Mutual Severance Agreement Template for the United Arab Emirates

A Mutual Severance Agreement is a legally binding contract that formalizes the consensual termination of an employment relationship in the United Arab Emirates. This document protects both employer and employee interests by establishing clear terms for separation, final settlements, and post-employment obligations while ensuring full compliance with UAE labor regulations.

When do you need this document?

You need a Mutual Severance Agreement when both you and your employer agree to end the employment relationship amicably. This commonly occurs during organizational restructuring, when employees seek career changes, or when workplace conflicts require resolution through separation. The agreement is particularly valuable for senior positions involving complex compensation packages, confidential information access, or restrictive covenant considerations. It's also essential when negotiating enhanced severance packages beyond statutory minimums, ensuring tax-efficient separation arrangements, or when either party wants documented protection against future legal claims. Companies often use these agreements during voluntary redundancy programs or when accommodating employee requests for early contract termination.

Key legal considerations

Your Mutual Severance Agreement must include comprehensive final settlement calculations covering salary, overtime, unused annual leave, and end-of-service gratuity as mandated by UAE law. The document should clearly define confidentiality obligations, non-disclosure requirements, and any post-employment restrictions on competition or solicitation. Property return provisions must detail company assets, equipment, and confidential materials requiring surrender. Mutual release clauses should be carefully drafted to prevent future employment-related claims while preserving statutory rights that cannot be waived under UAE law. The agreement must specify the effective termination date, final working day arrangements, and any garden leave provisions. Consider including provisions for reference letters, visa cancellation responsibilities, and assistance with employment visa transfers to new employers.

Legal requirements in United Arab Emirates

Under UAE Labor Law (Federal Decree-Law No. 33 of 2021), your severance agreement must comply with minimum notice period requirements and statutory end-of-service benefit calculations. The agreement cannot waive your rights to gratuity payments, which are calculated based on your basic salary and length of service according to specific legal formulas. If you're employed in the Dubai International Financial Centre (DIFC), additional requirements under DIFC Employment Law No. 2 of 2019 may apply. The document must be executed properly with appropriate witness signatures and may require notarization for enforceability. Corporate employees may need board approval for certain severance terms, while agreements involving significant financial settlements should consider UAE Central Bank regulations. The agreement should address visa sponsorship transfer or cancellation procedures as required under UAE immigration law, ensuring compliance with residence permit regulations following employment termination.