Employers must navigate strict labor laws when considering terminating an employee on workers compensation in UAE.
Wrongful dismissal can result in legal disputes, financial penalties, and reputational damage.
This article explains how and when employers can lawfully terminate an employee on workers’ compensation in UAE in 2025.
Contact our expert labor law firm in UAE. Click the WhatsApp icon below.
Table of Contents
Lawfully Terminating an Employee on Workers Compensation in UAE
Is It Legal to Terminate an Employee on Workers’ Compensation?
In the UAE, an employer cannot dismiss an employee solely because of a work-related injury.
Federal Decree-Law No. 33 of 2021, along with Ministerial Resolution No. 657 of 2022, prohibits termination before the employee has received all entitled compensation.
However, Termination of Employment in UAE is possible under specific conditions, such as when an employee is medically declared permanently unable to work or has exhausted all statutory sick leave entitlements.
Additionally, suppose an employee has formally filed a worker compensation claim.
In that case, any termination action linked to this claim may be classified as retaliatory and unlawful under Article 47 of the UAE Labour Law.
However, if a claim has not been filed, termination will not automatically be deemed unlawful unless the employer fails to meet compensation and procedural obligations.
Learn about Workmen Compensation Insurance UAE Rules.
To lawfully terminate an employee on workers’ compensation, the employer must follow a structured legal process:
Complete the Medical Evaluation Process
The employee must undergo an official medical assessment to determine fitness for work. If the employee is declared fully and permanently incapacitated, termination can proceed.
If the employee has a partial disability, alternative work arrangements should be considered before termination.
The employer must obtain a formal medical report before making any termination decision.
Ensure Statutory Sick Leave Entitlement is Exhausted
Employees injured at work are entitled to six months of full-pay sick leave, followed by six months at half-pay if their medical condition persists.
Employers cannot terminate an employee during this leave period unless a medical report confirms permanent incapacity.
Settle All Workers’ Compensation and Benefits
The employer must pay statutory compensation for disability or death as Cabinet Resolution No. 33 of 2022 outlines.
Compensation is 24 months’ basic salary for total disability and a percentage for partial disability.
Any outstanding wages, unpaid salaries, end-of-service gratuity, unused leave balances, and other final settlements must be cleared before termination.
Compensation payments must be processed within 10 days of the final medical report.
Provide Legal Notice as Required
Terminating an employee on workers compensation in UAE must be communicated in writing with valid justification.
The employer must provide the contractually agreed notice period (30–90 days, unless waived).
If the employee has exhausted sick leave and cannot work, the employer must issue a termination letter citing medical incapacity.
Follow Free Zone-Specific Regulations
Employers operating in free zones must adhere to specific additional requirements when terminating an employee on workers compensation in UAE.
In JAFZA (Jebel Ali Free Zone), employers must seek approval from JAFZA authorities before terminating an injured employee.
This includes submitting medical reports and compensation records to verify compliance with UAE labor laws. Failure to obtain approval may lead to penalties or restrictions on future business operations.
In DIFC (Dubai International Financial Centre), termination must comply with DIFC’s anti-discrimination policies, prohibiting dismissal due to disability.
If an employee’s injury results in permanent disability, the employer must demonstrate that reasonable accommodations were considered before termination.
Employers may also face additional liability if negligence contributed to the injury.
In DMCC (Dubai Multi Commodities Centre), employers must prove that the employee’s workers’ compensation insurance has fully covered medical expenses and entitlements.
DMCC may require a clearance certificate from the insurance provider before granting termination approval.
Employers must also follow DMCC’s employment dispute resolution procedures if a termination is contested.
Consequences of Unlawful Termination on workers’ Compensation UAE
Unlawfully terminating an employee on workers’ compensation leave in the UAE can lead to significant penalties for the employer:
- Government fines ranging from AED 5,000 up to AED 1,000,000 per violation as per Article 63 of the Labour Law.
- Potential criminal liability for repeat violations.
- Civil compensation payouts to the employee up to 3 months’ wages for wrongful dismissal (if the termination happened due to filing a complaint).
The employer will also be required to honor all other financial obligations toward the employee (contractual and legal entitlements), despite the attempted termination.
Best Practices for Termination on Workers’ Compensation in UAE
Terminating an employee who has suffered a workplace injury is a sensitive process that must be handled carefully to comply with UAE labor laws and avoid legal disputes.
Employers must ensure that they follow proper legal procedures, respect employee rights, and meet all statutory obligations regarding compensation and benefits.
Under UAE labor law, employees who sustain workplace injuries are entitled to medical treatment, compensation, and rehabilitation support.
Employers are required to provide these benefits before considering termination.
Failure to adhere to these regulations can result in penalties, fines, or legal action against the employer.
Employers must be aware of the regulations for businesses in free zones, which may require additional disability assessments and compensation.
To ensure compliance and mitigate legal risks, employers should follow these best practices:
Maintain Clear Documentation
Employers should keep records of medical reports, compensation payments, and termination notices. They should also document all discussions with employees regarding alternative work options.
Additionally, employers must retain records of workers’ compensation claim filings and approvals to ensure compliance with UAE labor laws.
Consult Legal and HR Experts
Employers should seek guidance from labor law specialists before terminating an employee on workers compensation in UAE to ensure compliance with labor laws.
If the company operates in a free zone, they must verify compliance with zone-specific employment regulations.
Employers should also check MOHRE compensation processing deadlines to avoid penalties.
Engage in Alternative Work Assessments
Employers must consider offering a different role to the injured employee if they have a partial disability.
They should explore reasonable accommodations to allow the employee to continue working.
DIFC and JAFZA regulations require disability assessments before an employer can terminate an injured worker.
Communicate Transparently with the Employee
Employers should provide advance notice of potential termination and clearly explain the compensation entitlements and the next steps.
Terminating discussions should always be conducted formally, with proper documentation to avoid legal disputes.
Legal Services for Employee Termination on Workers’ Compensation in UAE
Our labor lawyer in Dubai specializes in providing expert legal guidance to employers dealing with terminating an employee on workers compensation in UAE.
We offer tailored legal services to ensure compliance with UAE labor laws, MOHRE regulations, and free zone-specific policies, helping businesses avoid wrongful termination disputes and penalties.
Our legal services include:
- Legal Consultation and Compliance Audits – We assess the legal viability of termination cases, ensuring compliance with UAE labor laws and free zone requirements.
- Drafting Termination Documentation – We prepare legally sound termination letters, settlement agreements, and employee notifications to avoid future disputes.
- Negotiation and Settlement Services – We mediate between employers and employees to ensure fair settlements and prevent litigation.
- Representation in MOHRE and Free Zone Disputes – We represent employers before MOHRE, DIFC, JAFZA, DMCC, and labor courts in the event of wrongful dismissal claims.
- Medical Report and Compensation Compliance – We assist employers in obtaining official medical evaluations, verifying compensation calculations, and ensuring proper payouts before termination.
Our legal team provides proactive legal strategies to help businesses navigate complex labor laws, minimize legal risks, and protect corporate reputations.
Contact us today for expert assistance in managing employee terminations within the UAE’s legal framework.
FAQs about Terminating on Workers Compensation in UAE
Conclusion.
Terminating an employee on workers’ compensation requires careful legal compliance.
UAE labor laws mandate full compensation payment before termination and protect employees from unfair dismissal.
Before ending an employment contract, employers must follow medical assessments, sick leave policies, and compensation regulations.
Employers must also be aware that termination after a workers’ compensation claim is filed may be deemed retaliatory.
MOHRE and Dubai labor courts take strict action against wrongful dismissals, with financial penalties and legal consequences.
By following the correct legal steps, employers can ensure fair and lawful termination while upholding employee rights.
Compliance with free zone-specific rules, prompt compensation settlements, and proper documentation will protect businesses from costly disputes and penalties.
Contact our labor law firm in UAE for expert help. Click the Whatsapp icon below.
A legal consultant specializing in UAE labor law. He regularly publishes articles on the website and writes on various areas of UAE law, with a specific focus on labor law.
