General Overview

The United Arab Emirates is a modern, dynamic economy known for its robust financial services, real estate, tourism, and trade sectors. With a business-friendly environment and progressive labor regulations, the UAE continues to attract multinational companies and skilled professionals from around the world.

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Employment Contracts

Types: There are two main types of contracts:

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• Limited term (fixed-term) contracts
• Unlimited term contracts

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Requirements: Contracts must be written in Arabic (and may be bilingual in English) and include the start date, type of employment, work location, terms and conditions, duration, and salary.

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Probation Period

The probation period must not exceed 6 months. During this period, the employer may dismiss the employee without providing notice or an end-of-service benefit. Once the probation is successfully completed, the period counts as part of the employee’s continuous service.

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Working Hours

Private Sector: Employees work 8 hours per day or 48 hours per week. Public Sector: Employees work 7 hours per day. Ramadan: Working hours are reduced by 2 hours.

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Overtime:

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• Overtime is paid at the normal hourly rate plus an additional 25%.
• If overtime is performed between 9 PM and 4 AM, the rate increases to an extra 50%.

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Vacation Days

Annual Leave:

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• Employees with 6 months but less than one year of service are entitled to 2 days per month.
• Employees with one year or more of service are entitled to 30 days of annual leave.

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Carry Over: Unused leave may be carried over as agreed, and upon termination, any unused leave must be paid out.

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Sick Leave

Eligibility: Sick leave is available only after 3 months of continuous service following the probation period.

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Entitlement:

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• First 15 days: Full pay.
• Next 30 days: Half pay.
• Remaining 45 days: No pay.

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Note: These provisions do not apply to occupational illnesses, which are treated separately.

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Wages and Salary Payment

Payment Frequency:

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• Salaries must be paid once a month on the due date, and no later than 10 days after the end of each salary period.
• If not specified, payment should be made every 14 days.

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Minimum Wage: There is no statutory minimum wage in the UAE; however, salaries should be sufficient to cover the basic needs of employees.

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Public Holidays

The UAE observes several public holidays. Key holidays include:

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• Gregorian New Year: January 1
• Eid Al Fitr: From the 29th day of Ramadan to the 3rd day of Shawwal (4 days)
• Arafah Day & Eid Al Adha (Feast of Sacrifice): From the 9th to the 12th of Dhu al Hijjah (4 days)
• Hijri New Year (Islamic New Year): Date varies (e.g., 12 August 2021; 30 July 2022)
• Prophet Mohammed’s Birthday: Date varies (e.g., 21 October 2021; 8 October 2022)
• Commemoration Day: December 1 (formerly observed on November 30)
• National Day: December 2 and 3 (2 days)

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Note: Islamic holidays are determined by moon sighting. If a public holiday falls on a Sunday, the holiday may be observed on another day within 3 months.

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Employer Taxes

Social Security: Contributions are applicable only to Emirati employees:

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• 12.5% of the employee’s salary.

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Employee Taxes

• Personal Income Tax: There is no personal income tax in the UAE.
• Social Security: Emirati employees contribute 5% of their salary; expatriates are not required to contribute.

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Notice Period

For limited term contracts (which cannot exceed 2 years), the notice period must be stated in the contract and ranges from a minimum of 1 month to a maximum of 3 months.

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Termination and Severance Pay

• Notice Requirements: Either party may terminate the contract by providing written notice of between 1 and 3 months.
• Obligations: The party terminating the contract must honor all contractual obligations during the notice period.
• Severance Pay: For early termination, compensation may be required, provided it does not exceed the equivalent of 3 months’ gross wages.