Employment Law

Employment Contracts in the UAE

In the UAE, a written employment contract must be entered into for the employee's compliance with visa sponsorship. Contracts are also standard for companies hiring employees in the UAE.

The contract should clearly state the employee's compensation rate, benefits, job responsibilities, and any agreements regarding termination of the contract. In some circumstances, the law of default will apply regardless of anything contained in the employment contract. In other cases, however, the default rule can be avoided by providing clear and specific terms in the contract. It is critical for foreign businesses to use employment contracts that comply with local labor laws .

When you work with Remoly's UAE and Dubai PEOs, we ensure that employment contracts comply with all local labor regulations.

Fixed Term (up to 3 years, unlimited renewal)

UAE No Longer Allows Indefinite Contracts

UAE Working Hours

The standard working week in the UAE is Sunday to Thursday and the weekend is Friday to Saturday. Local labor laws stipulate that only Friday is the legal rest day. Many companies in the UAE work 5.5 or 6 days a week.

For employees who need to work on Friday, they are entitled to an extra day off or a salary increase of no less than 50% on the basis of normal working hours.

The maximum working hours in the UAE are 8 hours per day, or 48 hours per week. Although public sector employees typically work from 7:30 am to 2:30 pm, standard working hours for private organizations may vary.

During Ramadan, daily working hours must be reduced by two hours.

Employment Tax

Although there is no employer tax in the UAE, employers are advised to allocate 8.3% of an employee's salary towards end-of-service benefits or gratuity.

From June 1, 2023, a corporate tax rate of 9% applies to businesses or individuals operating in the UAE with profits exceeding AED 375,000 (approximately US$102,000).

Health Insurance

Abu Dhabi and Dubai require employers to provide health insurance. Insurance is also required for the employee’s spouse and dependents. Businesses in other emirates often offer employer-sponsored health insurance to their employees, even if the employer does not require it.

Holiday Policy

Take a Vacation

In the UAE, 30 calendar days of leave is the standard annual leave benefit. The length of paid leave depends on how long the employee has been with the company. An overview is as follows:

• Less than six months: employees are not entitled to annual leave
• 6-12 months: Employees who serve the company can enjoy no less than two days of annual leave every month
• More than one year: Employees are entitled to 30 days of annual leave

Annual Leave

The amount of paid time off an employee is entitled to during each year of work. According to Dubai Labor Law, employees are entitled to annual leave after working continuously for 12 months. The length of annual leave varies depending on the number of years the employee has been with the company.

The following is the length of annual leave stipulated in Dubai Labor Law:

1. Employees who have worked for six months but less than one year are entitled to half a month (15 working days) of annual leave.
2. After one year of service, employees are entitled to one month (30 working days) of annual leave.
3. After working for three years, employees are entitled to one month (30 working days) of annual leave.
4. After 10 years of service, employees are entitled to 2 months (60 working days) of annual leave.

Sick Leave

In the UAE, employees are eligible for up to 90 days of sick leave per year after working for the company for at least three months after the probationary period. Holiday leave is paid at the following rates:

• Full salary for the first 15 days of sick leave
• Half of your monthly salary for the next 30 days
• No salary for the remaining time period

If an employee becomes ill as a result of misconduct, he or she is not entitled to sick leave.

In order for employees to receive the full wages they are entitled to, workers must provide their employers with a valid medical certificate from a certified physician.

Maternity and Paternity Leave

Female employees who have worked continuously in the company for one year are entitled to 45 days of paid maternity leave. If an employee has been employed continuously for less than one year, she is entitled to leave at half pay for the same period. Employees can choose to extend their unpaid maternity leave by up to 10 days.

Within 18 months after giving birth, the mother can take two breastfeeding breaks of up to 30 minutes each.

UAE law provides for five days of paternity leave for fathers. This must be done within six months of the child's birth.

Severance Package in UAE

Employees who have worked continuously in the UAE for one or more years are entitled to severance pay if they are dismissed. An employee's severance pay is equal to the following wage rates, based on his or her tenure of employment:

• 21 days for companies with service from one to five years
• 30 days of service per year after the first five years

If an employee has an indefinite employment contract and chooses to resign, they are entitled to severance pay in the following amounts:

• One-third of 21 days' salary for one to three years of service
• Two-thirds of 21 days' pay for three to five years of service
• Service period over five years is 21 days

For companies expanding overseas for the first time, dealing with employee layoffs and dealing with severance packages can be complicated. Remoly's UAE PEOs can reduce risk for foreign companies and provide guidance along the way.

Salary and Benefits

UAE Compensation Law

There is no minimum wage for expatriates in the UAE. However, UAE nationals have specified salary requirements based on their education level. For nationals without a high school certificate, their monthly income cannot be less than 3,000 dirhams (AED). For high school graduates, the minimum salary is Dh4,000 per month, while employees with university certificates cannot earn less than Dh5,000 per month.

Employers also need to take care to pay employees correctly for overtime. Employees who work on a Friday, a designated statutory rest day, are eligible for at least a 50% pay increase, or an extra day off.

Guaranteed Benefits in the UAE

When implementing a benefits administration plan, employers need to be aware of the legally required benefit coverage. During national statutory holidays, employees are entitled to take leave with full pay. Vacation time depends on the length of time the employee has been with the company. However, the industry "standard" is generally 30 days of vacation per year.

Pregnant female employees are entitled to 45 days of paid maternity leave - as long as they have been with the employer for at least one year. Women who have been with their employer for less than a year are entitled to half-paid maternity leave.

Male employees in the UAE are entitled to five days of paternity leave. This leave must be taken within six months of the birth of the child.

UAE Benefits Management

Benefits administration in the UAE should include statutory benefits and supplementary benefits. This will help employers attract and retain high-level talent. One such benefit required by law is pilgrimage leave. All workers are entitled to a one-time unpaid pilgrimage leave of 30 days.  

Both Abu Dhabi and Dubai have mandatory health insurance schemes that must be provided to all employees and their spouses and dependents. Although not compulsory in other emirate countries, many UAE employers choose to offer employer-sponsored health insurance to their employees.

Using Remoly's Abu Dhabi and Dubai PEO solution allows you to take the burden of employee benefits administration off your shoulders, ensuring complete accuracy and legal compliance.

Benefits and Compensation Limitations

It should be acknowledged that there are not many significant restrictions on benefits and compensation in the UAE. This includes the absence of a minimum wage for foreign employees. The UAE Penal Code makes it a criminal offense for anyone to join or participate in a trade union or labor strike.