Labor Law Compliance Guide for United Arab Emirates

This labor law guide for United Arab Emirates has important information for businesses looking to hire employees or contractors in the country. United Arab Emirates is a country in the middle east.

Category	Details
Minimum Wage	No national minimum for expats; AED 6,000/month for Emiratis in private sector (effective Jan 1, 2026)
Overtime Wage	125% of basic salary; 150% for night (9 PM-4 AM) or rest days; 250% for public holidays
Meal Breaks	1 hour
Rest Breaks	2 breaks of 15 minutes each
Working hours	8 hours/day, 48 hours/week
Salary Payment Cycle	Monthly
Payroll Taxes	None (no personal income tax)
Paid Vacation	30 days
Overtime Hours	Over 48 hours/week or 8 hours/day (max 2 hrs/day)
Night Shift Hours	150% of basic salary
Holidays	13
No Work Days	Friday
Unemployment Insurance	Mandatory; AED 5-10/month premium

The United Arab Emirates (UAE) continues to showcase robust economic growth. In the first nine months of 2025, GDP expanded 5.1% year-on-year, reaching approximately AED 1.4 trillion, with non-oil activities growing 6.1%. The CBUAE projects approximately 5% GDP growth for 2026. As a key financial hub in the Middle East, the UAE's economy is diversified with substantial contributions from various sectors, including financial services and insurance (+9%), construction (+8.7%), real estate (+7.9%), manufacturing, tourism, and aviation. The country continues to invest heavily in technology and innovation as part of its long-term economic diversification strategy.

The currency used in the United Arab Emirates is the UAE Dirham (AED).

Hiring Laws in the UAE

When hiring workers in the UAE, businesses must adhere to several key regulations:

A business must register locally to hire workers, typically by establishing a business entity in one of the UAE's free zones or mainland jurisdictions.

Setting up a business entity can cost between AED 20,000 to AED 50,000 and may take approximately 2-4 weeks, depending on the type of entity and location.

Employers must sign written contracts with employees, including key clauses such as job description, salary, working hours, duration of contract, leave entitlements, and termination terms.

UAE labor laws differentiate between employees and contractors. Employees are subject to labor law protections, while contractors typically fall under civil law.

Minimum Wage in the UAE

The UAE does not enforce a federal minimum wage law applicable to all expatriate workers. However, effective January 1, 2026, MoHRE raised the minimum wage for Emiratis in the private sector to AED 6,000/month (up from AED 5,000), as part of the phased Emiratisation strategy. Employers must amend Emirati employment contracts by June 30, 2026, or face suspension of new work permits from July 1, 2026.

Minimum wages can also be set by certain free zones or for specific professional categories via ministerial decrees.

Guidelines for minimum wages for some category of workers in the UAE:

• University Graduates: AED 12,000
• Technicians: AED 7,000
• Skilled Workers: AED 5,000

For expatriates, wage levels are guided by immigration salary benchmarks and market practice, not a statutory minimum.

Holiday pay is mandatory for all employees, regardless of their wage status.

Working Hours in the UAE

The standard work hours are 8 hours a day, 6 days a week, amounting to 48 hours weekly.

Under Federal Decree-Law No. 33 of 2021, overtime rates are:

• Standard overtime (beyond 8 hrs/day or 48 hrs/week): 125% of basic salary
• Overtime between 9 PM and 4 AM: 150% of basic salary
• Work on weekly rest day (no substitute day off): 150% of basic salary
• Work on public holidays: 250% of basic salary

Overtime is capped at 2 hours per day and 144 hours per year (extendable with MoHRE approval). Calculation is based on basic salary only, excluding housing, transport, and other allowances. During Ramadan, working hours are reduced by 2 hours per day.

The minimum age for employment is 15 years old, and stringent laws protect against child exploitation.

Payroll and Taxes in the UAE

Employers are responsible for registering employees with relevant authorities and ensuring compliance with labor law mandates. There are no payroll taxes or personal income taxes in the UAE.

Corporate Tax: A 9% corporate tax applies on taxable income exceeding AED 375,000 (effective since June 2023). A Domestic Minimum Top-Up Tax of 15% applies to large multinationals under the OECD Pillar Two framework (effective from January 2025).

VAT: The UAE levies a 5% VAT. Key amendments effective January 1, 2026 include simplified reverse-charge mechanisms and VAT credit carry-forward capped at 5 years.

E-Invoicing: A voluntary pilot begins in July 2026, with mandatory adoption for businesses with revenue over AED 50 million by January 2027.

Statutory Leave Policies in the UAE

Employees in the UAE are entitled to several types of leave:

• Vacation: 30 calendar days of paid vacation annually.
• Maternity leave: 60 days (45 days at full pay + 15 days at half pay). No minimum qualifying service period required. Additional 30 days paid + 30 days unpaid leave if the child has disabilities. Coverage extends to miscarriage/stillbirth after 6 months of pregnancy.
• Paternity leave: 5 days.
• Sick leave: Up to 90 days per year; beyond that may be unpaid.

Public Holidays in the UAE (2026)

Holiday	Expected 2026 Date(s)
New Year’s Day	Thursday, January 1
Eid Al Fitr	Friday, March 20 - Sunday, March 22 (3 days)
Arafat Day (Day of Arafah)	Tuesday, May 26
Eid Al Adha	Wednesday, May 27 - Friday, May 29 (3 days)
Islamic New Year (Hijri)	Monday, June 15
Prophet Muhammad’s Birthday (Mawlid)	Tuesday, August 25
Commemoration Day	Monday, November 30
National Day	Wednesday, December 2 - Thursday, December 3

Note: Islamic holiday dates depend on moon sightings and will be officially confirmed closer to each date.

Employee Benefits

Employers in the UAE are required to provide several benefits:

End of Service Gratuity

Under Federal Decree-Law No. 33 of 2021, employees with at least 1 year of continuous service are entitled to end-of-service gratuity:

• Years 1-5: 21 days' basic salary per year of service
• Years 5+: 30 days' basic salary per additional year
• Cap: Total gratuity cannot exceed 2 years' wages
• Basis: Last basic salary only (excludes housing, transport, utilities allowances)
• Payment deadline: Within 14 days of contract termination

MoHRE also offers a Voluntary Savings Scheme as an alternative, where gratuity funds are invested in approved investment funds, allowing employees to grow savings through investment returns.

Unemployment Insurance (ILOE)

The Involuntary Loss of Employment (ILOE) scheme is mandatory for all private sector and federal government employees:

• Premiums: AED 5 or AED 10/month depending on salary bracket
• Benefit: Cash payments for up to 3 months if employment is lost involuntarily
• Non-subscription fine: AED 400
• Missed payments (3+ months): AED 200 fine and insurance certificate cancellation

Other Benefits

• Healthcare: Mandatory health insurance coverage for all employees.
• Annual Bonus: Not mandatory, but common in many sectors.

Employee Termination in the UAE

The UAE does not adhere to "At Will Employment" laws. Termination must follow due process as prescribed by labor laws:

• Notice Period: Typically, a 30-day notice period is required.
• Termination Benefits: Entitled to end-of-service gratuity, payment for unused leave, and any due salary.
• Legal Challenges: Employees can file complaints with the Ministry of Human Resources and Emiratisation.

As of January 1, 2025, all new employment contracts must be fixed-term (unlimited contracts are no longer valid for new contracts). All contracts must specify duration, position, basic wage, and benefits.

Conditions for Termination

• Gross misconduct
• Non-performance
• Violation of employment contract terms
• Redundancy or downsizing

Termination must be substantiated with valid reasons to avoid penalties or legal disputes.