Can UAE Employees Still Claim Gratuity if Their Employer Goes Bankrupt? What You Need to Know in 2025

When a UAE company goes bankrupt, one of the biggest concerns employees face is whether they can still claim their end of service gratuity and other unpaid entitlements. Under the UAE’s Bankruptcy Law, employees are given strong protections, but recovery is not automatic. Whether workers receive their full dues depends on how much the company’s assets can cover during the liquidation process. As of 2025, the rules governing employee rights in insolvency have become clearer, but they still require employees to take proactive legal steps to secure their claims.

Employees Are “Preferred Creditors” Under UAE Bankruptcy Law

The UAE classifies employees as preferred creditors, meaning their claims are prioritized over many other debts when a company’s assets are sold. Employee claims typically include:

• Unpaid wages
• End-of-service gratuity
• Accrued but unused annual leave
• Notice period compensation
• Contractual entitlements documented in employment agreements

These claims must be satisfied after court appointed expenses, but before many commercial creditors, giving workers a meaningful advantage during liquidation.

But There Is *No Government Guarantee* for Gratuity

Despite employees being preferred creditors, the UAE does not operate a government-backed insurance or guarantee fund for gratuity payments in the private sector. Unlike some jurisdictions where the state covers unpaid wages if a company collapses, the UAE system relies entirely on:

• The company’s available assets
• The liquidation value of property, receivables, machinery, or cash balances
• The outcomes of court-supervised bankruptcy proceedings

If the company’s assets are insufficient, employees may receive only partial payment—or in severe cases, none at all.

Bankruptcy Law Caps Employee Claims at Three Months’ Salary

Under the updated Bankruptcy Law, employee claims that receive preferential treatment, including unpaid wages and gratuity, are capped at the equivalent of three months’ salary. Amounts exceeding this threshold may fall into the pool of unsecured claims, reducing the likelihood of full recovery.

The cap creates more predictable outcomes for insolvency proceedings but can leave long-term employees exposed if their gratuity entitlements exceed the protected amount.

How Employees Recover Their Dues During Bankruptcy

In the event of insolvency, employees must take steps to protect their rights through the court system. Key protections include:

1. Filing a Labour Complaint and Obtaining a Court Judgment

Employees can file a claim with the Ministry of Human Resources and Emiratisation (MOHRE), which may refer the matter to the Labour Court. A judgment strengthens the employee’s position in bankruptcy proceedings.

2. Joining the Bankruptcy Proceedings as Preferred Creditors

Once the company enters liquidation, employees must register their claims formally with the court-appointed trustee, ensuring they are included in the distribution of assets.

3. Legal Tools to Enforce Judgments

UAE courts allow employees to request strong enforcement measures where applicable, including:

• Attachment (seizure) of company assets
• Placing liens on bank accounts
• Travel bans on managers in cases of wrongdoing or unpaid judgments

These tools provide leverage in ensuring employees are not ignored during insolvency cases.

What Happens if the Company Has No Assets?

If the company has minimal or no assets, such as in cases of corporate abandonment, it becomes extremely difficult for employees to recover gratuity or wages. Without liquidatable assets, the bankruptcy court has nothing to distribute, meaning:

• Employees may receive no payment regardless of their legal entitlements.
• Managers may face civil or criminal liability depending on misconduct, but this does not guarantee financial compensation.

Why the UAE’s System Balances Worker Protection With Business Predictability

The Bankruptcy Law aims to strike a balance between safeguarding employee rights and maintaining a business friendly environment. Key policy objectives include:

• Ensuring workers have priority in insolvency distributions
• Creating clarity for investors and lenders
• Promoting responsible restructuring instead of abrupt closures
• Establishing predictable outcomes for all parties

However, the lack of a state backed compensation mechanism means employees still shoulder risk when employers collapse without sufficient assets.

What Employees Should Do Immediately If Their Employer Faces Bankruptcy

If insolvency is suspected, employees should act quickly:

• Request outstanding payments in writing
• File a MOHRE complaint promptly
• Gather employment records, contracts, payslips, and bank statements
• Consult legal counsel to evaluate potential asset recovery
• Monitor court announcements related to bankruptcy filings

Early action increases the likelihood of being recognized as a preferred creditor and ensures timely participation in bankruptcy proceedings.

Conclusion

In the UAE, employees can indeed claim their gratuity and other end-of-service benefits even when their employer goes bankrupt, but recovery depends entirely on what assets the company has left. As preferred creditors, workers stand near the front of the line in liquidation proceedings, yet the absence of a government guarantee means outcomes can vary widely based on each company’s financial situation. Understanding the 2025 Bankruptcy Law, taking timely legal action, and securing proper documentation are essential steps for employees seeking to protect their rights during insolvency events.

For businesses seeking guidance, Al Kabban & Associates, with over 30 years of experience in UAE law and recognition by Legal 500, stands ready to help corporations build resilience against legal risks while ensuring compliance with local and international standards.

For more information or to schedule a consultation, contact us at +971 4 453 9090 or visit www.alkabban.com.

You can also follow us on social media for more updates on everything law related in the UAE: @Alkabban_Law