Legal Requirements for Hiring Employees in the UAE

Table of Contents

1. Introduction
   • Navigating the New UAE Labour Law
2. Core Principles of the New Labour Law
   • Equality and Anti-Discrimination
   • Protections Against Workplace Harassment
3. The Modern Employment Contract
   • Mandatory Fixed-Term Agreements
   • New Flexible Work Models
4. Employee Rights and Entitlements
   • Working Hours and Overtime
   • Leave Policies (Annual, Sick, Maternity, and Others)
   • End-of-Service Gratuity Calculation
5. The Hiring Process: A Step-by-Step Guide
   • Phase 1: Recruitment and Contracting
     • Compliant Job Advertisements
     • The MOHRE Offer Letter
     • Drafting the Employment Contract
     • Probationary Period Rules
   • Phase 2: Securing the Right to Work
     • Visa and Permit Process
     • Mandatory Health Insurance
6. Emiratisation: A National Priority
   • Understanding the Mandate and Targets
   • The Costs of Non-Compliance
7. Mainland vs. Financial Free Zones
   • Distinguishing Legal Jurisdictions
   • Key Differences: Gratuity vs. DEWS
8. Conclusion: Strategic Compliance for Your Business

The United Arab Emirates' work environment witnessed its most major upheaval in decades with the implementation of new laws controlling labor relations.  For any company existing or preparing to launch on the UAE mainland, a comprehensive grasp of this legislation is not only a question of compliance; it is a strategic essential for recruiting talent, managing risk, and cultivating a productive workplace. 

This resource offers companies and their legal advisers with a comprehensive overview of the basic legal requirements for recruiting and managing personnel in the UAE's private sector.  We will discuss the underlying principles of the law, the contemporary employment contract, significant employee privileges, and the crucial compliance demands that govern the employer-employee relationship in the Emirates.

The Foundation and Navigating the UAE's Federal Labour Law

The cornerstone of employment regulation is the Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations, often called the "New Labour Law." Effective from February 2, 2022, this legislation repealed the long-standing previous law, ushering in a more flexible and protective framework.

This law applies to all private sector businesses and employees across the UAE mainland. However, it does not apply to companies operating within the distinct legal jurisdictions of the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), nor does it cover government employees or domestic workers, who are governed by separate legislation. The federal body responsible for overseeing and enforcing the law is the Ministry of Human Resources and Emiratisation (MOHRE).

Core Principles: Equality and Enhanced Protections

The New Labour Law specifies explicit, non-negotiable principles that must be entrenched in all HR practices. A major element is the express ban of discrimination based on race, color, sex, religion, national origin, socioeconomic background, or handicap.  This protection includes all elements of work, from recruiting to termination. The legislation additionally demands equal compensation for women doing the same employment or labor of equivalent value as men.

Additionally, the law introduces robust protections against workplace abuse. Article 14 specifically prohibits sexual harassment, bullying, and any form of verbal, physical, or psychological violence, placing a firm duty on employers to create a safe and respectful work environment.

The Modern Employment Contract: Fixed-Term Agreements

Perhaps the most major change is the prohibition of "unlimited" or indefinite-term employment contracts. Under the new system, all workers must be hired on a fixed-term contract that cannot exceed a maximum tenure of three years. These contracts are renewed with mutual agreement for comparable or shorter durations, providing for job continuity. 

This trend has important ramifications for workforce management. All organizations were expected to transfer current unlimited contracts to fixed-term agreements by February 1, 2023. Every employment relationship now has a set review point, requiring enterprises to proactively handle contract renewals and succession planning.

New Work Models: Strategic Flexibility

Recognizing global shifts, the law formally defines and regulates several work models beyond the traditional full-time role, providing businesses with a new toolkit to structure their workforce. These legally recognized models include:

• Full-time: The standard model of working for a single employer.
• Part-time: Working for one or more employers for a specified number of hours or days.
• Temporary: Work limited to a specific duration or project.
• Flexible: Working hours and days can change based on operational needs.

The law also provides a framework for remote working and job-sharing models, offering businesses unprecedented flexibility to build a blended workforce that can manage fluctuating demand and access a wider talent pool.

Employee Entitlements: Hours, Leave, and Gratuity

The law provides a clear framework for minimum employee entitlements that all employers must meet or exceed.

Working Hours: Maximum normal hours are 8 per day or 48 per week. During Ramadan, daily hours are reduced by two.

Overtime: Capped at two hours per day, compensated at the employee's basic wage plus a 25% premium (or a 50% premium if performed between 10 pm and 4 am).

Annual Leave: After one year of service, an employee is entitled to 30 calendar days of paid annual leave.

Sick Leave: After probation, an employee can take up to 90 days of sick leave per year (15 days at full pay, 30 at half pay, 45 unpaid).

Maternity Leave: A generous 60 days of paid leave (45 days at full pay, 15 at half pay). An employer is explicitly prohibited from terminating an employee for her pregnancy or for taking maternity leave.

Newly Introduced Leaves: The law introduced several new paid leave types, including 5 days for the death of a spouse (bereavement leave) and 5 working days of parental leave for both parents within six months of a child's birth.

End-of-Service Gratuity

This statutory benefit is payable to expatriate employees upon termination, provided they have completed at least one year of continuous service. The calculation is based on the employee's last basic wage:

• 21 days' basic wage for each of the first five years of service.
• 30 days' basic wage for each subsequent year of service.

The total gratuity cannot exceed two years' total wage and must be paid, along with all other final dues, within 14 days of the employee's termination date. This is a significant financial liability that businesses must properly accrue and manage.

The Employer's Playbook: A Step-by-Step Guide to the Hiring Process

Hiring an expatriate employee in the UAE is a structured process governed by MOHRE and the Federal Authority for Identity, Citizenship, Customs & Port Security (ICP). Adhering to the correct procedure is critical.

Phase 1: Recruitment and Contracting
An employer's legal obligations begin well before an employee's first day.

Compliant Job Advertisements: All job postings must be clear, accurate, and free of discriminatory language related to race, gender, religion, or disability.

The MOHRE Offer Letter: A mandatory first step is issuing a formal offer letter through the MOHRE system. Once signed by both parties, this becomes a legally binding document. The terms of the final employment contract must mirror this offer; they cannot be altered to the employee's detriment without their consent. This formalization means the decision to hire is effectively sealed at the offer letter stage, requiring robust internal due diligence beforehand.

Drafting the Employment Contract: Following the offer letter, a formal contract is drafted. It must be in Arabic, though a bilingual version is standard practice. In case of any dispute, the Arabic text will prevail.

Probationary Period: The probation period cannot exceed six months. An employer can terminate during this period with at least 14 days' written notice. If an employee resigns during probation to join another UAE employer, they must provide at least one month's notice, and the new employer is obligated to compensate the original employer for recruitment costs.

Phase 2: Securing the Right to Work

The employer is responsible for managing the entire visa and permit process and, crucially, for bearing all associated costs. It is illegal to pass these costs on to the employee. The process generally involves applying for a work permit from MOHRE, which allows an entry permit to be issued by the ICP. Once the employee enters the UAE, they must complete a medical fitness test and apply for their Emirates ID card. The employer must also provide mandatory health insurance coverage before the final residence visa is processed, which is now digitally linked to the Emirates ID card.

A National Priority: Emiratisation Compliance

Emiratisation, the initiative to increase UAE national participation in the private sector, is a non-negotiable legal requirement with significant financial penalties for non-compliance.

Understanding the Mandate

The targets apply to companies based on their size and focus on "skilled roles."

• Companies with 50 or more employees are required to increase their Emirati skilled workforce by 2% each year, broken down into 1% growth targets for each half of the year.
• Companies with 20 to 49 employees operating in 14 specific economic sectors (including IT, finance, real estate, and healthcare) were required to hire one Emirati national by the end of 2024 and must hire a second Emirati national by the end of 2025.

The Cost of Non-Compliance

MOHRE enforces these targets rigorously. For 2025, the monthly fine for each unhired Emirati under the quota is AED 9,000, amounting to an annual penalty of AED 108,000 per missed position. The government also imposes severe fines starting at AED 100,000 for "Fake Emiratisation" (e.g., registering an Emirati in a fictitious job).

To support businesses, the government has established the Nafis platform, a federal program and database for hiring qualified Emirati talent. Companies with exceptional performance can also gain membership in the Emiratisation Partners Club, receiving benefits like significant discounts on MOHRE service fees.

Mainland vs. Financial Free Zones: A Jurisdictional Maze

A fundamental strategic decision for any business is where to establish its presence. The UAE features numerous free zones, but not all are legally equal.

Most non-financial free zones, like the Jebel Ali Free Zone (JAFZA), are subject to the federal UAE Labour Law for substantive employment rights like leave and gratuity. Their independence lies in their administrative authority for handling visas and contracts.

In contrast, the financial free zones, for example the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), are legally distinct "common law islands". The UAE Federal Labour Law does not apply within their jurisdictions; they create and operate under their own comprehensive employment legislation based on English common law principles.

For example, a key difference in the DIFC is the DIFC Employee Workplace Savings (DEWS) scheme, a mandatory defined contribution plan that replaces the end-of-service gratuity system. This requires employers to make monthly contributions (e.g., 5.83% of basic salary for the first five years) into a savings plan, shifting the financial obligation from a lump-sum liability to a regular operational expense.

Strategic Compliance for Your Business

Navigating this diverse legal environment demands a proactive and integrated strategy where HR, legal, and finance units interact.

We encourage all enterprises to undertake a thorough pre-hire checklist, including validating visa quotas, evaluating job descriptions for non-discriminatory wording, and getting all internal budget clearances before releasing a legally binding MOHRE offer letter.

Ongoing compliance is similarly crucial. This involves establishing a thorough employee handbook relevant to your unique jurisdiction (Mainland, DIFC, or ADGM), keeping extensive personnel records for at least two years post-employment, and arranging frequent reviews of all HR policies to verify they correspond with the newest legislation. For a deeper dive into establishing effective policies and maintaining continuous compliance in the UAE's changing legal environment, our team at Lawzana is here to assist to link you with the appropriate labor law specialists in the UAE.