Notice Period and Pay in Lieu of Notice — UAE and KSA Explained

When a job in the Gulf ends, two different money entitlements come into play, and they are often confused. The first is your notice period — the period of warning one party must give the other before the contract ends, during which you keep your job and your full pay. The second is your end-of-service gratuity (also called the end-of-service benefit, or EOSB), a lump sum based on your length of service that is paid once you actually leave.

The single most important thing to understand is this: notice pay and gratuity are calculated separately and paid in addition to one another. Notice pay is not a slice of your gratuity, and it does not reduce it. If your employer ends your contract without giving you the notice the law requires, you are owed compensation in lieu of that notice on top of the gratuity you have already accrued — not instead of it.

This guide covers how statutory notice works in both the UAE and Saudi Arabia, how to work out pay in lieu of notice, what happens when an employer skips the notice it owes you, and exactly how this sits alongside your gratuity. You can run your own gratuity figure with our UAE EOSB Calculator or KSA EOSB Calculator, then add notice pay to it using the method below.

Notice in the UAE private sector is governed by Federal Decree-Law No. 33 of 2021, Article 43. The rule is straightforward and applies to either party ending the contract:

• Either the employer or the employee may terminate the employment contract for a legitimate reason, provided the other party is given written notice of not less than 30 days and not more than 90 days.
• During the notice period, the employment relationship continues: you keep working and you receive your full wage as normal.
• The 30-day minimum is the statutory floor. Your contract may specify a longer notice period (up to the 90-day maximum), and if it does, the contractual figure applies.

Two practical points follow from this. First, the 30-day rule applies whether you resign or are dismissed — both sides owe notice. Second, an employee who has been given notice of termination is entitled under the law to one unpaid day off per week during the notice period to search for a new job, provided three days' advance notice of the absence is given.

The post-2021 framework also removed the old "arbitrary dismissal" resignation penalties, so your gratuity is no longer cut simply because you resigned — but notice obligations still apply regardless of who ends the contract. (For how resignation affects the gratuity itself, see our guide on gratuity after resignation in the UAE.)

In Saudi Arabia, notice is set by the Labour Law (Royal Decree No. M/51), Articles 75 and 76. The amount of notice depends on the type of contract.

Indefinite-Term Contracts

For an open-ended (indefinite) contract, the party ending the relationship must give written notice for a valid reason before the termination date. The minimum notice for an employer ending the contract is longer than for an employee resigning, and your own written contract may set a longer period — if it does, the contractual figure governs. Check the exact day-count in your contract and against the current HRSD text, because Saudi notice rules were amended in 2025 and the precise minimum (and any two-month floor on compensation for a no-reason termination) is set out there rather than being a single fixed number that has stayed the same over time.

Fixed-Term Contracts

A fixed-term (limited) contract normally simply runs to its agreed end date — the date itself is the notice. If a fixed-term contract is ended early without a lawful reason, the defaulting party owes compensation for breaking it, which is a different calculation from notice pay (it relates to the remaining term, subject to the limits in the law).

During any notice period in Saudi Arabia, as in the UAE, you remain employed and keep your full wage. Notice is a warning period, not an early exit.

"Pay in lieu of notice" (sometimes written as PILON or "compensation in lieu of notice") is what the law requires when a party ends the contract without serving the notice period — usually because the employer wants the employee to stop work immediately. Instead of working the notice, you are paid for it.

The principle is the same in both countries: the compensation equals your wage for the un-served notice period.

• UAE — under Article 43(3) of Decree 33/2021, the party that does not abide by the notice period pays the other "compensation in lieu of notice" equal to the employee's wage for the notice period (or the remaining balance of it).
• KSA — under Article 76 of the Labour Law, a party who does not observe the notice required by Article 75 pays compensation equal to the worker's wage for the notice period, or the balance remaining.

The basic formula is simply:

Pay in lieu of notice = (monthly wage ÷ 30) × number of un-served notice days.

Note the important difference from gratuity. Pay in lieu of notice is based on your wage as actually paid during employment — the same money you would have received had you worked the notice. In the UAE that is your full wage, not the basic-salary-only figure used for the Art. 51 gratuity. So your notice pay and your gratuity are built on different bases as well as being separate payments.

If your contract or your settlement does not clearly show notice pay as its own line, our Settlement Checker helps you separate notice pay, gratuity, and unused leave so nothing gets quietly absorbed into a single round number.

If your employer ends your contract and tells you to leave immediately — no notice served — that does not extinguish your entitlement. In both the UAE and Saudi Arabia, the law treats failure to give notice as something the defaulting party must pay for, not something it can simply skip.

• You are owed compensation in lieu of notice — the wage for the notice period the employer failed to give you (UAE Art. 43(3); KSA Art. 76). This is a debt the employer owes you, separate from your gratuity and your final salary.
• It works both ways. If you resign and walk out without serving notice, you can in principle be liable to the employer for the same compensation. This is why resignations should be given in writing with the correct notice — leaving abruptly can cost you the equivalent of the notice period.
• Summary dismissal is the exception. Where an employee is lawfully dismissed for serious misconduct of the kind listed in the law (UAE Art. 44 / KSA Art. 80), the employer may end the contract without notice and without pay in lieu. That is a narrow, defined list — a general "we no longer need you" is not on it, and still requires notice or pay in lieu.

If notice pay has been left off your final settlement, document it in writing and raise it. In the UAE this goes through the Ministry of Human Resources and Emiratisation (MoHRE); in Saudi Arabia through Qiwa / HRSD. Notice pay is one of the line items most often "forgotten" in a rushed exit, so it is worth checking before you sign anything off.

It is worth being explicit about the full picture, because workers frequently accept a single lump sum without realising it should be made up of distinct parts. When your employment ends, your final settlement should typically include, as separate amounts:

1. Unpaid salary up to your last working day.
2. Pay in lieu of notice, if the notice was not worked — your wage for the notice period.
3. Payment for unused annual leave accrued but not taken.
4. End-of-service gratuity / EOSB — the service-based lump sum (UAE Art. 51, on basic salary; KSA Arts. 84/85, on the last wage).

The gratuity is the only one of these that depends on your years of service. Notice pay depends only on the notice period and your wage. They never overlap, and one is never deducted from the other. An employer who says "your gratuity covers your notice" is misstating the law — they are two different entitlements with two different legal bases.

So the correct way to think about your exit money is: work out the gratuity first (use the UAE or KSA calculator), then add any pay in lieu of notice, unused leave, and final salary on top. The Settlement Checker lays these out as separate lines so you can confirm each one is present and correct.

Suppose you work in the UAE on a total monthly wage of AED 15,000 (of which AED 10,000 is basic salary), you have completed 4 years of continuous service, and your employer terminates you with a 30-day contractual notice — but asks you to leave immediately rather than work it.

Step 1 — pay in lieu of notice (full wage):

• 30 days of notice not worked, paid on the full wage of AED 15,000.
• Pay in lieu of notice = AED 15,000 (one month's full wage).

Step 2 — end-of-service gratuity (basic salary, Art. 51):

• Gratuity accrues at 21 days of basic pay per year for the first 5 years.
• Daily basic = AED 10,000 ÷ 30 = AED 333.33.
• Per year = 21 × AED 333.33 = AED 7,000; over 4 years = AED 28,000.

Step 3 — add them together:

• Pay in lieu of notice (full wage): AED 15,000
• Gratuity (basic only): AED 28,000
• Plus any unpaid salary and unused leave.
• Total exit money before leave/salary = AED 43,000.

Notice the two figures use different bases: notice pay on the AED 15,000 full wage, gratuity on the AED 10,000 basic. If your settlement shows only AED 28,000, the notice pay has been omitted — and that is exactly the kind of gap worth challenging before you sign. Run the gratuity portion in our UAE EOSB Calculator and confirm the notice line is added separately.