Employment Issues in the
United Arab Emirates
Latham & Watkins | Employment Issues in the United Arab Emirates 1
The purpose of this memorandum is to summarise employment issues
arising in the United Arab Emirates (UAE). This note focuses on the
UAE Federal Law No. 8 of 1980 (the Labour Law). It also describes the
employment law that applies in the Dubai International Finance Centre
(the DIFC) in Dubai.
Prior to commencing any work in the UAE, all non-UAE nationals must obtain a work
permit and residency visa which enables them to live and work in the country. These
documents are obtained via sponsorship with an employer (or local sponsor) which
is licensed and registered with the Federal Ministry of Labour and Social Affairs (the
Ministry of Labour). A residency visa is usually tied to the employment visa application
and will allow the employee the right to reside and work in the UAE for the duration of
his/her employment only. The UAE has designated a number of Free Zone areas to
provide exemption from many UAE laws to encourage foreign investment. If an employee
is employed by an organisation which is based in a Free Zone, such as the DIFC, the
free zone authority will be the sponsoring entity.
There are significant penalties for both the employer and employee for failure to comply
with immigration procedures and requirements.
APPLICABLE LABOUR LAW
The Labour Law applies to employees working in the UAE, whether they are UAE
nationals or not, except for employees working in the DIFC, whose employment is
governed by the employment law of the DIFC (DIFC Law No. 3 of 2012, the DIFC
Employment Law) (see below). Other Free Zones, such as the Jebel-Ali Free Zone and
the Dubai Airport Free Zone, often have their own laws and regulations, including certain
provisions regarding employment, but these are much less prescriptive that the DIFC
Employment Law, and accordingly the Labour Law continues to apply in these Free
Certain categories of individuals are exempted from the Labour Law, including:
(a) Domestic servants
(b) Staff and workers who are employed by the federal government
(c) Members of the armed forces and police
The Labour Law provides for minimum standards for employing employees in the UAE
which employers cannot contract out of.
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The UAE government introduced the Emiratisation programme in 2004 to encourage
employment for its citizens in both the public and private sectors. The programme aims
to reduce the UAE’s dependence on foreign workers and to ensure that UAE citizens
benefit from the economic growth in the country. Similar programmes are being pursued
by other Gulf Cooperation Council countries including Oman, Bahrain, Qatar and Saudi
Arabia. Emiratisation does not currently apply in any of the Free Zones.
The Labour Law provides that employers should prioritise UAE nationals (followed
by other Arab nationals) over any other nationalities when seeking employees. This
means that — in theory — the Ministry of Labour will not permit non-UAE nationals to
be recruited where ministry records show unemployed nationals could perform that role.
These requirements are not currently applied in the DIFC but may be applied in other
Free Zone areas.
As part of its Emiratisation programme, the UAE has sought to identify suitable industries
in which UAE nationals can work. Banking and insurance were identified as two such
industries and companies operating in these sectors must now meet specific annual
The government established the National Human Resource Development and
Employment Authority (TANMIA) to assist with the Emiratisation programme. TANMIA
provides career guidance and training to UAE nationals. All employers in the UAE should
be registered with TANMIA.
The Ministry of Labour may impose fines on companies that do not meet the
Historically when non-UAE nationals wished to transfer to a new job in the UAE, upon
cancellation of their work permit with their previous employer, the Ministry of Labour
would impose a six-month ban on the non-UAE national applying for a new work permit,
unless the previous employer provided a “Certificate of No Objection”, otherwise the
employee would be required to pay a fee.
Since 1 January 2011 however, this six-month ban is no longer automatically applied,
provided that the employment contract is terminated by mutual consent or in accordance
with the terms of the contract (i.e. requisite notice is given) and the employee has a
minimum level of qualifications, or has at least two years’ service with his previous
Latham & Watkins | Employment Issues in the United Arab Emirates 3
As part of the work permit and residency visa application process, non-UAE nationals
will be required to enter into a short, standard-form employment contract provided by the
Ministry of Labour.
All employees are entitled to a written contract of employment. The Ministry of Labour
has a prescribed form of employment contract, although an employer can choose to use
his or her own form, provided it contains certain provisions (as summarised below). All
employment contracts must be registered with the Ministry of Labour (in Arabic).
The Labour Law envisages two types of employment contracts — fixed-term and openended
(which is terminable on notice). A fixed-term contract must be for a term of four
years or less although it can be renewed by mutual consent for a similar or lesser period.
Any employment contract which does not include a termination date will be deemed an
The Labour Law provides that the following information must be included in the
(b) Date of employment contract
(c) Commencement date of employment term
(d) Nature of the employment contract (whether fixed or open-ended)
(e) Job description
(f) Term of contract (for fixed-term contracts)
(g) Location of employment
TERMINATION OF EMPLOYMENT
The Labour Law provides for the initial employment period to be classed as a
probationary period. The probationary period can last up to six months. During this period
the employer may terminate the employment immediately.
After the probationary period, the Labour Law provides for a 30-day minimum notice
period provided the employer provides an “acceptable” reason. An acceptable reason is
not defined in the Labour Law but is generally considered to be a reason for termination
that must relate to the employee’s work (which is therefore quite broad). Employers can
make a payment in lieu of notice rather than allowing the employee to work out his or her
Article 120 of the Labour Law sets out the circumstances under which an employer can
dismiss without notice, payment in lieu of notice or entitlement to end of service gratuity
(see page 4). These circumstances include failing to carry out his/her basic duties under
the employment contract or being found drunk or intoxicated by drugs during working
No specific regulations apply regarding redundancies or lay-offs. Therefore, employers
need not consider information or consultation obligations when implementing a
Additional considerations apply to dismissals of UAE nationals. Under Ministerial
Decision No. 176, which came into force in February 2009 concerning the dismissal of
UAE national employees in the private sector, it is unlawful to dismiss a UAE national if
any of the following apply:
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(a) Other than for a summary dismissal reason as set out in Article 120 of the Labour
(b) If a non-national is performing the role of the national who was dismissed
(c) If the employer failed to file a notice to the Ministry of Labour at least 30 days
prior to the effective date of dismissal, or failed to follow any Ministry of Labour
instructions relating to the notice of dismissal
(d) If the UAE national was not paid all retirement and end of service entitlements,
as specified in the Labour Law
Whilst compensation for arbitrary dismissal is usually capped at three months’ pay,
whether that compensation cap would apply to the dismissal of an Emirati in violation of
Ministerial Decision No. 176 is unclear. Further, whether the employer could be ordered
to reinstate the dismissed Emirati also remains unclear. One consequence that is clear
— if the employer applied for new work permits, the Ministry of Labour would not issue
any until the court had issued its final judgment in the matter.
The maximum working hours for an adult employee is eight hours per day (although
normal work hours are reduced by two hours during Ramadan) and employees
are entitled to a rest break after five consecutive hours of work. The Labour Law
provides that overtime hours must not exceed two hours per day (unless the work is to
prevent occurrence of a major loss or a serious accident or to remove or mitigate the
consequences of such loss or accident). Overtime hours are to be paid at an increased
salary of 25 percent, or where the employee works overtime between the hours of 9 p.m.
and 4 a.m., overtime should be paid at an increased salary of 50 percent. If the employee
is required to work on a Friday, the employee is entitled to a day off or an increased
salary of 50 percent. Employees cannot be required to work for two consecutive Fridays
unless their salary is calculated on a daily basis.
Employers cannot ask employees to “opt-out” of these working time obligations
although the working time and overtime provisions do not apply to “persons holding
senior executive managerial supervisory positions”, if such persons have the powers of
employer over the employees. The Ministry of Labour has categorised such people as:
(i) Chairpersons and members of boards of directors
(ii) General managers
(iii) Managers of departments
(iv) Individuals working in supervisory posts who have dedicated powers of authority
over other employees
Employees are entitled to 30 calendar days of paid vacation after they have been
employed for one year. This is roughly equivalent to 22 working days. In addition,
employees are entitled to official public holidays declared for the sector in which they are
working (public or private). Muslim employees are also entitled to 30 days’ unpaid leave
once during their employment to perform Hajj (pilgrimage).
Latham & Watkins | Employment Issues in the United Arab Emirates 5
Employees are not entitled to paid sick leave during the probation period. After the
probation period, employees are entitled to full pay for the first 15 days and half pay for
the next 30 days. Employees are required to provide evidence of their sickness by way of
an official medical certificate.
Under the Labour Law, women are entitled to 45 days of paid maternity leave (although
the Sharjah Executive Council has increased this to 60 days for women employed in the
emirate of Sharjah). This leave is based on full pay if the employee has completed one
year of service and half pay if the employee has completed less than one year’s service.
At the end of this 45-day period, women have a right to take a further 100 days of unpaid
leave. The Labour Law provides no paternity entitlement (although male employees in
Sharjah are entitled to three days of fatherhood leave).
If an employee is dismissed, the employer is responsible for the repatriation costs to
the place of recruitment or to any other place agreed with the employee, unless the
employee is commencing new employment with another employer in the UAE — in which
case the new employer assumes responsibility for the employee’s repatriation costs upon
termination of that employment.
Under Dubai Law No. 11 of 2013, since January 2014 employers in Dubai are required
to provide basic health insurance to employees. This law is being implemented in stages
— meaning companies with 1,000 or more employees must provide their workers with
health insurance by October 2014, companies with 100 to 999 employees must comply
by July 2015 and companies with fewer than 100 workers must comply by June 2016.
WAGES PROTECTION SYSTEM
Workers in the UAE are paid via the wages protection system — an electronic salary
transfer system through which employers transfer wages to certain authorised banks,
bureaux de change or financial institutions, which then transfer the wages to the workers.
This system was implemented to guarantee the timely and full payment of agreed-upon
The UAE government does not collect income tax. Whether or not a non-UAE national
will be required to pay tax in his or her home country will depend on the tax regime
applicable to each individual. The UAE government does not collect social security
contributions for non-UAE nationals. However, with respect to UAE nationals, both the
employer and the employee are required to make contributions (12.5 percent employer
contribution and five percent employee contribution) to the General Pension and Social
End of Service Gratuity (ESG)
Employees who have provided more than one year’s service may be entitled to an ESG
payment. An ESG payment is calculated as the sum of the following:
(i) 21 days’ salary for each year of the first five years of service
(ii) 30 days’ salary for each additional year of service
6 Latham & Watkins | Employment Issues in the United Arab Emirates
The maximum ESG entitlement is two years of salary. If an employee resigns that
individual is entitled to 1/3 of their ESG payment if his or her length of service is between
one and three years; 2/3 of their ESG payment if his or her length of service is between
three and five years; and a full ESG payment if his or her length of service is more than
The employee is not entitled to an ESG payment if the employee is terminated for one of
the reasons set out in Article 120 of the Labour Law (as described earlier).
ESG is calculated based on an employee’s basic wage, i.e., excluding any allowances
such as housing or transport allowances.
WORKS COUNCILS, UNIONS OR EMPLOYEE CONSULTATION
The UAE does not provide a right to freedom of association, therefore, trade unions and
collective bargaining are not currently permitted. No statutory provisions relate to works
councils or employee consultation, and any collective industrial action — such as striking
— is a criminal offence as set out in the criminal code.
If an employee has a dispute relating to his or her employment or the termination of his or
her employment, this dispute should be raised with the Ministry of Labour who will handle
the conciliation process, or submit the dispute to court, if necessary. If a court determines
that an employee has been dismissed ‘arbitrarily’, i.e., without a fair reason, the court may
order the employer to pay compensation to the employee of up to three months’ salary.
DIFC EMPLOYMENT LAW
As stated previously, the DIFC has its own independent legal framework and judicial
system. The main differences between the Labour Law and the DIFC Employment Law
are as follows:
(i) Probation period and notice period – The DIFC Employment Law provides no
specific probationary period. The employee and employer are entitled to the following
minimum periods of notice:
(a) Seven days if the period of continuous employment is less than three months
(b) 30 days if the period of continuous employment is three months or more but
less than five years
(c) 90 days if the period of continuous employment is five years or more.
The employee and employer can agree to waive the notice period.
(ii) Summary dismissal — The Employment Law does not provide list of circumstances
which justify summary dismissal. The employer is entitled to dismiss immediately for
“cause” being where the conduct of the employee warrants termination and where
a reasonable employer would have terminated the employment. Therefore, this
arguably allows the employer greater flexibility than under the Labour Law.
(iii) ESG payment — The DIFC Employment Law calculates the ESG payment in the
same way as the Labour Law. However, the DIFC Employment Law includes no
provision to reduce the ESG payment if the employee initiates the departure.
(iv) Working hours — An employee’s working time shall not exceed 48 hours per
week. However, the employer can obtain the employee’s consent to opt-out of these
working time provisions.
Latham & Watkins | Employment Issues in the United Arab Emirates 7
(v) Vacation — Vacation entitlement for employees with more than one year’s service is
20 working days plus official public holidays for the sector in which they are working
(public or private). Employees are only entitled to the 30 days’ unpaid leave for the
Hajj pilgrimage if they have worked for a minimum of 12 months.
(vi) Maternity leave — Maternity leave is 65 days (33 days of full pay and thereafter
32 days of half pay) provided the woman has been employed for at least one year
preceding the expected week of childbirth. This leave is also available to employees
adopting a child three months or younger (unlike the Labour Law which is silent
regarding adoption leave).
(vii) Sick leave — The maximum annual sick leave entitlement is 60 days of full pay.
(viii) Discrimination — Unlike the Labour Law, which does not include any provisions
regarding discrimination, the DIFC Employment Law expressly prohibits employers
from discriminating against employees on the grounds of sex, marital status, race,
nationality, religion or disability. Employers are also required to provide and maintain
workplaces which are free of harassment.
This memorandum is a summary of the key requirements under UAE Labour law as of 1 July 2014.
Please note that this information is provided for guidance purposes only and should not be taken as a
definitive statement of law. The information provided is only applicable to employers in the private sector.
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