Restructuring in the UAE: Can Employers Cut Salaries or Change Roles — and What Must a Lawful Final Settlement Include?

In the UAE, employers navigating restructuring often consider adjusting roles or reducing costs, but the law places clear limits on how far such changes can go without employee approval. An employer may downgrade an employee’s position and reduce their salary only if the employee provides explicit written consent. Without this agreement, such unilateral changes are not legally permissible, and any modification to the employment contract must be formally documented and signed by the employee.

This principle is reinforced under Article 24 of the UAE Labour Law, which addresses changes to wage structures. It stipulates that an employee who is paid a monthly salary may only be moved to another form of remuneration—such as daily, weekly, hourly, or piecework — if they agree to the change in writing. Importantly, such a transition must not compromise any rights or benefits the employee accrued while on a monthly wage. This provision ensures that restructuring measures do not erode existing entitlements under the guise of contractual adjustments.

Beyond role changes and salary considerations, UAE law also provides clarity on what constitutes a standard final settlement when an employee’s service comes to an end. A key component is the end-of-service gratuity, which is calculated based on the employee’s basic salary. The law provides for 21 days’ wage for each year of service during the first five years, and 30 days’ wage for each additional year thereafter, reflecting a progressive increase tied to tenure.

In addition to gratuity, employees are entitled to receive payment in lieu of notice, as stipulated in their labour contract. This is calculated on the full salary, not just the basic component. Any accrued but unused annual leave must also be compensated, with payment calculated on the basic salary regardless of how long the leave has been pending.

Employers are further required to settle any outstanding salary payments in full, ensuring that no dues — whether partial or complete — remain unpaid at the time of separation. In cases where the employment is terminated by the employer, the cost of a return flight ticket is generally included in the final settlement, although this does not typically apply when an employee resigns.

Finally, the settlement may include any additional entitlements that have been agreed upon by both parties or are mandated by law. These can cover documented overtime, commissions, or bonuses that form part of the employee’s earnings.

Taken together, these provisions underline a central principle of UAE labour law: while businesses may restructure to adapt to changing conditions, employee rights — particularly those tied to pay, role, and end-of-service benefits — remain protected unless clearly and voluntarily waived through written agreement.

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