A settlement can resolve an exit cleanly, but it **cannot buy out statutory entitlements**. Gratuity, accrued leave and notice remain payable, and payment is still due within 14 days. What a settlement adds is an agreed additional sum in exchange for a release — and the release only works if the entitlements underneath it were paid properly.
Settlement Agreement
Ending employment by agreement
A settlement can resolve an exit cleanly, but it cannot buy out statutory entitlements. Gratuity, accrued leave and notice remain payable, and payment is still due within 14 days. What a settlement adds is an agreed additional sum in exchange for a release — and the release only works if the entitlements underneath it were paid properly.
| Item | Detail |
|---|---|
| Employer | [COMPANY NAME], [licence] [NUMBER] |
| Jurisdiction | [Mainland / Free zone / DIFC / ADGM] |
| Employee | [NAME], passport [NUMBER] |
| Joined | [DATE] Last working day: [DATE] |
| Reason for ending | [Mutual agreement / restructuring / resignation on terms] |
| Statutory entitlements | AED [AMOUNT] — due within 14 days regardless of this agreement |
| Additional settlement sum | AED [AMOUNT] |
| Total | AED [AMOUNT] |
| Visa cancellation | After settlement — [DATE] |
| Independent advice taken | [DATE / declined] |
| Language | [English / Bilingual — Arabic prevails onshore] |
1. What a Settlement Can and Cannot Do
| Can | Cannot |
|---|---|
| Add a payment above statutory entitlements | Reduce or waive gratuity, leave or notice |
| Record an agreed reason for leaving | Change the date entitlements fall due |
| Agree a reference and an announcement | Prevent a complaint to MOHRE or the courts as a matter of fact |
| Agree confidentiality on both sides | Silence a report of unlawful conduct |
| Confirm return of property and access removal | Bypass the permit and visa cancellation process |
| Reaffirm confidentiality and post-termination restrictions | Create restrictions wider than the law allows |
| Resolve a disputed claim | Make an unlawful deduction lawful |
1.1Pay the statutory entitlements properly first, then settle. A settlement built on an underpayment of gratuity or leave is vulnerable, and the employee retains the underlying claim for the shortfall.
1.2A release is not a bar to a complaint being made. Its value is that the employer has paid correctly, documented it, and can show the employee agreed — not that the door is bolted.
2. The Payments
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Gratuity, accrued leave and notice remain payable in full and within 14 days of the last working day. A settlement adds a sum on top in exchange for a release. It cannot be used to reduce or buy out what the law requires.
Negotiating a single total and then working backwards is how underpayments happen. Calculate what is legally due first, then decide what to add. The employee should see both figures separately.
An employee can still approach MOHRE or the courts. What the release gives you is evidence that you paid correctly, documented it, and that the employee agreed. Built on an underpayment, it protects very little.
An employee who signed under pressure, without understanding, with their visa about to be cancelled, has a strong argument the agreement should not stand. Five working days and an offer of independent advice cost almost nothing against that risk.
Where the employee’s first language is not English, explain the agreement in their language or provide an Arabic version. A signature on a document the person could not read is weak evidence of agreement.
An employee asked to release the employer while remaining exposed themselves will reasonably ask why. A mutual release, carved out for fraud and wilful misconduct, removes a common reason settlements stall.
A confidentiality clause that appears to prevent reporting conduct to a regulator is objectionable and may be unenforceable. Clause 4.2 states expressly that nothing prevents it — include it even where no such conduct is in issue.
Recruitment, permit, visa, medical and Emirates ID costs can never be recovered from an employee, in a settlement or otherwise. Training cost recovery requires a lawful agreement and must stay within statutory deduction limits.
Settlement then cancellation, in that order. Cancelling while money is outstanding leaves the employee without status and turns an agreed exit into a complaint. Explain the grace period that follows.
A settlement statement showing gratuity on basic salary, leave days and the daily rate prevents most disputes. A bare figure invites the employee to have it checked and to find the error you did not.
Where a funded scheme applies, contributions must be up to date and the benefit is dealt with through the administrator, not paid by the Company. Confirm the position as part of the settlement rather than assuming it.
A settlement reaffirming post-termination restrictions cannot make an unenforceable restraint enforceable. Restrictions remain subject to the reasonableness limits that applied in the contract.
Most of what a departing employee actually cares about is what will be said about them. Agreeing the reference wording and the internal announcement costs nothing and removes a frequent sticking point.
Signed agreement, full calculation, evidence of payment and the record of advice offered. If the settlement is later questioned, these are the documents that answer it.
Reflects UAE law current as of {{DATE OF USE}}. Entitlements, payment deadlines, deduction limits, the enforceability of releases and restrictions, and DIFC and ADGM procedures all change — take UAE employment advice before settling any contested exit, and have a bilingual version prepared where the forum is onshore.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, corporate secretary, or accountant as relevant) before you rely on it.