Updated August 2026. Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations — commonly called the UAE Labour Law — replaced the prior Federal Law No. 8 of 1980 and governs private sector employment relationships across the UAE mainland and non-financial free zones. The law applies to all private sector employees whether UAE nationals, Arab expats, or non-Arab expatriates. Key changes from the 2021 law include the abolition of unlimited-duration contracts (all contracts are now fixed-term, maximum 3 years, renewable), enhanced protections for part-time and remote workers, stronger anti-discrimination provisions, and updated end-of-service gratuity calculation rules. Employer compliance costs — MOHRE registration, WPS infrastructure, gratuity provisioning — amount to approximately 15–25% of total payroll in annual HR compliance expenditure.
- All employment contracts in the UAE private sector must now be fixed-term (maximum 3 years, renewable) — open-ended contracts are no longer permitted for new hires or contract renewals.
- Wages Protection System (WPS) is mandatory for all private sector employers with 1 or more employees; non-compliance results in fines of AED 5,000 per affected employee and a hiring ban.
- End-of-service gratuity accrues at 21 days’ basic salary per year of service for the first 5 years, and 30 days’ basic salary per year for subsequent years — payable within 14 days of termination.
- Non-compete clauses are valid for a maximum of 2 years and must be geographically and functionally scoped — courts strike down disproportionate restrictions.
- MOHRE (Ministry of Human Resources and Emiratisation) registration and labour card issuance must be completed before any employee commences work; failure to register is a criminal offence for the employer.
UAE Employment Law Framework: Federal Decree-Law No. 33 of 2021
Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations (the “Labour Law”) was issued on 15 September 2021 and took full effect on 2 February 2022. Cabinet Decision No. 1 of 2022 issued implementing regulations. The Labour Law applies to private sector employees on the UAE mainland and in non-financial free zones including JAFZA, DMCC, DAFZA, RAKEZ, and twofour54. Employees in ADGM and DIFC are governed by their own labour statutes (ADGM Employment Regulations 2019 and DIFC Employment Law No. 2 of 2019, as amended). UAE nationals employed in the private sector are subject to the Labour Law alongside UAE Nationalisation (Emiratisation) quotas administered by MOHRE.
The Ministry of Human Resources and Emiratisation (MOHRE) is the primary regulatory authority for private sector employment in the UAE mainland. MOHRE registers employers and employees, issues work permits and labour cards, receives labour complaints, conducts labour inspections, and enforces compliance with the Labour Law. The General Directorate of Residency and Foreigners Affairs (GDRFA) in each emirate handles residence visa issuance for expatriate employees.
The Labour Law applies to domestic workers (housemaids, chauffeurs, cooks) only if they are employed through a licensed domestic worker recruitment agency — separate detailed regulations for domestic workers are issued under Federal Law No. 10 of 2017. Free zone employees may benefit from free zone-specific employment regulations that are supplemental to or harmonised with the Labour Law.
Types of Employment Contracts
Under the 2021 Labour Law, all private sector employment contracts must be fixed-term with a maximum initial duration of 3 years, renewable for additional fixed terms of up to 3 years each on mutual written agreement. Open-ended (unlimited) employment contracts are no longer permitted for new hires — employers had until 1 February 2023 to convert existing unlimited contracts to fixed-term. An employee whose contract has not been converted is deemed to have an automatic fixed-term contract of 2 years from the conversion deadline.
The Labour Law recognises the following work patterns: full-time (minimum 8 hours per day, 48 hours per week in standard arrangement); part-time (fewer than the standard full-time hours); temporary (for a specific project or period); flexible (hours vary by employer requirement subject to minimum protections); remote work; and job sharing. Part-time employees have proportional entitlements to annual leave, gratuity, and other benefits calculated on actual days worked.
All employment contracts must be in Arabic (the legally binding language) with an English translation where the employee does not read Arabic. MOHRE provides model contract templates on its online portal (mohre.gov.ae) for various employment categories — use of these templates ensures compliance with minimum legal requirements. Key mandatory contract terms: job title and description; basic salary and allowances; working hours; annual leave entitlement (minimum 30 calendar days for employees with 1+ year of service); probation period (maximum 6 months); and notice period (minimum 30 days, up to 90 days).
Wages Protection System (WPS) Requirements
The Wages Protection System (WPS) is a mandatory electronic salary transfer system administered by MOHRE and operated through UAE Central Bank-licensed financial institutions and exchange houses (including First Abu Dhabi Bank, Emirates NBD, Al Ansari Exchange, Al Rostamani Exchange, and others). All private sector employers with one or more employees registered with MOHRE must pay salaries through WPS by the end of the month following the month of work (i.e., by day 14 of the following month for monthly salary structures).
WPS requires employers to register on the Wage Protection Portal (WPP), link each employee to their Emirates ID and bank account, and transmit salary payment files through WPS-licensed financial institutions. The system records all WPS-compliant salary payments, allowing MOHRE inspectors to verify compliance in real time. Construction sector employers must comply with additional WPS monitoring — failure by construction companies triggers an automatic hiring suspension (blacklisting) after the first violation.
WPS non-compliance penalties: AED 5,000 per employee not paid through WPS; a hiring ban preventing the employer from recruiting new staff until all salaries are paid; and potential licence suspension by DED. Repeat violations can result in criminal referral. Setting up WPS typically requires: opening a MOHRE-registered payroll account with a WPS-licensed bank or exchange (cost: AED 0–2,000 setup fee); using payroll software with WPS-compliant file generation capability (AED 5,000–30,000 per year for SMEs); and maintaining accurate employee salary data in MOHRE’s TAWTEEN portal.
MOHRE Registration and Compliance
Before hiring any employee, an employer must hold a valid labour establishment permit issued by MOHRE. Registration steps: (1) obtain a trade licence from the DED (or relevant free zone authority); (2) register the establishment with MOHRE through the MOHRE portal or TASHEEL service centres (fee: AED 300–1,500 depending on establishment size); (3) obtain an establishment card (fee: AED 1,000–2,500); (4) for each new hire, submit a work permit application (fee: AED 400–600 for skilled workers; AED 300 for domestic workers); (5) issue an employment contract through the MOHRE system; (6) upon the employee’s UAE entry, convert the work permit to a labour card and apply for the residence visa.
Key annual MOHRE compliance obligations: renewal of establishment card (AED 1,000–2,500 per year); renewal of labour cards for each employee (AED 300–600 per employee per year); filing annual Emiratisation compliance report for private sector employers with 50+ employees (Nafis portal); WPS salary payment records maintenance; and workplace health and safety compliance under Ministry of Human Resources Ministerial Order No. 32 of 1982 and subsequent occupational safety regulations.
End-of-Service Gratuity Calculation
Every employee who completes one year of continuous service is entitled to an end-of-service gratuity (EOSG) payment upon resignation, termination, contract expiry, or death. The EOSG is calculated on the employee’s basic salary — it excludes allowances such as housing, transport, education, and phone allowances. The EOSG formula under the 2021 Labour Law:
First 5 years of service: 21 days’ basic salary per year of service (i.e., basic salary ÷ 30 × 21 for each completed year).
Years 6 and beyond: 30 days’ basic salary per year of service for each completed year beyond 5 years.
Maximum EOSG: capped at 2 years’ total basic salary.
Example: An employee earning AED 15,000 per month basic salary (AED 500 per day) who has completed 7 years of service: First 5 years = 21 days × AED 500 × 5 = AED 52,500. Years 6–7 = 30 days × AED 500 × 2 = AED 30,000. Total EOSG = AED 82,500.
EOSG must be paid within 14 days of the last day of employment. Late payment attracts a 9% per annum interest charge. Employers should provision for EOSG on an accrual basis in their financial statements — this is required under IFRS (IAS 19 for defined benefit obligations) and is an audit focus point for companies with significant headcounts. Typical EOSG annual accrual cost: 5.8–8.3% of basic payroll.
Non-Compete and Confidentiality Clauses
Non-compete clauses are expressly recognised and enforceable under the 2021 Labour Law subject to three cumulative conditions. First, duration: maximum 2 years from the date the employee leaves the company. Second, geographic scope: the restriction must be geographically limited to the area in which the employee actually worked or had influence — a UAE-wide restriction may be upheld for senior executives but is often narrowed by courts for lower-grade employees. Third, functional scope: the restriction must relate to work that the employee actually performed and that could reasonably cause harm to the employer through competition — vague “any competing business” restrictions are routinely struck down.
The Labour Law makes the employer bear the burden of proving that the non-compete is necessary and proportionate. A post-termination payment (garden leave or compensation) is not a legal requirement under UAE law (unlike some European jurisdictions) but may strengthen enforceability. Confidentiality and non-solicitation clauses are separately enforceable and face a lower proportionality threshold than non-compete restrictions — they remain valid for the period specified in the contract (typically 3–5 years).
UAE Employment Compliance Costs 2026
| Cost Item | Per Employee | Employer (10 employees) | Employer (100 employees) |
|---|---|---|---|
| MOHRE Work Permit & Labour Card (annual) | AED 700–1,200 | AED 7,000–12,000 | AED 70,000–120,000 |
| Residence Visa (employer-sponsored, 2 yr) | AED 3,500–5,000 | AED 35,000–50,000 | AED 350,000–500,000 |
| Medical Insurance (mandatory, annual) | AED 2,500–8,000 | AED 25,000–80,000 | AED 250,000–800,000 |
| EOSG Accrual (% of basic salary) | 5.8–8.3% per year | Varies by salary | Varies by salary |
| WPS Infrastructure (payroll software) | AED 300–500 per year | AED 5,000–15,000 | AED 20,000–80,000 |
| Annual Leave Payout (30 days) | 8.2% of basic salary | Varies | Varies |
| HR Legal Advisory (annual) | — | AED 10,000–30,000 | AED 50,000–150,000 |
Employee Termination and Notice Periods
The Labour Law specifies notice period minimums based on service duration. For employees with less than 1 year of service: minimum 30 days’ notice. For 1–3 years: minimum 30 days. For 3–5 years: minimum 60 days. For 5+ years: minimum 90 days. Notice must be given in writing. The employer may alternatively pay the employee their salary in lieu of notice for the notice period.
An employee may be terminated without notice (summary dismissal) only for the reasons specified in Article 44 of the Labour Law — these include assault, intoxication at work, disclosure of trade secrets, absence without authorisation for 7+ consecutive days or 20+ non-consecutive days per year, and conviction of a crime involving moral turpitude. For any other termination, the employer must give proper notice and pay EOSG in full. Employees may resign without notice during probation (giving 14 days’ notice to the employer). After probation, the minimum notice from the employee is 30 days (rising to the contractual notice period, maximum 90 days).
Arbitrary dismissal — dismissal without a valid reason not tied to the employee’s performance or conduct — entitles the employee to compensation of up to 3 months’ total salary (basic + allowances) in addition to EOSG and notice pay. Courts and MOHRE labour dispute panels actively enforce this provision, particularly for long-serving employees. Employers should document all performance management steps before initiating dismissal for performance reasons.
What is the UAE probation period limit?
The maximum probation period under Federal Decree-Law No. 33 of 2021 is 6 months from the date of commencement of employment. During probation, either party may terminate the contract: the employer must give 14 days’ written notice (or 1 month if the employee was hired from outside the UAE); the employee must give 14 days’ notice (to the employer) or 1 month’s notice (if they are joining another UAE employer). An employee who resigns during probation to join another UAE employer and then resigns again before completing 6 months at the new employer may be subject to an employment ban at the discretion of MOHRE.
How is annual leave calculated under UAE labour law?
Annual leave entitlement under the 2021 Labour Law: 30 calendar days per year after completing 1 year of continuous service; 2 calendar days per month for employees who have completed 6 months but less than 1 year of service (pro-rated). Annual leave must be taken in the year it accrues (or within 2 years by agreement). Leave that cannot be taken must be cashed out at the basic daily salary rate. Annual leave during official public holidays — the UAE recognises approximately 14 public holidays per year — extends the leave entitlement by the number of public holidays falling within the leave period.
Is medical insurance mandatory for UAE employees?
Yes, in Abu Dhabi and Dubai. Abu Dhabi: all employers must provide health insurance to employees under the Abu Dhabi Health Authority (HAAD) mandatory health insurance scheme — coverage extends to the employee and (for UAE nationals) their dependants. Dubai: all employers must provide health insurance under the Dubai Health Authority (DHA) mandatory health insurance law (Law No. 11 of 2013), with phased implementation requiring all employees to be covered. Other emirates: there is no federal mandatory health insurance law outside Abu Dhabi and Dubai, though federal law requires employers to cover work-related injury medical costs. Typical annual health insurance premiums: basic plan AED 2,500–4,500 per employee; comprehensive plan AED 5,000–12,000 per employee depending on coverage and employee demographics.
Can UAE employers include non-compete clauses in employment contracts?
Yes, with conditions. Non-compete clauses are valid and enforceable under Article 10 of Federal Decree-Law No. 33 of 2021, provided they are proportionate in duration (maximum 2 years), geographic scope, and functional scope. Courts will not enforce blanket non-compete clauses that cover entire industries or the whole UAE territory for junior employees. For senior executives with access to trade secrets, client relationships, or key commercial information, a UAE-wide, 2-year non-compete with a defined functional restriction is generally upheld. Employers wishing to enforce non-compete clauses should also seek an injunction (interim relief) from the competent court at the earliest opportunity after the employee’s departure.
What are the Emiratisation obligations for UAE employers?
Under the Nafis programme (managed by the Emirati Cadres Competitiveness Council), private sector companies with 50 or more employees must meet annual Emiratisation quotas — currently 2% of skilled positions per year, increasing annually. Companies that miss their Emiratisation targets are required to pay a monthly AED 6,000 contribution per unfilled Emirati position to the Nafis fund. Companies in the banking sector face higher Emiratisation targets under CBUAE guidance. Employers with 20–49 employees have separate targeted Emiratisation obligations for specific skilled roles. All Emiratisation compliance is monitored through the TAWTEEN portal and linked to MOHRE establishment licences.