United Arab Emirates (UAE) Employment Law

Employment Law Regime

United Arab Emirates (UAE) employment law is regulated by Federal Law No. 8 of 1980, also known as the UAE Labour Law. This law applies to all employees working in the UAE, including foreign nationals. The UAE Labour Law covers several aspects of employment, including recruitment, employment contracts, termination, and compensation.

Employment Contracts

In the UAE, employees are classified into two main categories:

Skilled and Unskilled Workers

Supervisory, Managerial, and Professional Staff

Employment Contracts

All employment relationships in the UAE must be governed by a written employment contract. The contract should specify the terms and conditions of employment, including the job description, remuneration, working hours, and duration of the contract. Employers are required to provide employees with a copy of their employment contract in Arabic, and employees are required to sign the contract before starting their employment.

Under the UAE Labour Law, fixed-term employment contracts can be terminated by mutual agreement between the employer and employee or by the expiry of the contract’s duration. In contrast, indefinite-term contracts can be terminated by either party, subject to the terms of the contract and the provisions of the law. Employers must provide written notice to employees before terminating their employment, and employees are entitled to compensation if they are terminated without a valid reason.

Holiday’s in UAE

The UAE recognizes several public holidays, including:

New Year’s Day (January 1st)

Eid al Fitr (date varies)

Arafat Day (date varies)

Eid al Adha (date varies)

Hijri New Year’s Day (date varies)

Prophet Mohammed’s Birthday (date varies)

National Day (December 2nd)

Employees are entitled to a paid day off on public holidays, and if they work on a public holiday, they are entitled to receive their normal wage plus an additional 50% of their wage.

Termination of Employment

Under the UAE Labour Law, employers are required to provide employees with notice before terminating their employment. The length of the notice period depends on the length of service of the employee. Employees who have been employed for less than five years are entitled to 30 days’ notice, while employees who have worked for more than five years are entitled to 90 days’ notice.

Employees who have been employed for more than one year are entitled to end-of-service benefits, which include:

-A gratuity payment based on the length of service and the employee’s salary

-Payment for any accrued but unused annual leave

-Payment for any unused sick leave

-Compensation for any outstanding benefits, such as unpaid overtime or commissions

The gratuity payment is calculated as follows:

-21 days’ pay for each year of service for the first five years of service

-30 days’ pay for each year of service after the first five years

-The maximum gratuity payment that can be made is two years’ salary.

Pension

There are multiple pension funds in the UAE with various mandates. General Pension and Social Security Authority (GPSSA) is entrusted with providing pension-related services to citizens employed in the federal government entities and the private sector across all the emirates. However, it does not cover citizens working in the public and private sectors in the emirate of Abu Dhabi and in the public sector in the emirate of Sharjah.

The Investment Corporation of Dubai recently introduced a new investment option for foreign nationals and their employers called the Golden Pension Plan, which allows employees to invest a certain amount of their end-of-service benefits with National Bonds (an investment company owned by the Investment Corporation of Dubai), provided they have completed one year of service with their employer. Employers can invest either a lump sum or a portion of their employees’ end-of-service benefits through a pension, and employees have the option to make a voluntary contribution of at least AED 100 per month. Since employees in the United Arab Emirates have historically relied on their end-of-service gratuity as their primary source of savings, these options intend to provide a financial safety net when planning for retirement. The Golden Pension Plan primarily aims to attract skilled workers, increase foreign investment and assist local entities in supporting their employees. Employers interested in offering this plan to their employees must register with National Bonds and employees are advised to research options and discuss their plan with employers.