UAE Labour Law

 

August 2021

Introduction to UAE Labour Law

The UAE labour law is for people working in the private sector of The United Arab Emirates. It was originally set out by the Ministry of Labour in 1980 under Federal Law No. 8.

If you have a company or employees in the UAE, it is imperative that you understand the labour laws that govern employment.

Some areas of Dubai such as Dubai International Financial Centre (DIFC)as well as some of the Free Zones such as Jebel Ali Free Zone have their own particular laws and regulations and do not fall under the UAE Labour Law mandate.

Employment

When looking to hire a new employee, it is vital that you have the correct documentation in place to ensure no fines are incurred, and you are abiding by the labour law.

Visa/ work permit

For you to hire a new employee, they must have the correct permissions to a) reside in the country, and b) have permission to work (i.e., work permit)

Unlike neighboring countries, applying for a resident’s visa in the UAE is rather straight forward. To obtain a visa in the UAE, you must have a sponsor. For an employee, the sponsor is the employer. In order for an employer to be a sponsor, they must have a registered company in one of the many free zones or with a local licensing department in one of the seven emirates.

If you are hiring an employee who is already sponsored (by a parent or spouse) and have a resident’s visa, then all you need do is apply for a labour card so your employee can legally work.

Health Insurance

As per the labour law, sufficient health insurance must be provided to any employee, and must meet or exceed the minimum benefits stipulated by the Dubai Health Authority (DHA).

It is also important to note, that it is against the law for employers to deduct the salary of workers to compensate or mitigate for the cost of medical insurance.

The law also states that all dependents (including children and spouses) and domestic workers (such as maids, cooks, drivers) or the employee must also be covered for basic health insurance, the responsibility to provide this lies with the visa sponsor. Employers are under no legal obligation to provide cover to any dependents of their employee, although they are encouraged to do so.

Working week and hours

In the UAE, the work week is from Saturday to Thursday, with Friday considered as the weekend, as Friday is the holy day of Islam. In some instances, the working week is from Sunday to Thursday, with Saturday included in the weekend.

The maximum normal working hours for adult employees is eight hours per day, or 48 hours per week. For certain industries, this can be increased to 9 hours per day, with adequate rest. During the holy month of Ramadan, normal working hours are reduced by two hours per day.

 

Salary

Taxation and Social Security

The UAE does not mandate an employment taxes at present.

If a UAE entity employs a UAE national, it is required to make social security contributions, but there is now requirement for an employer of an expatriate employee to make any social security contributions.

Such contributions for UAE national employees must be made to the General Pension and Social Security Authority (GPSSA). Companies must register to the authority and start paying contributions no later than one month after hiring the employee.

These contributions should be made by both the employer and the employee.

Employer contribution: 12.5% of the employee’s monthly salary

Employee contribution- 5% of employee’s monthly salary

The monthly minimum salary subject to social security is AED 1,000 per month and maximum is AED 50,000 per month.

Failure to make contribution payments on time will incur a late payment fee of 10%.

For GCC nationals in employment, pension rates will vary depending on their country’s pension scheme.

  • Pay by WPS

To process salaries, you will need a local bank account to do so.

Depending on where your company license has been set up, you will need to register your company for WPS, which is the UAE wage protection system.

WPS is an electronic salary transfer system that allows institutions to pay wages via banks and other financial institutions approved by the service.

If your company is regulated by WPS, you must upload the WPS file through the system in the defined format each month to pay your salaries.

Packages

In the UAE, it is often for employee’s salary to be split into sections covering certain allowances. This is known as a salary package. The following are examples of allowances that can form part of a salary package.

  • Basic salary (usually 50% of total salary)
  • Housing allowance (this can be cash value, or accommodation provided by the company)
  • Transportation allowance (this can be cash value, or transportation can be provided to the employee from the company)
  • Food allowance (this can be cash value, or provided to the employee by the company)

Minimum wage

There is currently no minimum wage for expatriate employees in the UAE. However, UAE nationals are subject to certain specific salary requirements. If a UAE national has no high school certificate, their salary should be no less than AED 3,000 per month. High school graduates must earn a minimum of AED 4,000 per month and UAE nationals with college certificate or more must earn a minim of AED 5,000 per month.

Leave

Annual leave

Employees are entitled to an annual leave of:

  • 2 days per month, if they have completed six months of service, but not one year
  • 30 calendar days, if they have completed one year of service.

The calculation of the duration of annual leave will include official holidays specified by law or by agreement and any other leaves caused by sickness if they fall within the annual leave.

Maternity leave

Women are entitled to a maximum of 45 days paid maternity leave following the birth of a child. They can choose to start their maternity leave up to two weeks before the due date of the child.

Parental leave

New parents are entitled to 5 days paid leave deemed as parental leave within the first 6 months of a child’s birth.

Sick leave

The employee shall not be entitled to any paid sick leave during the probation period. Should the worker spend more than three months after the end of the probation period in the continuous service of the employer and contracted an illness, he shall be entitled to a sick leave not exceeding 90 consecutive or non-consecutive days for every year of service, calculated as follows:

  • The first fifteen days with full pay
  • The following 15 days are half pay
  • The following periods without pay.

Unpaid leave

Employers are entitled to grant unpaid leave to employees who request to take leave days beyond their annual entitlement. The employer is responsible for tracking unpaid absences and reflecting these in the salary as a deduction.

The Labour Law requires the employer to grant unpaid leave to the employees under the following circumstances:

  • Parental leave (female employees only): up to 100 consecutive calendar days
  • Sick leave exceeding 30 days (total sick leave, including unpaid sick leave must not exceed 90 days per year)
  • Hajj leave for Muslim employees only

End of service settlement (Gratuity)

Employees are entitled to a gratuity payment at the end of their service. It is structured as follows:

-Less than 1 year service- no gratuity entitlement

– 1-5 years’ service- 21 days of basic salary for each year of service.

– 5 years plus service- 30 days of basic salary for each year of service following the first 5 years

Gratuity entitlement should not exceed 2 years’ salary.

Disclosure: This document is not the official Labour Law document issued by The Ministry of Human Resources and Emiratization, but it a replication and does not detail all aspects of the UAE Labour Law

 

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