Employment Law in UAE: Employer's Guide

Employment law in the UAE underwent its most significant transformation in decades when the new Labour Relations Law (Federal Decree-Law No. 33 of 2021) came into effect on 2 February 2022, replacing the 1980 Labour Law that had governed employer-employee relationships for over 40 years. The new law introduced fundamental changes to contract types, working arrangements, leave entitlements, termination procedures, and anti-discrimination protections. For employers, understanding and complying with these changes is not optional — MOHRE (Ministry of Human Resources and Emiratisation) has intensified enforcement, and penalties for non-compliance can reach AED 1 million for serious violations. This guide covers every major aspect of UAE employment law that employers must understand in 2026, from hiring to termination and everything in between.

Employment Contracts Under the New Law

Contract Types

The most significant change in the new law is the elimination of unlimited-term contracts. All employment contracts in the UAE must now be fixed-term (limited duration), with a maximum term of three years, renewable. Existing unlimited contracts were required to be converted to fixed-term contracts by 1 February 2023. If an employer failed to convert existing contracts, they are deemed to be fixed-term contracts under the new law's provisions. Fixed-term contracts provide certainty for both parties: the employer and employee know the contract's duration, and both understand the notice period and termination provisions that apply. The contract must specify the job title and description, start date and duration, workplace location, working hours, salary and allowances (in AED), leave entitlements, notice period (minimum 30 days, maximum 90 days), and probationary period (if applicable, maximum six months).

Probation Period

The probation period under the new law is a maximum of six months. During probation, either party can terminate the employment relationship with a written notice of 14 days. If the employee wishes to move to another UAE employer during or at the end of probation, they must provide at least one month's notice. If the employee wishes to leave the UAE entirely during probation, they must provide 14 days' notice. The employer cannot extend the probation period beyond six months, and an employee cannot be placed on probation more than once by the same employer. These provisions provide important protections for both parties during the initial employment period.

Part-Time and Flexible Work

The new law formally recognises several work arrangements beyond traditional full-time employment. Part-time work allows employees to work for one or more employers for a specified number of hours or days. Temporary work is for a specific period or task. Flexible work allows varying hours depending on operational needs. Remote work and job-sharing arrangements are also recognised. Employers who want to engage part-time or flexible workers must register the appropriate work permit type with MOHRE. Part-time employees are entitled to leave and end-of-service benefits on a pro-rata basis. This flexibility is particularly valuable for businesses that need specialised skills on a part-time basis or want to offer flexible working arrangements to attract talent. Consult a legal services professional to ensure your employment contracts correctly reflect the chosen work arrangement.

Working Hours, Leave, and Compensation

Working Hours

Standard working hours are eight hours per day or 48 hours per week. During the holy month of Ramadan, working hours are reduced by two hours per day for all employees (Muslim and non-Muslim). Overtime work is permitted with the employee's consent and must be compensated at a minimum rate of 125 percent of the normal hourly rate for daytime overtime and 150 percent for overtime between 10pm and 4am. Total working hours including overtime cannot exceed two additional hours per day. Certain categories of employees are exempt from overtime provisions, including senior management positions and employees whose work is inherently intermittent (such as security guards). Friday is the standard weekly rest day, though the government shifted the public sector weekend to Saturday and Sunday in 2022, and many private sector companies have followed suit.

Annual Leave

Employees are entitled to 30 calendar days of annual leave per year after completing one year of service. During the first year, employees accrue two days of leave per month worked. Leave must be taken within the year it is accrued — employers cannot systematically deny leave to accumulate a large balance. Upon termination, untaken leave must be paid out at the employee's basic salary rate. The employer determines the timing of annual leave based on operational needs but must consider the employee's wishes. Annual leave excludes public holidays that fall within the leave period — these are added to the leave duration.

Other Leave Entitlements

Beyond annual leave, the law provides for several other leave categories. Sick leave: employees are entitled to 90 days of sick leave per year after completing the probation period, divided into 15 days at full pay, 30 days at half pay, and 45 days at no pay. A medical certificate from an authorised medical facility is required. Maternity leave: 60 days total — 45 days at full pay and 15 days at half pay. Fathers receive five days of paternity leave within six months of the child's birth. Bereavement leave: five days for the death of a spouse, three days for a parent, child, sibling, grandchild, or grandparent. Study leave: employees who have completed two years of service are entitled to ten days of study leave per year for exams at a UAE-accredited educational institution. National service leave: full pay for the duration of mandatory national service.

Salary and Wage Protection

All salaries must be paid through the Wages Protection System (WPS), an electronic salary transfer system that ensures timely and accurate payment. Employers must pay salaries within the agreed payment cycle (typically monthly) and no later than ten days after the due date. Failure to pay through WPS or late payment triggers automatic alerts to MOHRE and can result in penalties including fines and suspension of new work permits. The minimum wage in the UAE is not fixed by legislation but is determined on a case-by-case basis by MOHRE based on the employee's qualifications, job type, and emirate. In practice, the visa and work permit system effectively sets minimum salary thresholds: the minimum salary for a work permit in Dubai is approximately AED 4,000 per month for skilled workers.

Termination and End-of-Service

Termination by Notice

Either party can terminate a fixed-term contract by giving written notice during the contract term. The notice period must be between 30 and 90 days as specified in the employment contract. If the contract does not specify a notice period, the minimum statutory notice of 30 days applies. During the notice period, the employer must allow the employee one unpaid day per week to search for alternative employment. If either party terminates without providing the required notice, they must pay the other party compensation equal to the salary for the remaining notice period (known as payment in lieu of notice).

Termination for Cause

Employers can terminate employment without notice in specific circumstances defined by Article 44 of the law, including: the employee assumes a false identity, commits a serious error causing substantial material loss, violates internal regulations after written warning, is absent without valid reason for more than 20 intermittent days or more than seven consecutive days in a year, discloses confidential information, is found intoxicated during working hours, assaults the employer or a colleague, or fails to perform basic duties despite written warnings. Termination for cause requires careful documentation. Employers must maintain written records of warnings, performance discussions, and the specific incidents justifying termination. Without proper documentation, a for-cause termination can be challenged as arbitrary dismissal, which carries additional compensation obligations.

End-of-Service Gratuity

Every employee who completes one year or more of continuous service is entitled to end-of-service gratuity upon termination (regardless of the reason for termination, including resignation). The gratuity is calculated as follows: 21 days of basic salary for each year of service for the first five years, and 30 days of basic salary for each additional year beyond five years. The total gratuity amount cannot exceed two years' total salary. "Basic salary" for this calculation means the last basic salary, excluding allowances (housing, transport, etc.). Days of absence without pay are deducted from the service period. Employers must pay the gratuity within 14 days of the employment end date. Late payment can result in MOHRE complaints and legal action. Note that the UAE has announced plans for an alternative end-of-service savings scheme (similar to a pension fund) that would replace the gratuity system for private sector employees. Implementation timelines have been announced but not yet fully enacted as of 2026.

Emiratisation Requirements

Current Requirements

Emiratisation — the government's policy of increasing UAE national employment in the private sector — has moved from a general goal to a specific, enforced legal requirement. Companies with 50 or more employees must achieve Emiratisation targets: as of 2024, a minimum of 2 percent of the skilled workforce must be UAE nationals, increasing by 2 percent annually. Companies that fail to meet the target face a monthly penalty of AED 7,000 per unmet Emiratisation position per month (AED 84,000 per year per position). The penalty increases by AED 1,000 per person annually. For a company with 100 employees that misses its target by five positions, the annual penalty exceeds AED 400,000. These penalties make Emiratisation compliance a significant financial concern for larger businesses.

Compliance Strategies

Meeting Emiratisation requirements involves both recruitment and retention. The government has established NAFIS (the national programme for Emiratis in the private sector) which provides salary support of up to AED 8,000 per month for Emirati employees in the private sector for the first five years of employment, reduces the effective cost to employers of hiring Emirati staff. Employers should partner with NAFIS, engage with Emirati job fairs and recruitment platforms, offer competitive packages that reflect the market expectations of Emirati candidates (who often have public sector alternatives), and invest in training and development programmes to retain Emirati employees. Companies in specialised sectors that struggle to find qualified Emirati candidates should consult with MOHRE about their specific situation, as some flexibility exists for highly specialised roles. Explore business consultancy services that specialise in Emiratisation compliance to develop a strategy that meets your legal obligations while supporting your business objectives.

Workplace Policies and Compliance

Anti-Discrimination and Equal Treatment

The new law explicitly prohibits discrimination in the workplace based on race, colour, sex, religion, national origin, social origin, or disability. It also prohibits sexual harassment, bullying, and any form of verbal, physical, or psychological violence in the workplace. Employers must establish clear anti-discrimination and anti-harassment policies, communicate them to all employees, and provide a confidential reporting mechanism. Violations can result in fines, licence suspension, and criminal prosecution in serious cases. While the UAE's anti-discrimination provisions may be less detailed than those in some Western jurisdictions, they represent a significant legal obligation that employers must address through policy, training, and enforcement.

Health Insurance

Providing health insurance for employees is mandatory in all emirates. In Dubai, the Dubai Health Authority requires employers to provide health insurance coverage that meets minimum benefit standards (the Essential Benefits Plan). In Abu Dhabi, health insurance is mandatory for all residents. The minimum coverage must include inpatient and outpatient services, maternity coverage, and prescribed medications. Health insurance costs range from AED 600 to AED 800 per year per employee for basic plans to AED 5,000 to AED 15,000 for comprehensive plans. Employers typically cover the employee's premium as a mandatory benefit and may optionally extend coverage to the employee's family members. Non-compliance with health insurance requirements can result in fines and restrictions on visa processing.

Non-Compete Clauses

The new law allows employers to include non-compete clauses in employment contracts, provided they are reasonable in scope, duration, and geography. The clause must be necessary to protect the employer's legitimate business interests, and the maximum enforceable duration is two years after employment termination. Courts will assess the reasonableness of non-compete clauses on a case-by-case basis. Overly broad clauses (such as a blanket prohibition on working in any competing business anywhere in the world) are likely to be struck down or narrowed by the courts. Employers should draft non-compete clauses carefully, specifying the exact activities restricted, the geographical area, and a reasonable duration. Have these clauses reviewed by a qualified employment lawyer to ensure they are enforceable under the current law.

Frequently Asked Questions

Can an employer deduct from an employee's salary?

Salary deductions are strictly regulated. Employers can only deduct from an employee's salary in specific circumstances: repayment of loans advanced by the employer (with the employee's written consent, and limited to 20 percent of monthly salary per instalment), social insurance contributions (where applicable), end-of-service fund contributions (where applicable), court-ordered deductions, and penalties for workplace violations defined in the company's internal regulations (subject to strict procedural requirements and a maximum of five days' salary per incident). Total deductions from any single month's salary cannot exceed 50 percent. Employers cannot withhold salary as a disciplinary measure or deduct costs of work equipment, training, or recruitment from an employee's salary unless the employment contract specifically allows it and the deduction has been approved by MOHRE.

What happens if an employee absences without notice?

If an employee is absent from work without a valid reason for more than seven consecutive days, the employer can terminate the employment for cause without notice. For intermittent absences, termination for cause is permitted after more than 20 days of absence without valid reason within a single year. Before terminating, the employer should make reasonable attempts to contact the employee and document these attempts. If the employee returns with a valid excuse (such as a medical emergency), the employer should assess the situation on its merits. The employer must report the employee's absence to MOHRE and cancel the employee's visa and labour card through the standard cancellation process. The employee's immigration status becomes invalid upon cancellation, and they are required to leave the country within 30 days unless they secure a new visa.

How is overtime calculated for employees on a monthly salary?

For employees paid a monthly salary, the hourly rate for overtime calculation is determined by dividing the monthly salary by the number of working hours in the month (typically 208 hours based on 48 hours per week for 4.33 weeks). The overtime rate is then 125 percent of this hourly rate for daytime overtime and 150 percent for nighttime overtime (10pm to 4am). For example, an employee earning AED 10,000 per month has an hourly rate of approximately AED 48.08 (10,000 divided by 208). Daytime overtime would be AED 60.10 per hour (48.08 times 1.25) and nighttime overtime would be AED 72.12 per hour (48.08 times 1.50). Overtime must be documented and approved in advance — requiring employees to work overtime and then refusing to pay for it is a violation that can be reported to MOHRE.

Are businesses in free zones subject to the UAE Labour Law?

Most free zones are subject to the UAE Labour Law (Federal Decree-Law No. 33 of 2021), which applies to all private sector employment in the UAE. However, the DIFC and ADGM (Abu Dhabi Global Market) have their own independent employment laws: DIFC Employment Law No. 2 of 2019 and ADGM Employment Regulations 2019 respectively. These financial free zones operate under common-law frameworks with employment provisions that differ in some respects from the federal law — for example, DIFC allows unlimited-term contracts (which the federal law has eliminated) and has different gratuity calculation methods. Businesses in DIFC and ADGM should consult the specific employment regulations of their jurisdiction. For all other free zones (DMCC, JAFZA, Dubai Internet City, etc.), the federal Labour Law applies in full. Navigate employment law services in Dubai to find a lawyer familiar with the specific requirements of your free zone.