Table of Contents

United Arab Emirates

Table of Contents

Currency

United Arab Emirates Dirham (AED)

Payroll Frequency

Monthly

Employer Taxes

12.5%

About United Arab Emirates

The United Arab Emirates (UAE) comprises a federation of seven states, which has developed into one of the Middle East’s most significant economic centers with high living standards. The United Arab Emirates has an open economy with a GDP of US$382.6 billion in 2017. UAE’s free trade zone offering 100% international ownership and zero taxes have also contributed to attracting global investors to its economy. With a current total population of 6,072,475, UAE has several ethnic groups: Emirati, South Asian, Egyptian, and the Philippines, with many spoken languages including Arabic (official language), Persian, Hindi, English, and Urdu. Islam is the official religion accounting for 76% of the population, with Christianity and others accounting for the rest. The UAE is considered politically stable and is projected to continue to grow economically.

Employment Relationship

• Permanent Employment

In the United Arab Emirates, unlimited and permanent employment contracts are prohibited. Employment contracts cannot exceed 3 years and can be extended when both parties are in agreement or if both parties continue to implement the contract after the expiration date and is thus implicitly extended. Any extension or renewal of the terms of the employment contract will be added when calculating an employee’s end of services benefits.

• Fixed-Term or Specific-Purpose Contracts

The maximum duration of a fixed-term contract is 3 years (can be renewed by mutual agreement). The contract can be terminated before its expiration with parties' mutual consent and notice period or in the case when one of the parties violates its terms. Employees currently engaged in unlimited term contracts must be converted to fixed-term contracts by December 2023. Contracts must contain salary information, a notice for termination, and any employee rights under the decree-law. Additionally, the contract must classify the work as full-time, part-time, temporary, flexible, or any other work specified by regulations. 

• Temporary Employment Contratcs

The labor law of the United Arab Emirates defines temporary work as work that requires a specific period or is based on a certain task. Temporary work performed must be covered under a contract. Temporary workers are not entitled to end-of-service benefits if their contract is for less than 1 year duration.   The UAE also permits the use of employment agencies for hiring temporary workers. These agencies make temporary workers available to third parties (beneficiary companies) for specific work. The agency must refrain from providing workers to a beneficiary if the Ministry administratively suspends the beneficiary company for committing violations relating to the application of the labor law. Additionally, they must not provide workers to another agency engaged in temporary employment with the aim of employing them at the beneficiary. All employment agencies must have a license to operate.

Probationary Period

In the UAE, the probationary period is counted towards the period of employment. During the probation, the employee can be dismissed without a notice period or end-of-service allowances. Employees are not entitled to paid sick leave while on probation. Employers are required to provide a minimum of 14 days notice to employees if they wish to terminate employment during the probationary period. 

Working Hours

According to the labor code of the United Arab Emirates, the standard workweek comprises 48 hours per week or 8 hours per day. Work in arduous or unhealthy jobs and industries is limited to 7 hours per day.  Employees under 18 years of age are prohibited from working over 6 hours a day.

Holidays / PTO

• Statutory Holidays

Hijra New Year (date may vary), Christian New Year (January 1), Eid-ul-Fitr – two days holiday (date may vary), Eid Al Adha and Wqfa Day – three days’ holiday (date may vary), Birthday of Prophet (date may vary), Ascension Day (date may vary), Commemoration Day – 30th November, National Day (December 2), Arafat Day – Date subject to change.

• Paid Annual Leave

According to the labor code of the United Arab Emirates, employees are entitled to annual leave as follows: For employees who have worked for over 6 months but less than one year, the annual leave is 2 days a month. For employees with more than 1 year of experience in the company, the annual leave is 30 days a year. Part-time employees are entitled to an annual leave based on the actual working hours and as outlined in the employment contract. Employees have the right to their basic pay and housing allowance for the duration of the annual leave. 

• Sick Leave

In the UAE, employees are entitled to annual sick leave of 90 days upon completing 3 months of employment after the probationary period. The employee must notify the employer about their sickness within 3 working days.  Employees cannot be dismissed while on sick leave. If they use all 90 days of sick leave and are unable to report to work afterward, employers are allowed to terminate the employment agreement. 

• Maternity Leave

In the United Arab Emirates, the law provides a paid maternity leave of 90 days to female employees starting from the delivery date. The leave is paid with full salary. If the female employee gives birth to a sick or disabled child, the employee is entitled to an additional 30 days of maternity leave with full pay starting at the end of maternity with the option for an additional 30 days without pay. 

• Paternity Leave

The United Arab Emirates provides paternity leave of 3 days during the month of birth with full payment to male employees. This is in addition to Emirati Federal Decree-Law No. 33 of 2021, employers must provide 5 paid working days of parental leave, to be taken within 6 months from the birth date of the child. 

Termination of Employment

• Notice Period

According to the labor law, employers can terminate an employment contract by providing written notice of at least 30 days up to 90 days. The party (employer or employee) who did not abide by the notice period is required to pay the other party compensation, which is equal to the employee's wage for the full notice period or whatever time is remaining.  If the employer terminates the employment contract, the employee shall have the right to be absent during the notice period for 1 working day without pay per week to search for another job. They must notify the employer at least 3 days before the absence day.

• Severance Benefits

The labor code states that employees must be provided with end-of-service remuneration if they have completed 1 year of service with the employer. Foreign employees are entitled to a severance gratuity as well. Under federal law, the severance is paid as follows if the employer terminates the employee's contract: 1 to 5 years of service – 21 days' salary for each year of service  More than 5 years of service – 30 days' salary for each additional year, provided the entire compensation does not exceed 2 years' pay Employers are obligated to have a bank guarantee of AED 3,000 for each employee or an insurance policy that covers every employee's severance entitlements in the case of bankruptcy. Employers have the option to register with the Ministry of Human Resources and Emiratisation to a voluntary program that serves as an alternative to the statutory end of service benefits. It is known as the Savings Scheme. In this program, employers contribute 5.83% of an employee's salary monthly for any employee with less than 5 years of service. The contribution rate increases to 8.33% for employees with 5 years or more of service.