Whether you’re a business owner, HR professional, or employee working in the United Arab Emirates (UAE), understanding the country’s employment laws isn’t optional — it’s essential. The UAE has a comprehensive legal framework designed to protect both employers and employees. However, failing to comply — even unintentionally — can result in costly fines, legal disputes, reputational damage, or even visa cancellation.
In this guide, we break down the key elements of UAE employment law and what you absolutely need to know to avoid expensive mistakes in 2025 and beyond.
1. UAE Labour Law: A Quick Overview
The UAE Labour Law (Federal Decree-Law No. 33 of 2021), which came into effect in February 2022, replaced the older law and brought significant changes to employment contracts, termination policies, benefits, and more.
This law applies to:
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Private sector employers and employees across the UAE (excluding DIFC and ADGM)
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Free zone workers (unless a separate framework applies)
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Both local and foreign employees with valid work permits
The law is designed to support a competitive, flexible labor market while safeguarding workers’ rights in line with international standards.
2. Employment Contracts: No More Unlimited Terms
Under the new law, all contracts must now be fixed-term, not exceeding three years, but renewable.
Key implications:
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All existing unlimited contracts must be converted to fixed-term.
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Termination clauses must be clearly outlined.
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Renewal of contracts must occur before expiration to avoid penalties.
Failing to update existing contracts could expose employers to fines or disputes.
3. Termination Rules: Know What’s Lawful (and What’s Not)
One of the most misunderstood areas is termination. UAE law outlines specific grounds for lawful termination, including:
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Mutual agreement
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End of contract term
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Performance-related issues (must be documented)
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Gross misconduct (requires evidence and notice)
Improper or unjust termination can lead to:
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Compensation claims (up to 3 months’ salary)
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End-of-service benefit disputes
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Complaints to the Ministry of Human Resources and Emiratisation (MOHRE)
4. End-of-Service Gratuity: A Financial Risk If Mismanaged
If you dismiss an employee without proper legal grounds — or fail to calculate end-of-service gratuity correctly — it could cost your business thousands of dirhams.
As per the law:
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Employees are entitled to 21 days of basic salary per year for the first five years, and 30 days per year thereafter.
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Gratuity is based on the last drawn basic salary, not total compensation.
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Deductions may apply only in cases of proven misconduct.
It’s essential to maintain accurate salary records and follow the correct process for calculation and payment.
5. Probation Period Rules: Limited and Regulated
While employers can still include probation periods, new regulations apply:
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Maximum duration: 6 months
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Notice requirements:
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14 days if employer terminates
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30 days if employee leaves for another UAE employer
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14 days if employee leaves UAE
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Violating these rules can result in fines or bans imposed by MOHRE.
6. Working Hours, Overtime & Leave Entitlements
Understanding time-related entitlements is crucial for compliance:
Working Hours:
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8 hours/day or 48 hours/week (may be reduced during Ramadan)
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Flexible and remote work models now recognized under law
Overtime:
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Paid at 125% of basic wage
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150% for night shifts or weekend/public holiday work
Leave:
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Annual leave: 30 calendar days after one year
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Sick leave: 90 days/year (first 15 with full pay, next 30 with half pay)
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Maternity leave: 60 days (45 paid, 15 unpaid or partially paid)
Employers must record and pay leave accurately or risk legal claims.
7. Anti-Discrimination and Equal Pay Provisions
The updated law prohibits discrimination based on race, color, sex, religion, nationality, or disability, particularly in hiring, promotions, and wages.
Equal pay for equal work is now a legal requirement, especially in cases of gender pay gaps. Discrimination or harassment in the workplace can lead to:
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Government investigations
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Hefty fines (up to AED 1 million)
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Civil liability
8. Dispute Resolution: MOHRE Mediation and Labor Courts
If a labor dispute arises, the process is:
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File a complaint with MOHRE
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MOHRE attempts mediation within 14 days
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If unresolved, the case proceeds to Labor Court
Employers who ignore or delay resolution could face business license suspensions or travel bans.
9. New Rules for Freelancers and Part-Time Work
To attract global talent, the UAE has modernized its employment structure:
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Freelancers must hold valid freelance permits
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Part-time contracts allow work for multiple employers
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Flexible work models require written agreements and approvals
Failing to register these arrangements properly could result in violations and immigration issues.
10. Penalties for Non-Compliance
Ignorance of the law is no excuse. Penalties for breaching UAE labor law include:
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Fines (AED 5,000 – AED 1 million)
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Visa bans or blacklisting
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Suspension of business licenses
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Court-ordered compensation
Staying compliant isn’t just ethical — it’s a strategic business move.
Final Thoughts
UAE employment law is designed to promote fairness, transparency, and flexibility. But failure to understand and comply with it could result in major financial and legal consequences.
Whether you’re hiring, terminating, or revising contracts — working with a UAE employment law expert ensures your firm or business stays on the right side of the law.
⚖️ Need Help with UAE Labor Compliance?
Our team of legal professionals helps employers and employees across the UAE stay compliant, protect their rights, and avoid costly disputes. Contact us today for a confidential consultation.