Full and Final Settlement in UAE: What’s Included and How to Calculate It (2026)
Reviewed under Federal Decree-Law No. 33 of 2021 | Last updated: July 2026
When you leave a job in the UAE — whether you resign, are terminated, or your contract expires — your employer owes you more than just your gratuity. The total amount owed is called the full and final settlement, and it can include several components that many employees are unaware of or underestimate.
Understanding what your full and final settlement should contain is important before you sign anything. Once you sign a settlement document acknowledging that you have received the full amount, it becomes significantly harder to dispute any shortfall.
This guide breaks down every component of the UAE full and final settlement, provides the formula for calculating each one, and includes a complete worked example so you can verify what you are owed before your last working day.
To calculate your gratuity component instantly, use our free UAE Gratuity Calculator.
Table of Contents
- What Is Full and Final Settlement in UAE?
- The 5 Components of Full and Final Settlement
- Component 1: End-of-Service Gratuity (EOSB)
- Component 2: Outstanding Salary
- Component 3: Annual Leave Encashment
- Component 4: Notice Pay
- Component 5: Contractual Benefits
- Lawful Deductions: What Employers Can and Cannot Take
- Full Worked Example: AED 12,000 Salary — 5 Years — Resigned
- What to Check Before Signing the Settlement Letter
- The 14-Day Payment Deadline
- What to Do If Your Employer Delays or Underpays
- Frequently Asked Questions
What Is Full and Final Settlement in UAE?
Full and final settlement is the complete financial package an employer owes an employee at the end of an employment relationship. It is not a single payment — it is the sum of several legally separate entitlements, each calculated using its own formula.
The term “full” refers to the fact that this should represent everything owed. The term “final” means it is the last payment the employer will make to the employee, and once accepted and signed, the employment financial relationship is considered closed.
In the UAE, the full and final settlement is governed primarily by Federal Decree-Law No. 33 of 2021. Article 53 of this law sets the legal deadline for payment, and Article 51 governs the gratuity calculation. Other articles cover leave entitlements, notice pay, and permissible deductions.
The settlement applies regardless of how the employment ended — whether the employee resigned, was terminated, or the contract expired. The components included may vary slightly depending on the circumstances, but the legal obligation to pay is the same.
The 5 Components of Full and Final Settlement
A complete UAE full and final settlement can include up to five components. Not all five will apply in every case — what is included depends on the employment contract, the method of departure, and the leave balance at the time of leaving.
| # | Component | Always Included? | Legal Source |
|---|---|---|---|
| 1 | End-of-Service Gratuity (EOSB) | If 1+ year served | Article 51 |
| 2 | Outstanding Salary | Yes — always | Article 19 |
| 3 | Annual Leave Encashment | If unused leave exists | Article 29 |
| 4 | Notice Pay | Situational | Article 43 |
| 5 | Contractual Benefits (e.g. air ticket) | If stated in contract | Employment Contract |
Component 1: End-of-Service Gratuity (EOSB)
Gratuity is the largest single component of the full and final settlement for most employees. It is a one-time payment calculated on years of service and basic salary, paid at the end of employment.
Under Article 51 of Federal Decree-Law No. 33 of 2021:
- For the first 5 years: 21 days of basic salary per year
- From year 6 onwards: 30 days of basic salary per year
- Maximum: 24 months of basic salary
- Minimum service to qualify: 1 full year
Formula:
Daily Wage = Basic Salary ÷ 30
Gratuity (Years 1–5) = Daily Wage × 21 × Years
Gratuity (Beyond Year 5) = Daily Wage × 30 × Additional Years
Gratuity is based on the basic salary only. Housing allowance, transport, food, commissions, bonuses, and all other benefits are excluded from the gratuity base. Only the fixed basic salary component in your employment contract is used.
For a detailed step-by-step breakdown of the gratuity formula with multiple worked examples, see our guide on how to calculate gratuity in UAE.
Component 2: Outstanding Salary
Outstanding salary is any portion of your regular monthly pay that has been earned but not yet paid at the time your employment ends. In most cases, this means salary for the days worked in your final month up to your last working day.
If you are paid on the first of each month for the previous month, and your last working day is the 20th, your outstanding salary is 20 days of pay that your employer owes you.
Formula:
Outstanding Salary = (Monthly Salary ÷ Total Working Days in Final Month) × Days Worked
Some employers use calendar days rather than working days for this calculation. Check your employment contract to confirm which method applies. If the contract is silent, the standard is to use the actual days worked in the month as a fraction of 30.
Outstanding salary covers your full monthly salary — not just the basic component. Your housing allowance, transport, and other regular monthly benefits are also owed for those days, because they are part of your agreed monthly pay.
Component 3: Annual Leave Encashment
Under Article 29 of Federal Decree-Law No. 33 of 2021, employees in the UAE accrue 30 calendar days of annual leave per year — equivalent to 2.5 days per month of service. Any leave days that have been earned but not taken by the time employment ends must be converted to cash and paid out.
Formula:
Leave Encashment = (Monthly Salary ÷ 30) × Unused Leave Days
Leave encashment is calculated on the full monthly salary — not just basic salary. Unlike gratuity, leave pay uses the total remuneration the employee receives each month, because it represents salary for days the employee was entitled to be off work but was not.
To calculate your accrued leave balance:
- Total leave earned = 2.5 days × months of service
- Deduct any leave days already taken during employment
- The remaining balance is what must be encashed
For example: An employee who has worked for 3 years (36 months) and taken 20 days of leave has accrued 36 × 2.5 = 90 days, minus 20 days taken = 70 days of unused leave to be encashed.
Employers cannot force employees to forfeit unused leave at the end of employment. Under UAE law, accrued leave is a financial right. If it is not used, it must be paid.
Component 4: Notice Pay
Notice pay is the salary for the notice period. Depending on the circumstances of departure, it can either be owed by the employer to the employee, or by the employee to the employer.
When the Employer Owes Notice Pay to the Employee
If the employer terminates the employee and asks them to leave immediately — without working through the notice period — the employer must pay the salary equivalent of the full notice period. This is called payment in lieu of notice.
Similarly, if the employer asks the employee not to come in during their notice period while they are still technically employed (garden leave), the full notice period salary is owed.
When the Employee Owes Notice Pay to the Employer
If the employee resigns but does not serve the required notice period, the employer may deduct the salary equivalent of the unserved days from the final settlement. The employer cannot cancel the gratuity for this reason — only the specific notice pay equivalent can be deducted.
When Notice Pay Is Zero
If the employee serves the full notice period and is paid their regular salary throughout, there is no additional notice pay component in the settlement. Both obligations were fulfilled during the working notice period.
Formula (where applicable):
Notice Pay = (Monthly Salary ÷ 30) × Notice Days
The minimum notice period under Article 43 of Federal Decree-Law No. 33 of 2021 is 30 days. Contracts may specify longer notice periods — commonly 60 or 90 days for senior or specialist roles — and those contractual terms are legally enforceable.
Component 5: Contractual Benefits
Beyond the legally mandated components above, some employment contracts include additional benefits that become payable when employment ends. These are not universal — they depend entirely on what your specific contract says. Common examples include:
Air Ticket Allowance
Many UAE employment contracts for expatriates include a clause entitling the employee to a one-way economy air ticket to their home country at the end of service. If your contract includes this clause, you are entitled to the reimbursement of the ticket cost — or in some cases, a cash equivalent — when your employment ends. Check the exact wording: some contracts limit this to termination-initiated exits and exclude resignation.
Education Allowance
Contracts for employees with children sometimes include an education allowance paid termly or annually. If employment ends mid-academic year, the pro-rata portion already earned may be owed in the settlement, depending on how the contract is worded.
Annual Bonus (Pro-Rata)
If your contract specifies a guaranteed annual bonus and you leave before the bonus payment date, you may be entitled to a pro-rata portion of that bonus for the months worked. This is only payable if the bonus is contractually guaranteed, not discretionary.
Read your employment contract carefully for any provisions that activate on termination or resignation. If in doubt, ask HR in writing what contractual benefits you are owed before your last day.
Lawful Deductions: What Employers Can and Cannot Take
Employers may make specific deductions from the full and final settlement, but only in circumstances explicitly permitted by UAE law. Deductions outside these grounds are unlawful and can be challenged through MOHRE.
| Deduction Type | Lawful? | Legal Basis |
|---|---|---|
| Unserved notice period pay | ✅ Yes | Article 43 |
| Unpaid salary advances / loans from employer | ✅ Yes | Article 135 |
| Verified, documented damages to company property | ✅ Yes | Article 135 |
| Deduction for “performance issues” or subjective reasons | ❌ No | Not permitted — no legal basis |
| Deduction for “early resignation” penalty | ❌ No | No penalty for resignation under current law |
| Deduction of personal bank debts or third-party loans | ❌ No | Only employer-issued loans qualify |
| Withholding gratuity entirely as a “penalty” | ❌ No | Gratuity is a legal right — cannot be withheld except under Article 120 misconduct |
Full Worked Example: AED 12,000 Basic Salary — 5 Years — Resigned With Notice
Here is a complete real-world calculation showing every component of the full and final settlement for one employee.
Employee profile:
- Basic Salary: AED 12,000 per month
- Total Monthly Package: AED 17,500 (including AED 4,000 housing, AED 1,500 transport)
- Service Period: Exactly 5 years
- Reason for Leaving: Resigned — gave 30 days written notice, fully served
- Unused Annual Leave: 18 days accrued, not taken
- Last Working Day: 20th of the month (20 days worked in final month)
- Contract: Includes air ticket clause for economy flight home
- Outstanding Loans from Employer: AED 0
Component 1: Gratuity
| Step | Calculation | Amount |
|---|---|---|
| Daily Wage (Basic Only) | AED 12,000 ÷ 30 | AED 400 |
| 5 Years at 21-Day Rate | AED 400 × 21 × 5 | AED 42,000 |
| Gratuity Total | AED 42,000 |
Component 2: Outstanding Salary (20 Days in Final Month)
| Step | Calculation | Amount |
|---|---|---|
| Daily Rate (Full Package) | AED 17,500 ÷ 30 | AED 583.33 |
| 20 Days Worked | AED 583.33 × 20 | AED 11,667 |
| Outstanding Salary Total | AED 11,667 |
Component 3: Annual Leave Encashment (18 Unused Days)
| Step | Calculation | Amount |
|---|---|---|
| Daily Rate (Full Package) | AED 17,500 ÷ 30 | AED 583.33 |
| 18 Unused Leave Days | AED 583.33 × 18 | AED 10,500 |
| Leave Encashment Total | AED 10,500 |
Component 4: Notice Pay
The employee served the full 30-day notice period and was paid their regular monthly salary throughout. No additional notice pay is owed, and no deduction applies. Notice Pay = AED 0 (settled during employment).
Component 5: Air Ticket (Economy — Home Country)
The employment contract includes a clause for a one-way economy air ticket to the employee’s home country. Estimated cost: AED 1,800.
Final Settlement Summary
| Component | Amount |
|---|---|
| End-of-Service Gratuity | AED 42,000 |
| Outstanding Salary (20 days) | AED 11,667 |
| Annual Leave Encashment (18 days) | AED 10,500 |
| Notice Pay | AED 0 |
| Air Ticket (contractual) | AED 1,800 |
| Outstanding Loans / Deductions | AED 0 |
| Total Full and Final Settlement | AED 65,967 |
This employee is owed AED 65,967 in total. The gratuity alone (AED 42,000) is what most employees focus on — but the outstanding salary and leave encashment add another AED 22,167 to the total. Many employees leave money on the table by not claiming these components.
What to Check Before Signing the Settlement Letter
The full and final settlement letter is the document your employer presents for you to sign, acknowledging that you have received everything owed. Once signed, this document significantly limits your ability to make further claims.
Before signing, verify the following:
- Gratuity calculation: Has the employer used your basic salary — not total package — and applied the correct 21/30-day rates for the right service periods?
- Service years counted: Does the calculation include all years from your actual start date, including any contract renewal periods?
- Unpaid leave deducted: If any unpaid leave was taken, have those days been subtracted correctly and not overstated?
- Outstanding salary: Does the figure reflect your actual last working day, including all allowances in your monthly package?
- Leave balance: Does the employer’s leave balance match your own records? Have all accrued days been included?
- Deductions explained: Is every deduction listed? Do all deductions have a legal basis? Have you been given a breakdown of each one?
- Contractual benefits: If your contract includes an air ticket or other exit benefit, is it reflected in the settlement?
If anything in the settlement letter does not match your own calculation, ask for the employer’s full breakdown in writing before signing. You are legally entitled to understand how every figure was arrived at. Do not sign under pressure or with unresolved discrepancies.
The 14-Day Payment Deadline
Under Article 53 of Federal Decree-Law No. 33 of 2021, employers are required to pay the full and final settlement within 14 days of the employee’s last working day.
This is a hard legal deadline. It applies to all components of the settlement — gratuity, outstanding salary, leave encashment, and contractual benefits — as a single combined obligation. An employer who pays the gratuity on time but delays the leave encashment is still in violation of Article 53.
The 14-day rule applies regardless of:
- Whether the employee resigned or was terminated
- The complexity of the settlement calculation
- Whether there is an ongoing dispute about the amount
- The employee’s nationality or visa status
If there is a genuine dispute about the amount owed, the employer must still pay the undisputed portion within 14 days and seek resolution through MOHRE for the contested amount.
What to Do If Your Employer Delays or Underpays
If your employer has not paid your full and final settlement within 14 days, or has paid an amount that is lower than what the law requires, you have a formal legal route to recover what you are owed.
Step 1: Send a Written Request
Email HR or your direct manager formally requesting payment of your outstanding settlement. State the date of your last working day, the 14-day legal deadline, and the total amount you believe is owed. Keep a copy. Many delayed payments are resolved at this stage.
Step 2: File a MOHRE Complaint
If the employer does not respond or pay within a reasonable time after your written request, file a complaint with the Ministry of Human Resources and Emiratisation through:
- The MOHRE website at mohre.gov.ae
- The MOHRE app on iOS or Android
- In person at any MOHRE service centre with your documents
Step 3: MOHRE Conciliation
MOHRE will contact the employer and attempt conciliation — a formal mediated discussion to resolve the dispute. Many cases settle at this stage without going to court.
Step 4: Labour Court
If conciliation fails, the case is referred to the Labour Court. The court will apply the Article 51 formula and all applicable law to determine what is owed and order the employer to pay, along with any applicable penalties for late or short payment.
Documents to prepare before filing:
- Employment contract (original or copy)
- Payslips or bank statements showing salary history
- Resignation letter or termination letter with date
- Your own settlement calculation showing the discrepancy
- Any correspondence with the employer about the settlement
- Emirates ID and passport
Frequently Asked Questions
What is included in full and final settlement in UAE?
Full and final settlement in UAE includes five components: (1) end-of-service gratuity under Article 51, calculated on basic salary and years of service; (2) outstanding salary for days worked but not yet paid; (3) accrued annual leave encashment for unused leave days; (4) notice pay — owed by the employer if they waived the employee’s notice, or deducted if the employee did not serve it; and (5) any contractual benefits such as a repatriation air ticket. All must be paid within 14 days of the last working day.
How long does full and final settlement take in UAE?
Under Article 53 of Federal Decree-Law No. 33 of 2021, the full and final settlement must be paid within 14 days of the employee’s last working day. This is a legal obligation, not a target. Employers who miss this deadline without valid justification are in breach of UAE labour law and face financial penalties. Employees can file a MOHRE complaint if payment is not received within 14 days.
Can I refuse to sign a full and final settlement in UAE?
Yes. You have the right to refuse to sign a settlement document if the figures are incorrect or if unlawful deductions have been made. Do not sign under pressure. Ask for a written breakdown of every line item, compare it to your own calculation, and only sign when you are satisfied the amount is correct. Once you sign acknowledging receipt of the full amount, making further claims becomes significantly harder.
What is the difference between EOSB and full and final settlement in UAE?
EOSB — End of Service Benefit — refers specifically to the gratuity payment under Article 51. Full and final settlement is the broader total that includes EOSB plus outstanding salary, annual leave encashment, notice pay, and any contractual benefits. EOSB is one part of the full and final settlement, not the complete amount. Many employees are unaware of the additional components and leave money unclaimed.
What can an employer legally deduct from full and final settlement in UAE?
Under Article 135, employers can deduct: salary advances or loans borrowed from the employer; the salary equivalent of unserved notice days if the employee resigned without completing notice; and verified, documented costs of damage to company property. Employers cannot deduct for performance reasons, subjective dissatisfaction, early resignation penalties, or personal bank debts. Any deduction outside these grounds is unlawful and can be challenged through MOHRE.
Key Points: Full and Final Settlement at a Glance
- Full and final settlement = gratuity + outstanding salary + leave encashment + notice pay + contractual benefits
- Gratuity is based on basic salary only — allowances excluded
- Leave encashment and outstanding salary are based on your full monthly package
- Employer must pay everything within 14 days of last working day — Article 53
- Only 3 types of lawful deductions — unserved notice, employer loans, documented damages
- Do not sign the settlement letter until every figure has been verified
- MOHRE complaint is your legal right if the employer underpays or delays
Use our free UAE Gratuity Calculator to calculate your gratuity component quickly. Add your outstanding salary and leave encashment on top to arrive at your complete full and final settlement figure.
Disclaimer: This article is for informational purposes and reflects Federal Decree-Law No. 33 of 2021 as in force in July 2026. It does not constitute legal advice. For disputes, complex situations, or contested settlements, consult a qualified UAE employment lawyer or contact MOHRE at mohre.gov.ae.