The question of end‑of‑service gratuity becomes especially urgent when a company in the UAE faces bankruptcy or liquidation. Employees often worry that they may lose their statutory entitlements if the employer is unable to continue operations. The UAE Labour Law, together with the UAE Bankruptcy Law, provides clear protections to ensure that employees remain priority creditors and that their gratuity rights are preserved even when a company collapses financially.
How Gratuity Is Protected Under UAE Labour Law
End‑of‑service gratuity is a statutory right under Federal Decree‑Law No. 33 of 2021. It is owed to every eligible employee upon termination of employment, regardless of the employer’s financial condition. The law does not allow employers to waive or reduce gratuity due to bankruptcy, insolvency, or business closure. This means that even if a company cannot continue operating, the employee’s gratuity remains a legal debt that must be settled.
Gratuity is calculated based on the employee’s last basic salary and years of service. This calculation does not change simply because the company is undergoing liquidation.
Employees as Priority Creditors in Bankruptcy
Under the UAE Bankruptcy Law, employees are classified as priority creditors. This gives them a stronger legal position than many other parties when a company’s assets are distributed. Employee claims for unpaid wages, gratuity, leave salary, and other labour entitlements are settled before payments to banks, suppliers, or other unsecured creditors.
This priority status ensures that employees are not left without compensation when a company’s assets are liquidated. The bankruptcy trustee or court‑appointed administrator is legally required to allocate funds to satisfy employee claims as a first step in the distribution process.
What Happens When a Company Cannot Pay Immediately
In some cases, a bankrupt company may not have enough liquid assets to pay all outstanding employee dues at once. When this happens, the bankruptcy process ensures that:
- The company’s remaining assets are identified and valued.
- Assets are sold under court supervision.
- Proceeds are distributed according to the priority list, with employees at the top.
Even if the process takes time, employees retain the right to claim their gratuity and other dues until the liquidation is complete. The claim does not expire simply because the company has ceased operations.
How Employees Can File Their Claims
Employees must formally register their claims during the bankruptcy or liquidation process. This typically involves submitting:
- A copy of the employment contract
- Salary certificates or wage records
- Proof of unpaid dues
- Passport and Emirates ID copies
- A termination letter or proof of end of employment
The bankruptcy trustee reviews these documents and includes the employee’s claim in the official list of outstanding debts. Once approved, the employee becomes eligible to receive payment from the liquidation proceeds.
The Role of the Ministry of Human Resources and Emiratisation
MoHRE plays an important role in safeguarding employee rights during company closures. The Ministry may intervene to ensure that employees receive their dues, issue labour complaints, and coordinate with the bankruptcy court when necessary. In some cases, MoHRE may also facilitate temporary support measures for affected workers.
Protecting Employee Rights During Financial Collapse
The UAE’s legal framework ensures that employees are not left unprotected when a company becomes insolvent. Gratuity remains a guaranteed entitlement, and employees are legally prioritised during the distribution of assets. While the process may take time, the law ensures that workers have a clear path to reclaiming what they are owed.
Our team at Ayesha Al Dhaheri Advocates and Legal Consultants assists employees and employers in navigating labour‑law entitlements, end‑of‑service calculations, and disputes arising from company bankruptcy or liquidation. We provide clear guidance on filing claims, understanding legal rights, and ensuring that statutory dues are properly recovered under UAE law. If you are dealing with a company closure or unpaid gratuity, we can help you move forward with clarity and confidence.