Hiring Employees in the UAE: Labour Law Basics, WPS, and Contracts

UAE Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations governs employment in the private sector across the UAE. Whether you operate from a free zone or the mainland, most of these rules apply to your employees:

Working hours: The standard working week is 8 hours per day or 48 hours per week. During Ramadan, working hours are reduced by 2 hours per day for all employees (not just Muslim employees). Overtime must be compensated at a minimum of 125% of normal hourly rate, or 150% for overtime between 10 PM and 4 AM.

Leave entitlements: Employees are entitled to 30 calendar days of annual leave after completing one year of service (2 days per month during the first year). Sick leave: 90 days per year (first 15 days at full pay, next 30 at half pay, remaining 45 unpaid). Maternity leave: 60 days (45 at full pay, 15 at half pay). Paternity leave: 5 working days within the first 6 months of the child's birth.

Probation period: Maximum 6 months. During probation, either party can terminate with 14 days written notice. The employer cannot impose a second probation period on the same employee.

Non-compete clauses: Permitted but limited to 2 years, must be geographically and activity-specific, and must be proportionate. Overly broad non-competes are unenforceable.

End of service gratuity: Mandatory for employees who complete 1+ years of continuous service. Calculated at 21 days of basic salary per year for the first 5 years and 30 days per year for each subsequent year. Total gratuity cannot exceed 2 years of basic salary.

Since February 2022, the UAE mandates that all employment contracts are fixed-term (limited duration). The previous "unlimited" contract type has been phased out.

Fixed-term contract requirements:

• Maximum duration: 3 years, renewable.
• Must be in writing and registered with MOHRE (mainland) or the relevant free zone authority.
• Must specify: job title, start date, contract duration, salary and benefits, working hours, leave entitlements, notice period, and place of work.
• Must be in Arabic. Bilingual contracts (Arabic/English) are common and recommended to ensure both parties understand the terms. In case of dispute, the Arabic version prevails.

Key contract clauses to include:

• Salary breakdown: Specify basic salary and allowances (housing, transport, etc.) separately. This matters because gratuity and other calculations are based on basic salary only.
• Notice period: Minimum 30 days, maximum 90 days. Must be the same for both employer and employee.
• Termination provisions: Clearly state grounds for termination with and without notice.
• Confidentiality: Protect business information.
• Intellectual property: Assign work products to the company.

Do not use generic contract templates downloaded from the internet. UAE labour law has specific requirements, and non-compliant contracts create risk for both parties. Use templates provided by MOHRE or your free zone authority, or have a UAE employment lawyer review your contracts.

The Wages Protection System is a mandatory electronic salary transfer system that ensures employers pay employees on time and in full. All private sector employers must pay salaries through WPS.

How WPS works:

• You register with WPS through your bank or an authorized exchange house.
• Each month, you upload a Salary Information File (SIF) to your bank, detailing each employee's salary, allowances, and deductions.
• The bank processes the payments and reports compliance to MOHRE.
• MOHRE monitors whether salaries are paid on time. Late or non-payment triggers warnings and can result in fines, work permit freezes, and legal action.

Payment deadlines: Salaries must be paid within the timeframe specified in the employment contract — typically by the end of the month or the first few days of the following month. MOHRE flags employers who are more than 10 days late.

WPS requirements for free zone companies: Most free zones have adopted WPS or have their own salary protection systems. Check with your free zone authority for specific requirements and registration procedures.

Practical tips:

• Set up WPS as soon as you hire your first employee — do not wait for MOHRE to mandate it.
• Pay salaries consistently on the same date each month. Irregular payment patterns attract scrutiny.
• Keep payroll records for at least 5 years. Document any deductions clearly and ensure they are lawful.
• Remember that WPS covers all compensation — basic salary plus allowances. You cannot pay part of the salary outside WPS.

Step 1: Make an offer. Provide a written offer letter stating the position, salary, benefits, start date, and key terms. This is not the employment contract — it is a preliminary agreement. Include a deadline for acceptance.

Step 2: Prepare the employment contract. Draft the contract using MOHRE or free zone templates. Register the contract with the relevant authority. Both parties sign.

Step 3: Apply for the work permit/visa. If the employee is not already a UAE resident, you need to process their work visa. This involves: labor quota approval, entry permit, medical fitness test, Emirates ID, and visa stamping. Timeline: 2-4 weeks. Cost: AED 3,500-7,000 per employee.

Step 4: Arrange health insurance. Mandatory in Dubai and Abu Dhabi before visa stamping. The policy must be DHA/DOH-compliant and active from the visa start date.

Step 5: Set up WPS and payroll. Register the employee in your WPS system and configure payroll for their salary structure.

Step 6: Onboard. Provide a clear onboarding plan: company policies, work tools, access credentials, and introduction to the team. Give the employee a copy of their signed contract, visa, and insurance card.

Step 7: Report to the free zone / MOHRE. Ensure all employee registrations are complete in the relevant government systems. Free zones typically handle this during the visa process.

Hiring is one of the biggest decisions a growing UAE business makes. Getting the legal foundation right from day one protects both you and your employees. For help navigating the legal and administrative requirements of scaling your team, our legal services quiz matches you with the right support services for your HR and compliance needs.

Eventually, employment relationships end. The UAE has specific rules for handling terminations:

Termination with notice: Either party can terminate by providing the notice specified in the contract (30-90 days). During the notice period, the employee continues to work and receive full salary. The employer must grant the employee one unpaid day per week during the notice period to search for new employment (if the employer initiated the termination).

Termination without notice (by employer): Permitted in limited cases: employee commits identity fraud, employee is found guilty of a crime affecting honor or honesty, employee violates safety rules causing serious damage, or employee is absent without valid reason for more than 20 non-consecutive days (or 7 consecutive days) in a year. Document everything thoroughly — wrongful termination claims are common and employees are well-protected under UAE law.

End-of-service gratuity calculation: 21 days of basic salary for each year of the first 5 years, and 30 days for each subsequent year. Example: An employee with 7 years of service and AED 10,000 basic monthly salary. Daily rate: AED 10,000/30 = AED 333. First 5 years: 5 x 21 x 333 = AED 34,965. Next 2 years: 2 x 30 x 333 = AED 19,980. Total gratuity: AED 54,945.

Final settlement timeline: All end-of-service dues (gratuity, unused leave, repatriation ticket if applicable) must be paid within 14 days of the last working day. Failure to pay on time can result in penalties.

Visa cancellation: You must cancel the employee's work visa within 30 days of termination. The employee then has a 30-day grace period to either leave the UAE, find new employment, or switch to a different visa status.