Told to leave the same day, with notice paid in lieu

Being walked out on the day is common, and it raises two questions most settlements answer badly: what the notice allowance is calculated on, and whether the paid-but-unworked notice days count as service for the gratuity.

The facts

Regional sales lead, Dubai mainland, private company under the federal law
Started 15 May 2019
Contract notice period: 60 days for either side
On 15 January 2026 the employer ended the contract with immediate effect, collected her laptop and said notice would be paid in lieu
Package 18,000 AED: basic 9,000, housing 6,000, transport 3,000
No unpaid leave; 10 days of annual leave untaken

Step 1 — the notice allowance

Article 43(1) lets either party end the contract for a legitimate reason with written notice of between 30 and 90 days, during which work continues. Article 43(3) says the party who does not observe the notice period pays the other a "notice period allowance" equal to "the worker's wage for the full notice period or the remaining part thereof" — payable "even if the absence of notification does not cause damage".

Article 43(4) says the allowance is calculated on "the last wage received by the worker". Wage, in the decree-law, is the basic wage plus cash allowances and in-kind benefits under the contract. So this is calculated on the full package, not on basic:

Daily wage: 18,000 ÷ 30 = 600 AED
Notice allowance: 60 × 600 = 36,000 AED

On basic alone it would have been 18,000. Notice pay calculated on basic is one of the commonest errors in a UAE final settlement, because it gets mixed up with the gratuity line next to it.

Step 2 — when did service end?

This is the genuinely contested point. Article 43(2) says the contract "continues to be valid throughout the notice period" and terminates when it expires. But here the notice was not given and served; it was replaced by a payment. The cautious view — the one an employer will take, and the one this site uses — is that a payment in lieu compensates for notice not given and does not keep the contract alive through those days. On that view service ended on 15 January 2026.

Gratuity on a 9,000 AED basic (300 AED a day) under the two possible end dates.
End of service	Service	Days	Gratuity
15 January 2026 — day of termination	6.671 years	155.14	46,541
16 March 2026 — if 60 days' notice had been worked	6.836 years	160.07	48,021

The working for the first row: six whole years from 15 May 2019 to 15 May 2025, plus 245 days of a 365-day year = 6.6712 years. First five years 105 days; the remaining 1.6712 × 30 = 50.137 days; 155.137 × 300 = 46,541 AED.

The gap between the two readings is 1,479 AED. Worth raising, not worth a lawsuit on its own. If the termination letter says the employment continues to the end of the notice period and she is simply not required to attend — garden leave, in effect — then the contract really is alive through those days and the later date is the right one. Read the letter for which of the two the employer has actually done.

Step 3 — the full settlement

Item	Amount	Basis
End-of-service gratuity	46,541	Article 51, on basic, service to 15 January 2026
Notice allowance	36,000	Article 43(3)–(4), 60 days on the full wage
Salary 1–15 January	9,000	15 days × 600
10 days' untaken annual leave	3,000	Article 29(9), 10 × 300 on basic
Repatriation expenses	check	Article 13(12): on the employer unless she joins another employer
Total cash	94,541	Before repatriation

Payable within 14 days of 15 January 2026, under Article 53.

Three different wages in one settlement

The gratuity and the leave are on basic (9,000). The notice allowance and the final salary are on the full wage (18,000). A settlement that uses one figure for everything is wrong somewhere, and it is almost always the notice line that has been shrunk.

What she does not get

The weekly job-search day. Article 43(5) gives a worker whose contract is ended by the employer one unpaid working day a week off during the notice period to look for work. It only matters when notice is being worked.
Article 47 compensation, unless the termination was a reaction to a serious complaint she had made to MOHRE or a lawsuit against the employer whose validity is proven. A sudden or badly handled termination is not, on its own, within Article 47.

Can the employer insist on paying in lieu?

The decree-law's model is that notice is given and worked; Article 43(3) then deals with the party who does not observe it by making them pay. It also allows the parties to agree to waive or shorten notice, "while preserving all the rights of the worker for the notice period" (Article 43(2)). In practice an employer that pays the full allowance has met its financial obligation, and the dispute, if there is one, is about the service date rather than the money. Contrast ADGM, whose 2024 regulations do not allow the employer to make a payment in lieu unilaterally — see ADGM end of service.

Questions

Is notice pay calculated on basic salary or total salary?

Total. Article 43(4) uses the last wage received, and the decree-law defines wage as the basic wage plus allowances and benefits under the contract. Gratuity, by contrast, is on basic only.

Does the notice period paid in lieu count towards my service?

Do not assume it does. A payment in lieu is compensation for notice not worked. If the employer instead keeps the contract running through the notice and simply tells you not to come in, those days are service. The letter usually tells you which.

Figures are for the case described. Published 2026-10-18 and reviewed against Federal Decree-Law No. 33 of 2021. General guidance, not legal advice — see the disclaimer.