Decoding the UAE Labour Law: What You Need to Know About Employment Contracts and Rights

The UAE Labour Law (Federal Decree Law No. 33 of 2021) governs employment relationships in the private sector across mainland UAE and its free zones, excluding DIFC and ADGM. In this article, we’ve covered key aspects of the UAE Labour laws, including contract types, probation periods, and various work models.

What Is UAE Labour Law?​

The UAE Labour law encompasses the legal framework that defines and regulates the dynamics between employers and employees. In the UAE, this framework is primarily based on Federal Law Decree Law No. 33 of 2021 regulating labour relations. 

This legislation specifically addresses the private sector, laying down clear guidelines on critical aspects of the employer/employee relationship.

What are employment contracts?

Employment contracts are formal agreements between employers and employees that outline the terms and conditions of employment. These contracts typically specify:

• job responsibilities, 
• salary, 
• benefits, 
• work hours, 
• duration of employment, 
• grounds for termination, 
• other employment-related details. 

They serve as a legal foundation for the employment relationship, ensuring clarity and protection for both parties.

Duration of employment contract

Under the UAE Labor Law, it is mandatory for all employers to enter into fixed-term contracts with their employees, specifying the duration of employment upfront.

These fixed-term employment contracts can be renewed after the expiration of the initial term. In case of renewal, the new term shall be considered an extension of the original term and added to it while calculating the worker’s continuous term of service.

Termination of the employment contract during the probationary period

As per the UAE Labor Law, the probation period cannot exceed six months from the date of commencement of work. An employer can terminate the employment contract during the probationary period by giving the employee a 14-day written notice. 

Similarly, an employee can also give a 14-day written notice of termination during the probationary period if leaving UAE or one month’s written notice if leaving to take up new employment in UAE. 

If the employee joins another company or takes up new employment in the UAE within three months of leaving, the former employer can seek compensation from the new employer to recover the recruitment costs.

Termination of the employment contract during the probationary period

As per the UAE Labor Law, the probation period cannot exceed six months from the date of commencement of work. An employer can terminate the employment contract during the probationary period by giving the employee a 14-day written notice. 

Similarly, an employee can also give a 14-day written notice of termination during the probationary period if leaving UAE or one month’s written notice if leaving to take up new employment in UAE. 

If the employee joins another company or takes up new employment in the UAE within three months of leaving, the former employer can seek compensation from the new employer to recover the recruitment costs.

Part-time work model

Under the UAE Labour Law, there can be different work arrangements apart from full-time work, such as:

• Part-time, i.e., working for a specified number of hours or days designated for work.
• Temporary work whose execution requires a specific period or is based on a certain task and is ended by its completion.
• Flexible work where hours or working days change according to the workload and the employer’s economic and operational variables. The worker may work for the employer at variable times according to the work conditions and requirements.

Working hours

Overtime work is common in many industries, and the UAE Labour Law provides clear guidelines for it. The law states the maximum average working hours for workers shall be eight hours per day or forty-eight hours per week. 

An employer may instruct the worker to work overtime over the normal working hours provided that they do not exceed two hours per day (unless the work is necessary to prevent the occurrence of a severe loss or accident). 

However, in all cases, the total working hours must not exceed 144 hours every three weeks.

Leave entitlements in the private sector

The UAE Labor Law provides leave entitlements for the following:

1. Annual leave is a fundamental right, with employees typically entitled to 30 days of paid leave after completing one year of service.
2. Maternity leave is sixty days for female workers; the first forty-five days are at full wage, and the following fifteen days are at half wage.
3. Bereavement leave of five days in case of death of the husband or wife and three days in case of death of the mother, father, son, brother, sister, grandson, grandfather or grandmother, starting from the date of death.
4. Parental leave grants five working days of paid leave, which can be availed from the date of the child’s birth up to six months afterwards. This provision, a significant step towards supporting work-life balance, allows both mothers and fathers to spend time with their newborns.
5. Study leave for ten days for an employee to sit for exams provided the employee is enrolled or regularly studying at an educational institution approved in UAE, and the service term of employment is not less than two years.

End-of-service gratuity

Under UAE Labor Law, an employee who has completed a year or more in continuous service is entitled to a full amount of gratuity irrespective of whether the employee leaves the job of his own volition or is terminated by the employer (regardless of the reason).

How to calculate gratuity in UAE Labour Law?

Gratuity is calculated based on basic salary as follows:

• 21 days’ wages per year for the first 5 years
• 30 days’ wages per year from the sixth year onwards

Unpaid leaves are excluded from the calculation of the employee’s service period. It means they are not calculated as part of the service period while determining the gratuity amount. As per UAE Labour Law, the gratuity amount cannot exceed the employee’s two-year salary.

Non-discrimination

The UAE Labor Law strictly forbids any form of discrimination in the workplace, whether it’s based on race, colour, gender, religion, nationality, social background, or disability. This law ensures that all employees have equal opportunities and are treated fairly regarding employment, job retention, and benefits. 

Additionally, the law mandates equal pay for female workers who perform the same or equivalent work as their male counterparts, reinforcing the commitment to gender equality in the workplace.

Harassment

UAE Labour Law also prohibits sexual harassment, bullying or any verbal, physical or psychological violence committed by employers, superiors and colleagues.

Workplace health and safety

In the private sector, it is the employer’s duty to ensure a safe and healthy work environment. This responsibility includes adhering to all health and safety regulations, providing necessary safety equipment, maintaining machinery and tools, and educating employees about safety practices.

Regular safety training and emergency procedure drills are essential in fostering a workplace safety and well-being culture.

Reporting and managing work-related injuries

The UAE Labour Law mandates immediate reporting and effective management of work-related injuries. Employers must ensure prompt medical care for injured employees and conduct thorough investigations to prevent future incidents.

Serious injuries require detailed reporting to the Ministry of Human Resources and Emiratisation (MoHRE) and other relevant authorities, contributing to enhancing workplace safety standards.

Compensation for work injuries and occupational diseases

Under the UAE Labour Law, if an employee suffers a work-related injury or occupational disease, the employer is responsible for covering all medical treatment expenses until the employee recovers and can return to work. 

In cases where the injury or illness prevents the employee from working, the employer must pay the employee’s full wage for the treatment period or up to six months, whichever is shorter.

If the treatment extends beyond six months, the employee is entitled to half their wage for another six months or until recovery, disability confirmation, or death, whichever occurs first.

In the unfortunate event of an employee’s death due to a work-related injury or disease, the law stipulates that the employee’s family is entitled to compensation. This compensation is equivalent to the employee’s basic wage for twenty-four months, with the total amount ranging between a minimum of AED 18,000 and a maximum of AED 200,000. 

This provision ensures financial support for the family during such a difficult time and underscores the employer’s responsibility towards their employees’ welfare.

Notice requirement for termination of a fixed term contract

The Law states that either party to the employment contract may terminate the contract for any legitimate reason. A party wishing to terminate an employment contract must adhere to the notice period stipulated in the contract, which should not be less than thirty days and not more than ninety days. 

This notice period is essential as it allows the employer time to find a suitable replacement and the employee to seek new employment. Employees are entitled to full salary during the notice period and are expected to continue their duties during this period unless mutually agreed otherwise. 

The law further states that the party who fails to abide by the notice period shall pay compensation to the other party, which shall equal the employee’s salary for the full notice period or the remaining duration of the notice period. Such compensation is called notice period allowance. 

Specific situations under which an employment contract can be terminated

The Law further sets out specific situations under which an employment contract can be terminated:

• Mutual Agreement: Both employer and employee agree to end the contract.
• Expiration of Contract Term: The fixed term of the contract comes to an end.
• Written Notice: Either party chooses to terminate the contract by providing written notice.
• Death of Employer: The contract ends upon the death of the employer in certain situations. 
• Death or Permanent Disability of Employee: The contract terminates if the employee dies or becomes permanently disabled.
• Criminal Conviction: The contract is terminated if the employee is convicted of a crime and receives a custodial sentence exceeding three months.
• Closure of Employer’s Business: The contract ends if the employer permanently closes its business.
• Bankruptcy or Insolvency: The contract can be terminated if the employer becomes bankrupt, insolvent, or is otherwise unable to continue their business.
• Failure to renew work permit: The contract may be terminated if the employee fails to fulfil the conditions for renewing the work permit for any reason beyond the employer’s control. 

Termination of employee without notice

An employer can terminate an employee without notice (after conducting a written investigation) when the employee:

• impersonates another person or submitted forged documentation;
• commits a mistake that resulted in a serious material loss to the employer;
• damages the employer’s property and acknowledged the same;
• violates the employer’s safety instructions;
• continues to fail to perform their primary duties according to its employment contract (despite a previous written investigation and at least two warnings);
• discloses an employer’s secret related to industrial or intellectual property that resulted in losses to the employer or a loss of an opportunity for the employer or a personal benefit to the employee;
• is found to be drunk or under the influence of prohibited drugs during working hours, or commits an action breaching the public morals at the workplace;
• absents himself without lawful excuse for more than 20 intermittent days or more than 7 successive days during one year;
• illegally exploits its position to obtain results and personal gains; 
• joins another company without complying with the rules and procedures prescribed by the Law.

Exceptional cases where an employee can resign without giving a notice

The Law provides that an employee can terminate the employment contract without notice in the following situations: 

Failure to meet contractual or legal obligations

An employee may terminate the contract if the employer fails to meet his legal or contractual obligations. An employee must notify the Ministry of Human Resources & Emiratisation of the employer (MoHRE) at least 14 days before resignation and can only resign if the employer fails to rectify the breach after being notified by MoHRE.

Workplace assault or harassment

An employee may terminate the employment contract if the employer assaults or harasses the employee at the workplace provided that the employee informs the competent authorities and MoHRE within five working days from the date he was able to report.

Performance of tasks different from work agreed upon

An employee may terminate if the employer instructs the employee to perform a work fundamentally different from the work agreed upon in the employment contract without the employee’s consent. This is not applicable in situations where work is absolutely required. 

Grave danger

An employee may terminate if the employer fails to remove the factors that pose a grave danger and/or threaten the employee’s safety or health despite being aware of it.

Post-termination restrictions in the UAE Labour Law

Employers often include restrictive covenants like non-compete and non-solicitation clauses in employment contracts. These clauses prevent employees from joining competitors or starting competing businesses after their contract ends. They serve as a safeguard for the employer’s business interests, including the protection of confidential information and trade secrets.

The question arises whether it is lawful to have such restrictions in employment contracts under UAE Labour Law.

Legality of restrictions under the UAE Labour Law

Under UAE Labour Law, these restrictions are legal if the employee’s role involves access to sensitive information about clients or trade secrets. In such cases, employers can legally require that the employee, post-contract, does not compete with them or engage in similar projects within the same sector. These restrictions must be clearly defined in terms of time, place, and the nature of the work.

The Law caps the duration of such non-compete clauses at a maximum of two years from the contract’s expiry date. 

However, it should be noted that even if a non-compete clause is in accordance with the parameters specified in the law (i.e., in terms of time, place, and type of work), UAE courts may still choose not to enforce it if they deem it unnecessary for protecting the employer’s legitimate business interests.

Enforcement and legal claims

For an employer to enforce a non-compete clause, they must demonstrate its necessity in protecting their legitimate business interests. Additionally, any legal claim against an employee for violating a non-compete clause must be filed within one year of the employer’s awareness of the breach.