Payroll

What to Pay When an Employee Leaves: UAE Final Settlement Explained

A UAE final settlement is last month's salary, gratuity, unused leave and other agreed amounts, less what the employee owes. One leaver worked through in AED.

  • Wurxa
  • •
  • 22 Oct 2026
  • •
  • 6 min read
What to Pay When an Employee Leaves: UAE Final Settlement Explained

A UAE final settlement is what you owe an employee on the way out: salary for the days worked in the last month, end-of-service gratuity, unused annual leave, and anything else agreed, minus any loan or advance still outstanding. It must be paid within 14 days of the contract ending. The arithmetic is not hard; the mistakes come from using the wrong salary figure for each part.

This guide takes one fictional leaver through the UAE final settlement line by line.

Four parts, two of them set by law and two by your records:

Our example: Omar joined on 16 April 2021 and his last working day is 15 October 2026, about five and a half years of service. He earns AED 8,000 basic, AED 3,000 housing and AED 1,000 transport, AED 12,000 a month. He has 12 days of annual leave not taken and AED 2,000 left on a salary advance.

How is the last month's salary worked out?

Pay the fixed salary for the days employed in the final month. A common method, and the one our calculator uses, divides by the calendar days in that month. Omar works 15 of October's 31 days:

12,000 x 15 / 31 = AED 5,806.45

Any unpaid days in that month come off as they would in a normal run. Add any overtime he earned in October in the usual way.

How is gratuity calculated?

Gratuity under Federal Decree-Law No. 33 of 2021 works like this:

The UAE Government Portal adds three details that change real figures: part years count in proportion to the time served, gratuity is worked on the last basic wage, and days of absence without pay are left out of the service period. Checked on 12 October 2026 against the u.ae page on end of service benefits.

For Omar:

Housing and transport play no part. Worked on his AED 12,000 package, the figure would be AED 48,000. Using the full package instead of basic is a frequent source of disagreement in a settlement. A calculator that measures service to the exact day can land a few dirhams away from a round half year; that is normal.

If Omar had left at eleven months, gratuity would be zero, however close he came to a year.

  • No gratuity under one full year of service.
  • 21 days of basic salary for each of the first five years.
  • 30 days of basic salary for each year after the fifth.
  • The total is capped at two years' wage.

How is unused annual leave paid?

The UAE Government Portal states that an employee who leaves before taking their leave is entitled to payment for unused annual leave, calculated on basic salary. Checked on 12 October 2026 against the u.ae page on types of leaves.

For Omar: 12 x 8,000 / 30 = AED 3,200.00.

If the contract or company policy pays leave on a larger figure, that is the employer's choice and should be applied the same way for everyone. Count the balance carefully: leave already taken in the final month, and leave earned in the final part year, are where balances usually go wrong.

What can be deducted?

The UAE Government Portal states that employers may deduct amounts owed by the worker from the gratuity. In practice an outstanding loan or salary advance is recovered from the settlement as agreed with the employee, along with anything else the employee agreed to repay. Show each deduction as its own line. Amounts owed to the employee under the contract, such as agreed notice pay or a bonus already earned, are added.

What is Omar's final settlement?

Check: 5,806.45 + 32,000 + 3,200 = 41,006.45; less 2,000 gives 39,006.45.

Pay it within 14 days of the contract ending. In the UAE Government Portal's words, "Employers must pay all outstanding wages, other entitlements and gratuity within 14 days of the termination of the contract."

Four checks before you pay

Keep a copy of the statement with the payroll run it was paid in, the leave balance it used and the loan record it cleared. If a question comes up months later, the answer is in one place rather than spread across emails and spreadsheets.

To try your own figures, the free UAE final settlement calculator shows every step of the working.

  • Use the basic salary at the end of service, including any raise agreed earlier in the year.
  • Take days of unpaid absence out of the service period before working gratuity.
  • Count part years. Rounding five and a half years down to five would cost Omar AED 4,000 in this example (15 days of basic).
  • Give the employee the working, not only the total. A settlement the employee can follow is one they are less likely to dispute.

Doing it inside payroll

In Wurxa Payroll, you enter the last working day and it takes the joining date, basic salary, allowances and any loan balance from the employee's record, suggests the unused leave days, and works out the gratuity and leave pay. You choose whether leave is paid on basic or on basic plus allowances, to match your contract. The settlement is paid with that month's run, so it appears in the WPS file like any other salary line.

Questions about a specific leaver? Ask Sara on wurxa.com or message us.

This article is general information, not legal advice.

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Frequently asked questions

What does a UAE final settlement include?

Salary for the days worked in the last month, end-of-service gratuity if service is one year or more, payment for annual leave earned and not taken, and anything else agreed in the contract, less any loan or advance the employee still owes.

How is gratuity worked out in a final settlement?

Under Federal Decree-Law No. 33 of 2021, 21 days of basic salary for each of the first five years and 30 days for each year after, with nothing under one year of service and a total capped at two years' wage. Part years count proportionally.

Is unused annual leave paid on basic or total salary?

The UAE Government Portal says payment for unused annual leave on leaving is calculated on basic salary. A contract can be more generous, so check what yours says.

When must the final settlement be paid?

Within 14 days of the end of the contract, covering outstanding wages, other entitlements and gratuity, according to the UAE Government Portal.

Can an employer deduct a loan from the final settlement?

The UAE Government Portal says employers may deduct amounts the worker owes from the gratuity. Recover an outstanding loan or advance as agreed with the employee, and show it as its own line so the employee can see the balance being cleared.

Sources

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