status, the employee is not
eligible to get a repatriation ticket.
4. End of Service Gratuity: –
Gratuity is a monetary payment eligible to an expat employee as a lump
sum at the end of his tenure, provided that the period of service
exceeds one year. The basis amount used to calculate is the
employee’s last drawn basic salary. The amount of gratuity payout is
calculated based on the type of contract, i.e., limited or unlimited
contracts, and the type of separation, i.e., resignation or termination.

3. Please see the below table to get a fair idea of how to calculate gratuity
under different scenarios.
For more information about UAE Gratuity calculation click here
5. Notice Period Pay: –
The employer or employee can terminate an unlimited employment
contract with a minimum of 30 days notice period. The employee will
have to perform his duties during such a period as instructed by the
employer. If either the employer or the employee fails to serve notice or
shortens the notice period, the party obligated to serve the notice shall
pay the other party a compensation as Notice period pay. If the
employer has terminated an employment contract for a limited period,
he becomes liable for the payment of compensation, provided that the
sum of compensation, in all events, may not exceed the total pay due to
him for a period of three months or for the remaining period of the
contract whichever is shorter, unless the terms of the contract provide

4. otherwise. If the contract has been terminated by the employee, for
reasons other than those mentioned under Article (121), the employee
becomes liable for compensating the employer against losses incurred
by him as a consequence of contract termination, provided that the
amount of compensation, may not exceed half a month’s pay for a
period of three months or for the remaining period of the contract,
whichever is shorter, unless the terms of the contract provide otherwise.
6. Any Outstanding loan, advances, or deductions: –
If there is any unrecovered portion of the outstanding loan,
advance or deduction, it can be recovered through final settlement.
For example:- An employee has taken a loan of AED – 60,000.00 and
the repayment is in 12 Equal installments. The employee has paid AED-
50000.00 (10 installments), and the remaining two installments (AED
10,000.00) are to be recovered from the employee when the final
settlement is calculated.
7. Other payments or recovery: –
If there is any other payment or recovery due to the employee, it also
can be settled in the final settlement calculation.I.e., any overtime
payment, bonus, commission, incentives, etc. that is pending to be paid
with his final settlement calculation. If any amount is to be recovered
(fines, telephone deductions, etc.), from an employee, it should be
considered in the final settlement calculation.
8. Any other benefits or compensation mentioned
in Employment Contract: –
As part of the separation, an employee is entitled to any other benefits
or compensation mentioned in the employment contract.

5. Here, we are trying to answer some of the commonly asked questions related
final settlement.
1. Can a company in UAE terminate an employee without any End of
service Gratuity or Notice period pay?
Any employee whose employment is terminated by the employer under
Article 120 is not eligible for any end-of-service gratuity or notice period
pay. Article 120 of UAE Labor law includes the below conditions.
 If the employee adopts a false identity or nationality or if he submits
forged documents or certificates.
 If the employee is appointed under a probationary period and
dismissal occurs during or at the end of said period.
 If he commits an error causing substantial material loss to the
employer, provided that the latter advises the labor department of
the incident within 48 hours from having knowledge of the same.
 If an employee violates instructions regarding the safety of the place
of business provided that such instructions are displayed in writing at
conspicuous places and in the case of an illiterate employee, the
latter must be informed verbally of the same.
 If he fails to perform his basic duties under the employment contract
and continue to violate them despite a formal investigation and a
warning that he will be fired if the same thing happens again.
 If he divulges any secrets about the establishment where he is
employed.
 If he is awarded final judgment by the competent court in respect of
an offence prejudicing honour, honesty or public morals.
 If during working hours, he is found drunk or under the influence
of a drug.
 If in the course of his work, he commits an assault on the employer,
the manager or any of his colleagues.
 If he is absent without lawful excuse for more than twenty
intermittent days or for more than seven successive days during one
year.
2. Do employees have the option to leave the company without serving
notice period in UAE?

6. As per Article 121 of UAE labor law, the employee may leave the
service in a Company in UAE without notice period in the following
cases:
 If the employer does not fulfill his obligations towards the employee
as provided for in the contract or in this law.
 If the employer or his legal representative has committed an act
of assault against the employee.
3. Is there is any deadline in labor law for processing EOS?
There is no such deadline in the law for final settlement before
cancelling Visa, as employees are asked to sign paperwork declaring
that they have received all that is due to them ahead of visa
cancellation.
4. Who bears visa cost? Can a company deduct visa cost from
employee if he/she resigned from the job?
As per UAE Labour law, employer has to bear all the visa expenses for
an employee and cannot deduct this from employee.
5. How long can an employee stay in the UAE once their visa is
cancelled by the company?
Employee can stay a maximum 28 days in UAE after cancelling the
visa.
6. Is WPS Payment processing mandatory for EOS?
WPS is not mandatory for EOS, it is recommended. Company can issue
cheque also.
7. Should a company intimate employee bank before processing final
settlement to the employee?

7. If company provided any letter to the bank saying that company will
inform bank while processing final settlement, it is obligatory to inform
bank. If there is no such letter issued by the company, it is not
mandatory to inform bank that payment is final settlement.
Payroll Service in UAE
The process of payroll is a little complicated and time-consuming; hence it is
always recommended to outsource your company’s payroll function.
Outsourcing payroll will ensure the assistance of a team of trained payroll
professionals and it frees up the time of the organization, helping them focus
on other projects that add value to their business. One should be extra vigilant
while selecting their payroll provider, as payroll data is highly sensitive, and
one should opt for a provider that can ensure high levels of data security.
As a leading payroll outsourcing company, HLB HAMT can help solve your
payroll complexities through customized strategies. We take care of our
clients’ entire payroll cycle that includes preparation of payroll reports,
processing salary payment with WPS compliance, accrual management
including Gratuity, pension funds, an online portal for accessing payslips, and
many more. Our leadership team spends the necessary hours in every
project, ensuring our clients get refined consulting services to take your
business forward.
To know more about our payroll process, click here
Disclaimer
Whilst every effort has been made to ensure the accuracy of this information,
HLB HAMT will not accept any liability arising out of errors or omissions.
Please note that this blog is not all-inclusive. Our guidance is designed only to
give general information on the issues/topics covered. It is subject to change

8. and is not intended to be a comprehensive summary of all laws which may be
applicable to your situation, treat exhaustively the subjects covered, provide
legal advice, or render a legal opinion.
Final Settlement Calculations in UAE
Level 18, City Tower-2,
Sheikh Zayed Road
PO Box 32665
Dubai – United Arab Emirates. Tel: +971 4 327 7775
E-mail: dubai@hlbhamt.com
www.hlbhamt.com