Updated August 2026. The UAE’s employment law framework was overhauled by Federal Decree-Law 33/2021 on the Regulation of Labour Relations, which replaced the decades-old Labour Law 8/1980. Since its implementation on 2 February 2022, the new law has changed how contracts are structured, how gratuity is calculated, and how disputes are resolved. HR and employment law compliance in the UAE is now more complex — and penalties for non-compliance with MoHRE’s Wage Protection System (WPS) and other requirements are actively enforced.
- Federal Decree-Law 33/2021 governs all private-sector employment in the UAE. It applies to mainland companies and, through contractual choice, is often adopted by free zone entities (except DIFC and ADGM which have their own employment laws).
- Limited-duration contracts are now the only contract type permitted under the new law — the “unlimited duration” contract was abolished effective February 2022. All employees on legacy unlimited contracts must have been migrated to fixed-term contracts by 1 February 2023.
- The MoHRE Wage Protection System (WPS) requires monthly salary payments through approved financial channels. Penalties for WPS non-compliance start at AED 5,000 per employee per month of default.
- End-of-service gratuity is now calculated at 21 days of basic salary per year for the first 5 years and 30 days per year thereafter, with no cap on total amount for the first 5 years’ component.
- The new law introduces 5 flexible work models including part-time, temporary, remote, shared employment, and task-based contracts.
- MoHRE’s free conciliation service must be attempted before any employment dispute proceeds to the Labour Court — failure to comply results in rejection of the court filing.
Federal Decree-Law 33/2021: Core Changes from the Old Labour Law
The transition from Federal Law 8/1980 to Federal Decree-Law 33/2021 brought multiple structural changes that every UAE employer must understand:
- Contract types simplified: All employment contracts are now fixed-term (limited duration), with a maximum initial term of 3 years (renewable). Unlimited-duration contracts no longer exist for new hires or renewals.
- Probation period: Maximum 6 months. If the employer terminates during probation, 14 days’ notice is required. If the employee resigns during probation to take another UAE job, 1 month’s notice (to the current employer) is required.
- Notice period: Minimum 30 days, maximum 90 days for employees earning above AED 15,000 per month (by agreement). Notice period must be specified in the employment contract.
- Non-compete clauses: Enforceable for up to 2 years post-termination if the employee is involved in direct client-facing or proprietary work, and the geographical and professional scope is reasonable.
- Annual leave: 30 calendar days per year after one year of service; 2 days per month for employees with 6–12 months service.
MoHRE Wage Protection System (WPS): Obligations and Penalties
The Wage Protection System (WPS) is a Ministry of Human Resources and Emiratisation electronic salary transfer system requiring private-sector employers to pay wages through approved WPS agents (banks, exchange houses) by the end of the month following the working month. Key rules:
- Employers with 100+ employees: WPS deadline is the last day of the month.
- Employers with fewer than 100 employees: WPS deadline is within 30 days of the month end.
- Wage protection must include basic salary and any fixed allowances specified in the employment contract.
- Penalties for WPS default: AED 5,000 per employee per month of default; suspension of new work permit applications after persistent non-compliance; and potential criminal referral for employers who persistently withhold wages.
| WPS Violation | First Occurrence Penalty | Persistent Non-Compliance |
|---|---|---|
| Salary paid late (1–3 months) | AED 5,000/employee/month | Work permit ban |
| Salary withheld (3+ months) | Employer placed on MoHRE watch list | Criminal referral to Public Prosecution |
| Underpayment vs. WPS amount | AED 1,000–AED 5,000/employee | Escalated MoHRE inspection |
| Non-enrolment in WPS | Work permit application suspension | Licence referral to DED |
End-of-Service Gratuity: Calculation Under Federal Decree-Law 33/2021
Under the new Labour Law, end-of-service gratuity (EOSG) calculation has been clarified and simplified:
- First 5 years of service: 21 calendar days of basic wage per completed year
- After 5 years of service: 30 calendar days of basic wage per completed year (for the additional years beyond 5)
- Part-years are calculated on a pro-rata basis
- The gratuity base is basic wage only — housing, transport, and other allowances are excluded
- Gratuity is payable upon termination of any kind (including resignation after 1 year), with no reduction for resignation (under the new law) unlike the old regime
Example calculation: An employee with 7 years’ service and a basic salary of AED 10,000/month: (21/30 × 10,000 × 5) + (30/30 × 10,000 × 2) = AED 35,000 + AED 20,000 = AED 55,000 total gratuity.
Working Hours, Overtime, and Leave Entitlements
The standard UAE working week under Federal Decree-Law 33/2021 is 48 hours per week (8 hours per day, 6 days), reduced to 36 hours per week during Ramadan for Muslim employees. Key provisions:
- Overtime: Hours worked beyond the standard day attract a 25% premium; work between 10pm and 4am attracts a 50% premium.
- Rest day: Employees are entitled to at least one paid rest day per week (Friday is the default).
- Sick leave: Up to 90 days per year (first 15 days: full pay; next 30 days: half pay; remaining 45 days: unpaid).
- Maternity leave: 60 days (first 45 days: full pay; next 15 days: half pay). Extended to 100 days with half pay for complications or disability of the child.
- Parental leave: 5 days for fathers within 6 months of birth.
Disciplinary Procedures and Termination
Under Federal Decree-Law 33/2021, employers must follow a structured disciplinary process before terminating an employee. Summary dismissal (without notice or gratuity) is permitted only in limited circumstances listed in Article 44, including: serious dishonesty, physical assault at the workplace, and abandonment of work for 7+ consecutive days or 20+ non-consecutive days in a year.
For all other terminations, the employer must:
- Issue a written notice (minimum 30 days, as per contract)
- Allow the employee to take their accrued annual leave during the notice period (or pay in lieu)
- Pay final settlement within 14 days of the last day of employment
- Cancel the employee’s work permit and residency visa within 30 days of employment termination
Wrongful termination compensation: courts typically award between 1 and 3 months’ wage in addition to full EOSG and notice pay.
DIFC and ADGM Employment Law: Key Differences
Employees working within the DIFC and ADGM are not governed by Federal Decree-Law 33/2021. Instead:
- DIFC: Governed by the DIFC Employment Law (DIFC Law 4/2021 as amended). DIFC employees accrue EOSG at 21 days per year (without the 5-year threshold for increase) until the DIFC Employee Workplace Savings (DEWS) scheme replaces it for new joiners (employers contribute monthly to a third-party fund).
- ADGM: Governed by ADGM Employment Regulations. Similarly moving toward a savings-plan model replacing traditional gratuity.
Frequently Asked Questions
Did the 2022 UAE Labour Law abolish unlimited employment contracts?
Yes. Federal Decree-Law 33/2021, effective 2 February 2022, abolished unlimited-duration contracts. All new employment contracts must be fixed-term (limited duration) with a maximum initial term of 3 years, renewable by mutual agreement. Employees on legacy unlimited contracts should have been migrated to fixed-term contracts by 1 February 2023 — failure to migrate does not invalidate the employment but leaves the employer in technical non-compliance with MoHRE.
Is an employee entitled to gratuity if they resign after 2 years?
Yes. Under Federal Decree-Law 33/2021, an employee who completes at least 1 year of service is entitled to EOSG upon any termination including voluntary resignation. Under the old 1980 law, employees who resigned before 5 years received reduced gratuity, but this reduction no longer applies under the 2021 law. An employee resigning after 2 years with a AED 8,000 basic salary would receive: 21/30 × 8,000 × 2 = AED 11,200.
What is the MoHRE free conciliation process?
Before any employment dispute can proceed to the UAE Labour Court, the complainant (employee or employer) must file a complaint with MoHRE’s Individual Labour Relations section. MoHRE offers free conciliation mediation — typically resolved within 2–4 weeks. If no settlement is reached, MoHRE issues a referral letter to the Labour Court. Courts reject cases where this step was skipped.
Can UAE employers include non-compete clauses in employment contracts?
Yes. Under Article 10 of Federal Decree-Law 33/2021, non-compete clauses are enforceable if they are limited in duration (maximum 2 years), geographical scope, and type of work. Courts assess whether the clause is proportionate to protect a legitimate business interest. Overly broad clauses covering all industries or entire countries are routinely set aside by UAE courts.
What are the 5 new flexible work models under the 2021 Labour Law?
Federal Decree-Law 33/2021 formally recognises 5 flexible work models: (1) Part-time contracts — defined working hours fewer than a full-time employee; (2) Temporary contracts — for a specific project or period; (3) Flexible contracts — where hours vary by operational need; (4) Remote/telework contracts — work performed outside the employer’s premises; and (5) Job-sharing contracts — two employees sharing one full-time role. MoHRE has issued model contract templates for each type.