Severance Pay and Golden Handshakes in the UAE: What You Need to Know

Hi Dubai

14-04-2025

Question: I am planning to move to the UAE this summer and have been exploring job opportunities. However, none of my potential employers have been willing to offer a severance package. I'd like to understand if there are any laws or regulations about this. Is it possible to include a "golden handshake" clause in my job contract? And if I do, will it be legally binding?
Answer: If you're considering an employment offer from a company based in the UAE mainland, you'll be governed by the UAE's Employment Law, as well as the Civil Transactions Law. These legal frameworks protect employee rights, including those related to severance pay.
According to Article 51(2) of the Federal Decree Law No. 33 of 2021, any employee who has completed at least one year of continuous service is entitled to severance pay upon the end of their employment. The severance pay is based on the employee's basic salary and is calculated as follows: 21 days of salary for each year of service during the first five years.
for each year of service during the first five years. 30 days of salary for each year of service after the first five years.
Additionally, Article 8 of the UAE Employment Law and Article 10(1) of Cabinet Resolution No. 1 of 2022 specify the regular terms and conditions that must be included in an employment contract. However, the standard contract template provided by the Ministry of Human Resources & Emiratisation (MoHRE) does not typically include a clause about severance pay.
Despite this, you are still entitled to severance pay if you have completed at least one year of service with your employer, even if it is not explicitly mentioned in your contract. The UAE Employment Law guarantees employees this entitlement, regardless of whether the contract addresses it directly.
Can a "Golden Handshake" Be Included in Your Contract?
While the UAE's Employment Law lays out the minimum rights of employees, it does not restrict employers from offering more favorable terms. As per Article 65(1) of the UAE Employment Law, employers can provide benefits that go beyond the statutory minimum, including the possibility of a "golden handshake" clause.
A "golden handshake" refers to a negotiated severance package that offers more generous compensation than the standard severance pay. If you wish to include this clause in your contract, you can discuss it with your prospective employer. If both parties agree, it can be incorporated into the contract and will be legally binding, as long as it complies with the UAE's legal framework on employment contracts, which mandates that contracts be executed in good faith and in line with the law.
In summary, while the UAE Employment Law ensures that you are entitled to severance pay, it also allows for the inclusion of more favorable terms such as a "golden handshake." You should discuss this possibility with your employer, who may agree to include it in your employment contract. If you have any concerns, it's always advisable to consult with a legal professional familiar with UAE employment laws to ensure your rights are fully protected.
Applicable Laws: Federal Decree Law No. 33 of 2021 Regarding the Regulation of Employment Relationships
Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Employment Relations
Federal Law No. (5) of 1985 On the Civil Transactions Law of the United Arab Emirates
News Source: Khaleej Times