04 Apr UAE Labour Law 2025: Essential Guide for Employers Hiring in the United Arab Emirates
Overview of UAE Labour Law for Employers
The UAE Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, which came into effect in February 2022, represents a significant modernization of the country’s employment legislation. For employers operating in the UAE or planning to hire workers in the region, understanding these regulations is fundamental to maintaining compliance and building productive workforce relationships.
The updated labour law applies to all employers and employees in the private sector across the UAE, with certain exceptions for free zone entities that operate under their own employment regulations. This guide provides a comprehensive overview of the key provisions that every employer needs to know in 2025.
Employment Contract Types and Requirements
Under the current UAE labour law, all employment relationships must be governed by a written contract. The law recognizes several types of employment arrangements to accommodate different business needs.
Fixed-Term Contracts
The UAE has moved to a fixed-term contract system, replacing the previous unlimited contract option. All employment contracts must now be for a fixed term not exceeding three years, with the possibility of renewal or extension for similar or shorter periods. Employers who previously had employees on unlimited contracts were required to convert them to fixed-term contracts by February 2023.
Part-Time and Flexible Work
The new law formally recognizes part-time employment, temporary work, and flexible working arrangements. This includes job sharing, compressed work weeks, and remote working options. Employers can now hire employees on part-time contracts, allowing workers to hold multiple part-time positions with different employers simultaneously.
Probation Period
The maximum probation period remains at six months. During probation, either party can terminate the contract with 14 days written notice. If the employee wishes to move to another employer within the UAE during probation, they must provide one month’s notice. If the employee leaves the country during probation, they cannot obtain a new work permit for one year unless agreed otherwise.
Working Hours, Leave, and Overtime
Standard Working Hours
The standard working hours in the UAE 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. Certain sectors may have different arrangements as specified in their employment contracts or collective agreements.
Annual Leave Entitlements
| Service Period | Annual Leave Entitlement |
|---|---|
| Less than 6 months | No annual leave (2 days per month if employer agrees) |
| 6 months to 1 year | 2 days per month |
| More than 1 year | 30 calendar days per year |
Other Leave Types
- Sick Leave: Up to 90 days per year (15 days full pay, 30 days half pay, 45 days unpaid)
- Maternity Leave: 60 days (45 days full pay, 15 days half pay)
- Paternity Leave: 5 working days within the first six months of the child’s birth
- Bereavement Leave: 5 days for spouse’s death, 3 days for parent, child, sibling, grandchild, or grandparent
- Study Leave: 10 working days per year for employees with over 2 years of service
Overtime Regulations
Employees who work beyond the standard hours are entitled to overtime pay. Regular overtime hours are compensated at 125% of the normal hourly rate. Overtime between 10 PM and 4 AM is paid at 150% of the normal rate. Friday work for those whose normal rest day is Friday is also compensated at 150%, with the option of a replacement rest day.
Wages and End-of-Service Benefits
Wage Protection System (WPS)
All employers in the UAE must pay employee salaries through the Wage Protection System, an electronic salary transfer system monitored by the Ministry of Human Resources and Emiratisation. Salaries must be paid within the specified timeframe in the employment contract, and employers who fail to comply face penalties including fines and potential suspension of work permits.
End-of-Service Gratuity
Employees who complete one year or more of continuous service are entitled to end-of-service gratuity. The calculation is based on the employee’s basic salary:
| Service Period | Gratuity Calculation |
|---|---|
| 1-5 years | 21 days of basic salary per year |
| More than 5 years | 30 days of basic salary per year (for years beyond 5) |
The total gratuity amount cannot exceed two years’ worth of the employee’s salary. Employers now also have the option to participate in the Savings Scheme as an alternative to the traditional gratuity system.
Termination and Notice Periods
Notice Period Requirements
Either party can terminate the employment contract by providing written notice. The minimum notice period is 30 days, but can be up to 90 days depending on what is specified in the employment contract. During the notice period, the employee is entitled to one unpaid day per week for job searching.
Grounds for Termination Without Notice
An employer can terminate an employee without notice in specific circumstances including fraud or assuming a false identity, committing a grave error causing substantial material loss, violating workplace safety instructions, absence without a valid reason for more than 20 intermittent days in one year, or disclosing confidential business information.
Non-Compete Clauses
The UAE labour law allows employers to include non-compete clauses in employment contracts. These clauses must be limited in time, place, and type of work, and can be enforced for a maximum period of two years following contract termination. The clause must be necessary to protect the employer’s legitimate business interests.
Emiratisation Requirements
The UAE government has introduced mandatory Emiratisation targets for private sector companies. Companies with 50 or more employees must increase their Emirati workforce by 2% annually. Failure to meet these targets results in monthly fines of AED 6,000 per unfilled Emirati position. Employers should factor these requirements into their hiring strategies and workforce planning.
Anti-Discrimination and Equal Pay
The UAE labour law prohibits discrimination based on race, color, sex, religion, national origin, social origin, or disability. It also mandates equal pay for men and women performing the same work or work of equal value. Employers must ensure their hiring practices, compensation structures, and workplace policies comply with these provisions.
How Business Umbrella Ensures Labour Law Compliance
Business Umbrella helps employers navigate the complexities of UAE labour law through our comprehensive recruitment and HR consulting services. Our team stays updated on all regulatory changes to ensure your hiring practices remain fully compliant.
From drafting compliant employment contracts to managing visa processing and WPS registration, our expert team provides end-to-end support for employers across all emirates. We also offer guidance on Emiratisation strategies to help companies meet their targets while building a diverse and productive workforce.
Frequently Asked Questions
What is the maximum probation period under UAE labour law?
The maximum probation period is six months. It cannot be extended or renewed. During this period, either party can terminate the contract with 14 days written notice.
How is end-of-service gratuity calculated in the UAE?
Gratuity is calculated at 21 days of basic salary for each year of the first five years of service, and 30 days for each additional year beyond five years. The total amount cannot exceed two years of the employee’s salary.
Are unlimited contracts still valid in the UAE?
No, the UAE transitioned to fixed-term contracts only as of February 2023. All employment contracts must be for a fixed term not exceeding three years, renewable for similar or shorter periods.
What are the penalties for non-compliance with UAE labour law?
Penalties range from fines starting at AED 5,000 to AED 1 million depending on the violation. Serious violations can result in suspension of work permits, company closure, or criminal prosecution. Non-compliance with WPS can lead to automatic suspension of new work permit applications.
Does UAE labour law apply to free zone employees?
Most free zones have their own employment regulations, though many align closely with the federal law. Exceptions include DIFC and ADGM, which have entirely separate employment frameworks. Employers should check with their specific free zone authority for applicable regulations.