Executive Severance in the Gulf: What a Departure Costs

An executive severance package in the Gulf is priced carefully at the point of hire and almost never revisited until the day it is actually needed, and by then the board is negotiating from a considerably weaker position than the one it held when the contract was signed. JOH Partners' reading of governance practice across more than 1,000 senior mandates closed since 2014 finds a consistent pattern: Gulf boards invest real diligence in pricing the hire, base, bonus, long-term incentive structure, and comparatively little in pricing the exit, so that the true cost of a failed senior appointment lands as an unbudgeted settlement rather than a line item the reward policy had already anticipated.

Why the executive severance package gets less attention than the hire

The asymmetry is structural rather than careless. A board setting compensation for a new chief executive or a senior functional head has every incentive to get the number right: the candidate is comparing offers, the market is visible, and getting the figure wrong either loses the appointment or overpays for it publicly. None of those pressures apply to severance terms at the point of hire, because nobody in the room expects the relationship to end badly, and the negotiation happens, if it happens with any real rigour at all, between lawyers reviewing contract boilerplate rather than between the board and its remuneration committee treating the exit terms with the same seriousness as the entry terms.

The result, documented in JOH's wider read of Gulf executive reward structures, is a severance provision that is legally sufficient but economically underexamined: it satisfies statutory minimums and standard notice conventions without the board ever having modelled what the full cost of an unplanned departure would actually be, across gratuity, notice, negotiated settlement, unvested incentive treatment, and the operating disruption of covering the seat until a successor is found.

What the statutory floor actually requires

The starting point in every Gulf jurisdiction is a statutory end-of-service entitlement, and the two largest markets calculate it differently enough that a single regional assumption is a mistake.

Figure 01FIG-01

Statutory end-of-service entitlement: UAE and Saudi Arabia

	UAE	Saudi Arabia
First five years of service	21 days' basic wage per year	Half a month's wage per year
Each year after five	30 days' basic wage per year	One month's wage per year
Cap	Two years' total wage	No statutory cap stated in the same form
Resignation treatment	No reduction for resignation under current law	Award reduced on a sliding scale for resignation, tied to length of service

Under the UAE's Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, an employee who has completed at least one year of continuous service is entitled to gratuity calculated on this basis regardless of whether the departure is a termination or a resignation, a meaningful simplification from the framework it replaced. Saudi Arabia's Labour Law, administered by the Ministry of Human Resources and Social Development, retains a resignation-linked reduction that the UAE's current framework does not, which means the same nominal seniority produces a materially different statutory floor depending on which market the contract sits in and, in Saudi Arabia specifically, whether the departure is framed as a resignation or a termination.

The statutory gratuity is the floor, not the estimate. Boards that stop their severance planning at the statutory number are pricing the departure at the amount the law requires, not the amount the exit is actually going to cost.

The four costs that sit above the statutory floor

JOH's observation across senior mandates is that the statutory entitlement is typically the smallest component of what a genuinely difficult senior departure actually costs a Gulf group. Four additional layers, largely unbudgeted, sit above it.

The first is negotiated notice and settlement pay beyond the statutory minimum, which most senior contracts include as a fixed notice period, commonly three to six months for C-suite appointments in JOH's mandate experience, and which frequently becomes a further negotiated sum once garden leave and a mutual non-disparagement or confidentiality arrangement enter the conversation. The second is the treatment of unvested long-term incentive awards, which is rarely a simple forfeiture in practice even where the plan document says it should be, because boards weighing reputational exposure and the risk of litigation over an ambiguous "good leaver" clause frequently settle rather than litigate the point. Where the departing executive holds equity or a phantom equity structure that has not yet vested, a board calculating the real cost of the exit needs a genuinely detailed account of what that unvested grant is actually worth under the plan's specific leaver terms, not the headline grant value quoted at the point of hire, because the gap between the two figures is frequently where the negotiation actually happens.

The third layer is the cost of covering the seat itself: interim leadership, an accelerated search timeline, and the operating disruption of a senior vacancy in a role the board did not plan to fill on short notice. The fourth, and the one JOH's clients most consistently underweight in advance, is reputational and governance cost, particularly where the departure follows a public disagreement, a regulatory issue, or a family dispute, and the settlement terms are shaped as much by the need to manage that exposure quietly as by the contractual entitlement itself.

Why family-controlled companies carry a distinct version of this cost

Group holdings and family-controlled companies face a version of this problem that fully professionalised listed companies do not carry in the same form. Where a senior departure follows a disagreement between an external executive and a founder or controlling shareholder, the boundary this piece's companion analysis on the chairman role describes, authority without executive power, becomes directly relevant to how the exit is negotiated: a board that has not previously drawn a clear line on where the chief executive's authority ends and the chair or owner's begins is negotiating a departure without a settled account of who was actually right, which tends to produce a more expensive and more protracted settlement than a departure where the governance boundary was already clear.

JOH's work on executive derailment signals makes the earlier-stage version of this same point: the departures that cost the most are rarely sudden. They follow a pattern of signals the board had visibility into, and did not act on, well before the actual exit became unavoidable. JOH's search for a UAE national President appointment at a regional industrial pipe manufacturer illustrates the leadership-transition version of the same discipline from the appointment side: getting the incoming mandate and reporting structure right at the point of hire is the most effective way to reduce the odds of an expensive, adversarial exit years later.

What a properly priced severance framework looks like

A board that has genuinely priced its executive severance exposure, rather than inheriting boilerplate contract language, does four things consistently. It models the full cost of a senior departure at the point of hire, not just the statutory floor, including a realistic estimate of negotiated settlement and unvested incentive treatment under a plausible bad-leaver and good-leaver scenario. It documents the leaver treatment for long-term incentive awards explicitly in the plan rules, rather than leaving "good leaver" and "bad leaver" as terms the board will interpret only once a specific departure forces the question. It reviews notice period and settlement conventions against current market practice on a defined cycle, consistent with the reward-structure discipline JOH's wider Gulf executive reward research documents across base, bonus and incentive design. And it treats interim coverage planning, who runs the seat and for how long if a senior departure happens with limited notice, as part of the succession discipline the board maintains on an ongoing basis rather than a plan built only after the vacancy is already open.

Boards seeking continuous visibility into succession readiness and executive-layer risk, so that a departure is a planned event rather than a genuine surprise, increasingly use platforms such as Board Pulse to track that readiness between formal review cycles. Peter Schatzberg's account of building, and losing, a venture-backed business under real capital pressure is a useful reminder from outside the Gulf executive-search context of the same underlying truth: the cost of a leadership exit is rarely just the number on the settlement agreement, and the businesses that plan for the exit in advance recover from it considerably faster than the ones that are negotiating the terms for the first time on the way out the door.

The practical case for pricing the exit now

Gulf boards price the hire with real rigour because the market forces them to. Nothing forces the same rigour onto the exit, which is exactly why so few boards apply it, and exactly why the eventual cost so often lands as a surprise rather than a budgeted item. A board that models its executive severance exposure now, documents leaver treatment for incentive awards before a departure is imminent, and reviews the framework on the same cycle it reviews compensation more broadly, is trading a modest amount of governance discipline today for a materially lower and more predictable cost the next time a senior departure actually happens. Given the pattern JOH sees across the region, that trade is rarely close.

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Key takeaways

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JOH Partners is an executive search and senior executive recruitment firm advising boards, family groups and sovereign-adjacent platforms on executive compensation, severance structuring and succession across the GCC, the UK and Singapore. For the full data on Gulf executive reward structures, download the Gulf Executive Reward Report 2026, then engage a partner for a confidential conversation about severance framework design. Boards wanting continuous visibility of succession and executive-layer risk can also request a Board Pulse demo.