THE UAE LABOR LAW: PAST VS. PRESENT

Effective Date: February 2, 2022

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On February 2, 2022, a new federal labor law came into force in the United Arab Emirates (UAE) which represents the biggest change to the UAE employment regime. The law is created to promote the rights of the employees and businesses alike, making it easier to establish employment contracts, while also offering businesses a competitive edge when it comes to attracting top-class talents from all over the world.

Past
Present

Employment Arrangements

Full-time employment was available. 

In 2019, part-time employment was introduced, and more flexible arrangements were implemented due to the 2020 Covid measures. 

Aside from full-time and part-time, other employment arrangements were introduced:

○ Temporary

○ Flexible

○ Remote Work

○Job Share

Work Permits

Expatriate employees must have an employment permit before they can legally work in the country.

A two-year full-time labor card or work permit was given to employees. 

All individuals who work in the UAE are required to submit an employment contract to the UAE authorities at the time of work permit application.

12 different kinds of work permits were created to showcase various types of sponsorship and employment arrangements that are in place and are listed below:

  1. Work permit for those recruited from outside the UAE.

  2. Work permits for expatriate employees transferred to and from the company. 

  3. Dependant permits for individuals who are sponsored for residency purposes by a dependant.

  4. Temporary work permits for those on a project basis where time is the main factor for the employment period.

  5. Task work permit for employees who are recruited from outside of the UAE to work on a temporary basis.

  6. Partial work permits for individuals employed on a part-time basis. 

  7. Juvenile work permits for individuals between the age of 15 and 18.

  8. Student training and employment permits allow employers to train or employ a student. Above 15 years are subject to specific terms and conditions. 

  9. UAE and GCC nationals’ work permits.

  10. Golden residency holders’ work permits.

  11. Training UAE nationals for scientific qualification work permits. 

  12. Self-employment permits for self-employed individuals who are not required to submit an employment contract to the labor authorities. 

Contract Terms

There were two forms of contracts: 

  1. Unlimited term contracts – These are continued until terminated.
  2. Fixed-term contracts – These are terminated on the agreed term unless renewed by parties.

Only one type of contract exists now, namely the fixed-term contract.

Fixed term employment contracts with a maximum period of three years are existent. 

Upon expiry, the contract can be renewed or extended for the same or shorter periods with attention given to the employee’s service. 

If the contract is not renewed or extended and both parties continue to operate, then the contract is deemed as renewed and is still in effect with the same terms and conditions. 

For employees currently on unlimited term contracts, employers are required to convert the existing contract to a fixed-term contract within one year from the effective date of the new UAE Labor Law. The transition to fixed-term contracts must be completed by February 1, 2023. They can be terminated for legitimate reasons which are subject to the following provisions: 

○ 30 days to terminate if the employee’s period of service is less than 5 years

○ 60 days to terminate if the employee’s period of service is more than 5 years

○ 90 days to terminate if the period of service is more than 10 years.

Contract Termination

An employee can be terminated without notice under Articles 88 and 120.

Termination under Article 120 forfeits any entitlement to end-of-service gratuity.

Termination with notice or valid reason is related to employee performance or conduct.

Termination can occur via mutual agreement or expiry of the agreed term in the case of a fixed-term contract.

An employee under the employment contract can be terminated for legitimate reasons – a written notice should be provided 30 to 90 days prior to termination. 

If the employee or employer chooses not to adhere to the notice period, the party terminating the contract must pay compensation to the employee which is their salary or remaining part of it during the notice period. 

Upon termination of the contract by the employer, the employee is permitted to have one day of unpaid leave per week to search for a new job. 

Termination with notice that is not related to employee performance or conduct is permitted and includes: 

Downsizing, redundancy, insolvency

Bankruptcy, company closure

The work permit cannot be renewed provided that the non-renewal is not attributed to any fault on the part of the employer.

Abuse of position due to profit or personal gain. 

For employers to terminate an employee due to redundancy is restricted by the following conditions: 

Confirmation that the employer is bankrupt or insolvent.

Inability to continue the activity for economic reasons that are beyond the employer’s control.

Conditions, controls, and procedures related to redundancies are explicitly expressed in new executive regulations. 

The employee can leave the employment immediately or without notice when:

There is danger in the workplace or threat to safety or health – the employer was aware but did not take action to eradicate the issue.

The employee’s tasks are different from the work described in the employment contract.

End of Service Gratuity (ESG)

When an employee resigns the amount of ESG is calculated based on the type of contract – Limited and Unlimited contract.

The employee’s basic pay is based on the calendar of days and has a maximum cap of 2 years with remuneration. 

Instead of paying ESG, the employer can pay contributions or benefits in terms of pensions or other saving schemes. 

No provisions or time frames were existent regarding service entitlements.

For ESG, under the present law, only one type of contract exists, namely the fixed-term contract.

Employees with more than 1 year of service are entitled to ESG and the calculation is same as before. 

Regardless of the circumstance of termination, if the employee has completed 1 year of service, then they are entitled to ESG without any reduction or loss of gratuity.

The payment of ESG and other termination payments must be made within 14 days of the termination date. 

Service Entitlements

No provisions or time frames were existent regarding service entitlements. 

All the service entitlements must be paid within 14 days from the termination date. 

If the employer failed to comply, then a fine of AED 5,000 to AED 1,000,000 is imposed – a multiplier effect depending on the number of employees will take place.

Unlawful Termination and Compensation

Compensation is awarded for arbitrary dismissal unrelated to the work of the employee by the courts. 

There are many reasons not attributable to the employee’s poor performance or conduct.

The concept of arbitrary dismissal has been removed. 

The present law states the unlawful termination of employees which are listed below: 

A serious complaint is filed by the employee against the employer. 

A case is filed against the employer and is successfully upheld.

The labor courts can oblige the employer to pay compensation of up to 3 months of total remuneration which includes basic salary, allowances, contractual and statutory entitlements.

The court, when awarding compensation, will consider the amount of damage sustained by the employee which includes the length of service, and the kind of work performed. 

Probation Period

The probation period for employees is a maximum of 6 months.

Employment is terminated without notice and notable consequences.

The maximum probation period of 6 months remains.

A minimum of 14 days’ notice should be given to employees before termination. 

If the employee resigns during the probationary period, various requirements need to be fulfilled:

The employee is joining another employer in the UAE then a minimum of 1 months’ notice must be given to the current employer. The new employer must compensate the current employer for the recruitment cost

If the employee leaves the country (UAE), then the employee must provide 14 days’ notice to the company. However, If the employee returns to UAE within 3 months for employment, then the new employer is liable to compensate the previous employer on the recruitment cost.

If the employee has failed to follow the provisions under the new law, they will be subject to a labor ban for a year which takes effect when they leave the country subject to exemptions from MOHRE.

Labor Ban

If the expatriate employee leaves work without valid reason or without completing his contractual notice period, then that employee is not allowed to get another job for one year from the date of their abandonment.

In certain circumstances, the MOHRE may not permit specific individuals to get a work permit when the employee resigns from their employment during their probation period or for an illegal reason. 

In the executive regulations, the labor ban does not apply when the individual is: 

“Of skill, professional or knowledge levels” and required by the UAE

Sponsored for residency purposes by a dependent 

A golden visa holder

Part of “occupational categories” as determined by the MOHRE and approved by UAE cabinet

Discrimination and Equal Pay

Provisions for equal pay for men and women for the same form of work exist but regarding discrimination there is limited protection. 

Provisions on harassment were less. 

The UAE courts had a limited right for the issuance of fines. 

Protection against discrimination or dismissal due to employee pregnancy and maternity leave existed. 

Protection against discrimination in workplace is specified on the grounds of: 

Race, color, sex, religion, national origin, social origin, and disability

Employees with a disability that would hinder the chances for equal opportunities or are subject to prejudice are protected under this law.

Employees on maternity or pregnancy are not listed as protected but employers are prohibited from terminating them.

Equal pay for men and women from the same work. 

Protection against sexual harassment, bullying, and verbal, physical, psychological, mental, and/or emotional abuse against employees. 

The UAE courts issued fines against employers for the breach of Labor Law. 

Penalties for discrimination and sexual harassment can range from AED 5,000 to AED 1,000,000 for breaching the law with a multiplier effect for the number of employees affected. Fines can be doubled by the court for the repetition of violations. 

Maternity, Parental and Additional Leave

Maternity leave is 45 calendar days at full pay and on expiry.
The employees get further 100 days of consecutive or intermittent maternity sick leave if they are suffering from a condition related to pregnancy or delivery that prevents them from going back to work.

Employees who are returning to work from their maternity leave are entitled to two additional breaks per day (not going beyond 1 hour) for nursing until the child turns 18 months of age. 

Employee salaries need to be paid in UAE dirhams into a UAE bank account.

The Wage Protection System is required to make salary payments.

Maternity leave is increased to 60 calendar days with 45 days being paid in full. The remaining 15 days are at half pay. 

Even if the employee has not completed 1 year of employment, maternity pay is not reduced.

If the employee miscarries after 6 months, has still birth/s or there is a death of an infant, maternity leave still applies.

For employees who give birth to a sick or disabled child or a child with health conditions that need a “constant companion”, 30 paid calendar days are added to their maternity leave and can be extended to 30 unpaid days of leave.

The nursing breaks of the employee are reduced from 18 months to 6 months from the date of delivery. 

Maternity sick leave is reduced to 45 consecutive or intermittent days.

With the amendments to maternity leave, new leave categories have been presented which are:

Compassionate leave:

5 days of leave is granted for the death of an employee’s husband or wife. 

3 days of leave are granted for the death of an employee’s mother, father, son, brother, sister, grandson, grandmother, or grandfather.


Parental leave:

5 days of leave, for both men and women, must be used within 6 months of the child’s birth.


Study leave:

10 days per year for an employee who has completed more than 2 years of service and is affiliated or on regular studies with an approved UAE education institution to take exams.

Employee salaries can be paid in other currencies other than UAE dirhams specified in the employment contract.

The Wage Protection System is required to make salary payments. 

Non-Competition Restriction

Restrictive agreements are permissible with no maximum length as long as they are limited in terms of time, location, and type of work. 

Courts are reluctant to consider restrictive periods exceeding 6 months as being reasonable unless the employer requires a longer restrictive period due to the legitimate risk in business. 

Non-competition restrictions in an employment contract is allowed provided that the provisions are limited in time, duration, place, scope, and extent needed to secure the legitimate interests of the employer. 

A maximum restrictive period of two years from the termination date is introduced. 

If the employer terminates the employee’s contract and it is not in accordance with the law, then any restrictive agreement is automatically abolished. 

The Executive Regulations provide that: 

Non-compete confirms their nature of work, geographic scope, and duration of restrictions. 

Non-compete applies when the employees resign from their work unless when the employer terminates the employment due to a breach of legal and contractual obligations. 

Non-compete waives through mutual agreement. 

The employer or new employee compensates the ex-employer for up to 3 months of total salary.

The employer terminates the employee’s employment during the probation period. 

The occupational categories connected to the needs of the labor market in the UAE are determined by the Minster of the MOHRE and approved by the UAE Cabinet. 

Annual Leave

Forfeiture of annual leave was not allowed, and unused leave can be automatically carried forward to the following year or paid out in lieu.

Employees must utilize their annual leave which is applicable every year.

Employees entitled to a payment in place of unused leave upon the termination of the contract are calculated based on the employee’s basic salary.

Work Regulation

The employer is obligated to place several “disciplinary rules” in particular circumstances in which certain disciplinary sanctions can be imposed on the employee. 

The work guidelines, as per executive regulation, is applicable for companies with more than 50 employees and include certain measures such as: 

○ Work instructions include daily working hours, weekends, festive holidays, health, and safety precautions

○ Penalties are imposed on an employee who has breached the terms and conditions of their employment.

○ List of criteria and controls for promotions and rewards.

○ Procedures to be followed prior to the termination of an employee’s employment.

○ Grievance policy, disciplinary policy, and other necessary policies. 

Working Hours

With 6 days working week, a maximum normal working hour for adults is 8 hours per day, 48 hours per week.

With 5 days working week, a maximum normal working hour for adults is 8 hours per day, 40 hours per week.

If employees work more than the required number of hours, it is treated as overtime, and they are entitled to overtime pay.

The employees can work for an additional of two hours of overtime per day.  

For over time, a different pay calculation is applied depending on the number of hours, working or non-working days, and time of the day. 

Overtime regulations are “carved out” for managerial and supervisory positions such as: 

Chairmen of boards of directors and board members 

General Managers

Managers of Departments 

Individuals working in supervisory posts at the institution

The maximum normal working hours for adults are 8 hours per day. 

A limit of two hours per day of overtime continues to apply. 

The method of calculating the type of overtime work is based on the rate of basic pay and includes: 

Extended working day

Rest day

As per executive regulation, certain employees are exempted from working hour and overtime provisions in the present law who are: 

Chairmen of the boards of directors and board members.

Employees with supervisory positions who represent the employer

The crew of naval vessels and employees who work at sea have special conditions of service due to the nature of their work.

Businesses whose technical nature requires employees to be engaged in shift work or be tour guides with average working hours of 56 hours per week. 

Preparatory or complementary works must be carried out outside the normal working day.

Disciplinary Process

If the employer is posing certain sanctions on the employee, a minimum disciplinary process should be followed in advance 

The minimum process should be carried out before disciplinary sanctions which include dismissal and other measures: 

    • the employee should be notified in writing of the charge.
    • The employee should be invited to a meeting and listened to. 
    • The employee should provide with written reasons of any penalty to be imposed, which should also be recorded in the employee’s personnel file. 

All the allegations against the employee should be investigated thoroughly. 

When the employer becomes aware of the allegation, the employee should be informed of the allegation within 30 calendar days and a disciplinary penalty should be imposed within 60 calendar days of investigation. 

There was no written concept of the employee’s right to appeal the disciplinary outcome. 

Disciplinary penalties are imposed on the nature of misconduct with the following criteria: 

○ Breach of confidentiality of data and information related to work.

○ Violation of the health and safety of the employees.

○ Disclosure of financial information that may harm the security of the company. 

○ Violation of the reputation of the employer and its employees. 

○ The exploitation of authority is entrusted to the employee.

○ Repetition of violation towards work. 

○ Existence of criminal or moral share in the committed violation.

The list of disciplinary penalties that can be imposed from the new law should be presented to the employer.

○ Similar to the original law, the penalties are imposed after the following process has been conducted: The employees are informed of the allegation in writing.

○ The representations have been heard.

○ Their position has been investigated.

○ The process is recorded in a written report and placed in his personnel file. 

○ The employee is notified in writing of the penalty imposed.

○ The type, amount, reason, and penalty that they may receive for violation repetition.

The employee’s ability to internally appeal any disciplinary penalty imposed against them is a big change in the executive regulation.

As per the executive regulations, the employer should not suffer any damages from the appeal and the employer should inform the employee of the outcome of the appeal. 

Labor Disputes

If an employee wishes to file a formal dispute against their employer, then the employee should raise an informal complaint to the labor authority before the formal claim is filed at the Labor Court. 

The process of filing for labor dispute remains the same as the previous law. 

As per the executive regulation, the employee can continue working during the labor claim; the employee can claim two months’ wages which MOHRE can compel the employer to pay the amount or refer the complaint to the court.

It is essential for all UAE companies, onshore and within free zones, except the ones in DIFC and ADGM, to review their contracts, especially new employment contracts, policies, handbooks, and procedures to ensure consistency with the current law. 

We are looking forward to working with you to ensure that you completely adhere to the current law. To know more about our services, please feel free to call 800-EZONEUAE or email us at setup@e.zone.  You can also visit our website e.zone for additional information. We are looking forward to working with you. 

At EZONE, Your Business Matters.

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