COUNTRY

Written Agreements

Written employment contracts are mandatory in the UAE. When the contract is concluded in writing, it has to be duplicated, and a copy is to be provided to the employee and the employer. The agreement must include the date of its conclusion, the date on which the job begins, the nature and place of work, the duration of the contract in case of limited-term agreements, and the amount of remuneration.

The law permits employers to include non-compete restrictions in employment contracts. These restrictions must be limited to the extent necessary to protect the business’s legitimate interests and defined in respect of time, place, and the nature of work. The maximum restrictive period is two years from the date of the employment contract's expiry.

Oral Agreements

Under the previous federal decree, oral contracts were allowable as they applied to unlimited contracts. The current federal decree regulating employment relationships limits employment contracts to fixed-term and requires written contracts, thus prohibiting the use of oral agreements. Employees may prove by all possible means of proof the existence of the employment contract, the amount of the wage, and any of the rights they are entitled to receive.

Implied Agreements

Under previous federal decree, implied contracts were allowable under unlimited contracts. The Federal Decree Law No. 33 of 2021 limits employment contracts to fixed-term and requires written contracts thus prohibiting the use of implied agreements. However, under civil law, the actions of parties can create a duty between them which will result in a contractual relationship. If a person performs work for another, the receiving party has an obligation to compensate the worker. If a person pays for a service, the person paid has an obligation to perform the work or return the amount which was paid.

According to the labor code of the United Arab Emirates, the standard workweek comprises 48 hours per week or 8 hours per day. Work in arduous or unhealthy jobs and industries is limited to 7 hours daily.

Employees under 18 are prohibited from working over 6 hours a day.

Hijra New Year (date may vary), Christian New Year (January 1), Eid Al Fitr – two days holiday (date may vary), Eid Al Adha and Wqfa Day – three days’ holiday (date may vary), Birthday of Prophet (date may vary), Ascension Day (date may vary), Commemoration Day - 30th November, National Day (December 2), Arafah Day - Date subject to change.

According to the labor code of the United Arab Emirates, employees are entitled to annual leave as follows:

• Annual leave is 2 days a month for employees who have worked for over 6 months but less than 1 year.
• Annual leave is 30 days a year for employees with more than 1 year of experience in the company.

Part-time employees are entitled to annual leave based on their actual working hours and as outlined in the employment contract. For the duration of the leave, employees have the right to their basic pay and housing allowance.

In the UAE, employees are entitled to 90 days of annual sick leave upon completing 3 months of employment after the probationary period. The employee must notify the employer about their sickness within 3 working days.

Employees cannot be dismissed while on sick leave. If they use all 90 days of sick leave and are unable to report to work afterward, employers are allowed to terminate the employment agreement.

In the United Arab Emirates, the law provides 90 days of paid maternity leave to female employees starting from the delivery date. The leave is paid with full salary.

If the female employee gives birth to a sick or disabled child, the employee is entitled to an additional 30 days of maternity leave with full pay starting at the end of maternity with the option for an additional 30 days without pay.

The United Arab Emirates provides paternity leave of 3 days during the month of birth with full payment to male employees. This is in addition to Emirati Federal Decree-Law No. 49 of 2022; employers must provide 5 paid working days of parental leave, to be taken within 6 months from the birth date of the child.

Minimum Wage

The new UAE Labour Law of 2021 introduced the provision for mandatory minimum wages for all private sector employees to be determined by the Minister of Human Resources and Emiratisation, effective February 2, 2022. The wage is yet to be determined as of October 2024.

Additionally, employees are entitled to receive their wages on the due dates in accordance with the regulations approved by the ministry, conditions and controls, and procedures specified by the Executive Regulations of this Decree-Law.

Employee salaries can be paid using currencies other than AED. Dubai Court of First Instance ruled in August 2024 that a part of an employee's salary can be paid in cryptocurrency without requiring it to be converted into national currency, as determined by the employment contract. Depending on the agreement between employer and employee, salaries must be paid either monthly or biweekly. Salaries must be paid biweekly if the contract does not specify the pay period.

Overtime, Holiday & Vacation Pay

The remuneration for overtime work equals 125% of the regular hourly pay. For overtime work between 9:00 PM and 4:00 AM, employees are entitled to 150% of the normal hourly remuneration. The law limits overtime work to two hours daily. Employees in managerial or supervisory roles and ship crews who work under special service conditions are exempt from overtime regulations.

During annual leave, employees are entitled to their basic salary and a housing allowance (if stipulated in the contract).

If the employer requests that the employee work during annual leave and the leave is not carried over to the next year, the employee must be paid their regular wages and the basic salary they are entitled to for the leave. The annual leave salary must be issued before the leave is taken. If an employee is dismissed or resigns, they are entitled to pay in place of unused annual leave.

Friday is the official weekend for all employees except for daily wage workers. If circumstances require the employee to work overtime on that day, they will be entitled to regular working hours' pay, plus an increase of at least 50% of that amount.

If the employee is required to work during a public holiday, they will be granted another rest day and an increase of 50% of the basic wage for that day. If the employee cannot be granted another day off, they are entitled to receive an additional 150% of the basic wage for that day. Employers should be mindful of the religious significance of some public holidays when requiring employees to work.

Notice Period

According to labor law, employers can terminate an employment contract by providing written notice of at least 30 days up to 90 days. The party (employer or employee) who does not abide by the notice period is required to pay the other party compensation equal to the employee's wage for the full notice period or whatever time is remaining.

If the employer terminates the employment contract, the employee shall have the right to be absent during the notice period for 1 working day without pay per week to search for another job. They must notify the employer at least 3 days before the absence day.

Severance Benefits

The labor code states that employees must be provided with end-of-service remuneration if they have completed 1 year of service with the employer. Foreign employees are also entitled to a severance gratuity.

Under federal law, the severance is paid as follows if the employer terminates the employee's contract:

• 1 to 5 years of service - 21 days' salary for each year of service
• More than 5 years of service - 30 days' salary for each additional year, provided the entire compensation does not exceed 2 years' pay

Employers are obligated to have a bank guarantee of AED 3,000 for each employee or an insurance policy that covers every employee's severance entitlements in the case of bankruptcy.

Employers can register with the Ministry of Human Resources and Emiratisation for a voluntary program that is an alternative to the statutory end-of-service benefits. It is known as the Savings Scheme. In this program, employers contribute 5.83% of an employee's salary monthly for any employee with less than 5 years of service. The contribution rate increases to 8.33% for employees with 5 years or more of service.

Pension

The retirement age for expatriate employees in the United Arab Emirates, excluding Sharjah and Abu Dhabi, is 60. Citizens of the UAE can retire at 49 if they have completed 20 years of service. At this age, employees become eligible for a retirement pension or have contributed to the pension scheme for a period of at least 15 years. Employees may also retire at any age if they have at least 20 years of insurance coverage.

The pension amount equals 60% of the average salary in the last five years, plus 2% per year of contribution beyond 15 years until it reaches 100%. If the service period exceeds 35 years, an amount equal to three month's salary is paid for every additional year.

Social Security contributions are paid by employees, employers, and the government.

In Sharjah and Abu Dhabi, employees and employers only pay social security contributions. The eligibility requirements and minimum pension amounts vary.

Dependents/Survivors Benefits

In the United Arab Emirates, the law mandates the provision of monthly pensions for the surviving beneficiaries after the death of the employee insured under the pensions scheme. The surviving beneficiaries include parents, spouses, children, and siblings. The pension amount is equal to the old-age or disability pension that the deceased employee was entitled to. It is distributed among eligible survivors. The survivors also receive a lump sum of AED 60,000 (United Arab Emirates dirhams) distributed among them under the Islamic Shari'a's inheritance provisions.

In case of death due to work-related injuries or occupational disease, the employee's survivors are eligible for a pension equal to 100% of the deceased's average salary. In addition, survivors are entitled to a lump-sum benefit equal to AED75,000, which is distributed among them under the provisions of inheritance in the Islamic Shari'a.

The Emirates of Sharjah and Abu Dhabi have different beneficiaries and benefit amounts.

Invalidity Benefits

The social security law in the United Arab Emirates covers benefits for termination of work due to total disability. There is no requirement of age or years of service to be fulfilled. The pension is calculated as the employee has completed 35 years of insurance coverage. The amount of the benefit is equal to 60% of the average salary in the last 5 years, plus 2% per year of contribution beyond 15 years until it reaches 100%. Private-sector employees' minimum pension amount can be 20% of the average salary in the last 4 years. Disability is assessed every 2 years.

The pension for death and disability due to a work incident in Sharjah is calculated as if the employee has completed 35 years of contributions. If the disability or death is not a result of work, the contribution period is calculated as 15 years. The pension is calculated monthly at the rate of 60% of the salary for the contribution periods calculated in the fund that reach 15 years and increased by 2% for each year exceeding this period, up to a maximum of 100%.

In case of an accident at work or occupational disease, the employer must cover employees' treatment expenses at government or private hospitals until they recover or their disability is proven. Employees are eligible to receive a pension based on the type and degree of disability. A lump sum of AED 75,000 (United Arab Emirates dirhams) is also paid to an employee diagnosed with a total permanent disability.