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Employment in United Arab Emirates

UAE employment law appears complex and confusing when looking from an outside view although in some ways there are many similarities to other countries. Both UAE nationals and foreign workers are subject to UAE employment law, with some exemptions for certain categories. For these and many other reasons the following are only guidelines in the broadest sense, and professional legal services are recommended when employing in UAE.

Key points on employment in United Arab Emirates

There are several key areas to be aware of within UAE’s employment regulatory framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the UAE laws and rules for both UAE employees as well as foreign nationals.

According to Article 3 of the Federal Law No. 8 of 1980 Regulating Labour Relations, the Law applies to all staff and employees working in the UAE, whether UAE nationals or expatriates. However, there are certain categories of individuals who are exempted from the Law as listed below:

1. Staff and workers employed by the federal government, government departments of the member emirates, the

2. Municipalities, public bodies, federal and local public institutions and those staff and workers employed in federal and local governmental projects.

3. Members of the armed forces, police and security units.

4. Domestic servants.

5. Agricultural workers and persons engaged in grazing (this exemption does not include persons who are employed in corporations which process agricultural products and/or those who are permanently engaged in the operation or repair of machines required for agriculture).

A partner in a business is not considered an employee and is therefore not required to obtain a labour card from the UAE. For immigration purposes therefore, a foreign partner will be sponsored by the entity he is a partner in, as an investor rather than as an employee and will deal with the immigration authorities directly rather than through the Labour Office, provided that his name is on the business entity’s license and subject to a minimum investment requirement in the entity. However, if the partner holds an employee position additional to his partner status, he will be considered as an employee for the work he is doing in the company.

On the other hand, employees working on a commission basis are considered as employees even if they are partners in the entity they are working for.

The official body covering employment law in the UAE appears to be the Ministry of Labour.

The following information should be considered as a broad and general guideline, and as always, legal advice is recommended should you require further help.

  1. Probation

    In the UAE the probation period can be for a maximum period of six months. Once completed, the probation period is considered as part of the overall employment term and is taken into account when calculating gratuity and other terminal benefits.

  2. Termination

    Notice Period

    The minimum notice period for non-probationary employees is 30 days, or payment in lieu.

    Procedure

    During the probation period, both the employer and the employee may terminate the employment contract with immediate effect without providing a valid reason or notice. In such cases, the employer will not be liable to pay end of service benefits or compensation to the employee.

    Otherwise, notice and acceptable reasons to cancel the contract without prejudice are required. As per most countries, acts such as gross misconduct or unlawful acts are valid reasons to terminate without the normal notice period.

    Severance Pay

    A worker who has completed at least one year of service is entitled to severance pay (also referred to as “end of service gratuity”) at the end of his employment.

    Severance pay is calculated as follows:

    • 21 days’ wages for each year of the first five years of service; and
    • 30 days’ wages for each additional year, provided that the total amount does not exceed 2 years’ wages.

    A worker shall be entitled to severance pay for any fraction of a year during which he actually served, provided that he has completed the minimum of one year of service.

    However there is no entitlement to severance pay if the employee is terminated without notice for reasons such as gross misconduct or unlawful acts.

  3. Leave

    Annual Leave

    For every year of service, an employee who has worked more than six months and less than a year is entitled to an annual leave of two days leave for every month of service. For employees who have worked over a year, they are entitled to 30 days annually

    An employee shall be paid his basic wage plus the housing allowance, if applicable, and any other allowances which he receives in the normal working month.

    Sick Leave

    The employee will not be entitled for any sick leave during the probation period.

    Employees who have worked for at least three months (after any probation period)

    • Full wage for the first 15 days.
    • Half wage for the next 30 days.
    • Any following period will be without wage.

    Maternity Leave

    Female employees are entitled to 45 days of paid maternity leave including before and after the delivery, provided the employee has served for at least a year. If they have worked less than a year, the maternity leave shall be granted half pay.

    At the end of the maternity leave, a working woman has a right to extend her maternity leave for a maximum of 100 days without pay.

  4. Pension

    If the employee falls under the pension scheme, employer contributions to the pension are equal to 12.5% of the employee’s monthly salary, while the employee contribution is equal to 5% of monthly salary.

Outsourcing Employment Through a GEO Employer of Record Service

Companies entering UAE can make a decision whether to use their own resources or to use a Global Employment Organization to handle employment and payroll responsibilities. A GEO solution is particularly beneficial when a company is looking to setup an office quickly with a manageable cost. The complexity of employment regulations in UAE makes the use of a GEO advisable to ensure full compliance with employment laws, including the drafting of local employment contracts for workers.

The company that is expanding into UAE contracts with the GEO to employ and payroll their staff on their behalf. The GEO then assumes the legal responsibility for these employees, sponsoring them on work permits if necessary, complying with local employment law and running their monthly payroll. This is especially useful to fulfill all of the specific withholding requirements for pensions and benefits, as well as documenting termination, probation periods and leave requests.

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