Employment trends and job market analysis for the UAE

Best known for its highly-developed infrastructure and celebrated diversity, the United Arab Emirates (or UAE) is an economic powerhouse of the Middle East and is widely known as a business-friendly country in the region that welcomes foreign workers and investments.

The UAE’s economy is the 5th largest in the Middle East, with a gross domestic product of US$501 billion (AED 1.84 trillion) in 2022.

The economy in the UAE relies on revenue from the natural gas and petroleum industries. One of its bigger non-oil revenue sources is tourism, and the UAE’s thriving services sector is contributing to the diversification of the economy. Across the nation, there is currently $350 billion worth of active construction projects in process.

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Capital                                                      Abu Dhabi

Languages spoken                                  Arabic

Population size                                         9.89 million

Payroll frequency                                     Monthly or bi-weekly

Currency                                                  United Aram Emirates Dirham (AED)

VAT                                                           5%

 

For more economical and fiscal information United Arab Emirates, visit the dedicated section.

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Payroll and taxes in the United Arab Emirates

Employer contributions

The UAE does not have any enforced federal income tax legislation for general business. Each Emirate has enacted an income tax decree, but in practice, the enforcement of the decrees is restricted to oil companies and foreign banks.

Employee contributions

There is no personal income tax law enacted in the UAE. This means that there are no individual tax registration or reporting requirements.

Employers are required to contribute to staff pensions, but we will cover this later on in the guide.

Social security contributions

Social security contributions are only applicable to UAE nationals. Both the employer and employee will need to make these contributions. The rates are as follows:

• Employer - 12.5% of the employee’s monthly salary

• Employee - 5%

• Government - 2.5%

These rates differ in Abu Dhabi, where contribution rates are as follows:

• Employer - 15%

• Employee - 5%

• Government - 6%

Employee contributions are deducted from the employee’s salary on a monthly basis. Payment is due before the 15th of the following month and processed through the UAE Funds Transfer System. There is a late payment fee of 10%.

Labour laws to be aware of in the UAE

The recent implementation of the UAE Labour Law in February 2022 has brought about significant changes in the employment landscape. Companies operating in the private sector (excluding the DIFC and ADGM) are now required to employ individuals on fixed-term contracts.

However, the three-year limit initially imposed on fixed-term contracts was removed in October 2022, affording flexibility to both parties involved. This means that the duration of the fixed-term can now be tailored to the specific needs and preferences of the individuals involved, although the inclusion of a fixed-term provision remains mandatory.

Moreover, the removal of the maximum term limit, combined with the right of either party to terminate the contract before its expiration, can render the fixed-term aspect of the agreement virtually insignificant. For instance, even if a five-year fixed-term contract is agreed upon, it essentially functions as a permanent employment contract.

These recent amendments have undoubtedly introduced a unique dynamic in terms of contractual obligations within the UAE.

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Minimum retirement age in the United Arab Emirates

Employees are entitled to a pension from the age of 50.

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Minimum wage in the United Arab Emirates

There is currently no minimum wage in the UAE, as there is no basic salary percentage under UAE Labour Law. However, common practice dictates that the average salary is around 60% of the gross salary, with allowances at 40%.

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Working hours in the United Arab Emirates

In the UAE, the working week is typically Sunday to Thursday with some businesses  open six days a week, closing on Fridays.

However, according to the UAE's new labor law which took effect in February 2, 2022, it is no longer mandatory for employers  to implement rest days on Fridays. Rest days can now be implemented on any day of the week based on an agreement between the involved parties. 

Additional changes also include a Monday to Friday work week ( with a half day on Fridays) for all government employees. While this is not implemented in the private sector, it is reported that many private sectors companies are making plans to instill a Monday to Friday work schedule.

Usual business hours are from 8am to 1pm, resuming at 4pm (once temperatures have reduced) and continuing until 7pm.

 

Employee benefits in United Arab Emirates

Mandatory benefits

In the UAE, it is compulsory to register employees with the national government pension programme and contribute to it regularly. All employees working in the UAE that come from countries that make up the Gulf Cooperation Council (Saudi Arabia, Kuwait, Qatar, Bahrain, and Oman) are entitled to pension programmes of their home countries.

The total mandatory pension contribution required by employers is 20% of the employee’s overall salary. These contributions are subject to a statutory minimum and maximum salary amount (AED 1,000 and AED 50,000, respectively), against which the pension contribution is calculated.

Supplementary benefits

When it comes to providing benefits for employees in the UAE, it’s useful to have a strong understanding of the economy and local expectations so that you can provide genuine value for your employees. Your benefits plan must address your workers’ needs as well as give you a competitive advantage in the careers market.

You can offer a variety of supplementary benefits to set your company apart, including:

• Performance awards

• Access to mental health support and counselling

• Training and development courses

• Financial advisory services

• Wellness and health events

 

Employee rights to be aware of in the UAE

Employees in the United Arab Emirates are entitled to certain rights and protections under the labour laws mentioned above. These rights include:

Equal treatment

Employees have the right to be treated fairly and without discrimination on the basis of race, nationality, religion, gender, or age. Discrimination in hiring, promotion, or any other employment-related decision is prohibited.

Written employment contract

Employees have the right to a written employment contract that clearly outlines the terms and conditions of employment, including job description, compensation, working hours, benefits, and other relevant details.

Wages and payment

Employees have the right to receive their wages on time, usually within a month of completing the work. Wages should be paid in the local currency (UAE Dirhams), and there are regulations in place to ensure the timely payment of wages.

Workplace safety

Employers are required to provide a safe and healthy working environment for their employees. They should adhere to safety standards and regulations to ensure the well-being of workers.

 

Types of leave available in the United Arab Emirates

Annual leave

Employees are entitled to the following:

• Two days' leave for every month if their service is more than six months and less than one year of continuous employment

• A minimum of 30 vacation days a year if their service exceeds one year of continuous employment

Annual leave is usually calculated on the basis of a calendar month rather than by working days.

According to the New 2022 Labour Law, employees can be required to use up all their annual leave in the applicable annual leave year, and employers are encouraged to update any policies that limit carry-over of leave.

Sick leave

If an employee is sick or has injuries that prevent them from working, they should report to their employer within a maximum of two days.

Employees in the UAE are not entitled to sick pay during their probationary period, but after a period of three months following probation, sick leave is applicable as follows:

• The full wage for the first 15 days

• Half wage for the next 30 days

Any sick leave exceeding 30 days must be taken unpaid. If the illness has been directly caused by misconduct, e.g. excessive drinking, the employee is not entitled to sick pay. Employees are required to provide evidence of their illness via an official medical certificate.

Workers can resign during their sick leave, provided that the reason for resignation is approved by a physician. In this case, employers must pay all the wages the employee is entitled to until the end of the 45-day period of sick leave entitlement.

Employers are not permitted to dismiss an employee during their sick or annual leave unless the employee has used up all of their sick leave and is unfit to return to work. In this instance, the employee should receive a full gratuity and end-of-service entitlement. They will not be entitled to wages for the days they have not reported to work after the end of their leave.

If an employee does not report back to work within seven days from the day they were due back, employers are within their rights to terminate the employment agreement.

Maternity and paternity leave

Maternity leave in the UAE is applicable for 50 calendar days. Maternity pay is as follows:

• Full pay for the first 45 days

• Half pay for the remaining 15 days

Employees are also entitled to take maternity leave if they have miscarried after six months of pregnancy or in the event of a stillbirth or death of the child following birth. This leave will be the same as is detailed above.

If an employee gives birth to an infant with an illness or disability, they are entitled to an additional 30 days of leave, which can be further extended by another 30 days of unpaid leave if necessary.

At the end of the maternity leave, employees are allowed to extend their leave for a maximum of 45 days without pay.

During the six months following the birth of a child, employees who are nursing are entitled to two daily half-hour intervals to nurse their baby. These intervals are considered working hours and should not incur a wage deduction. According to the New 2022 Labour Law, employers cannot terminate an employee because they are pregnant or taking maternity leave.

Paternity leave is not provided for under the New 2022 Labour Law.

Compassionate leave

In the UAE, compassionate leave is as follows:

• Five days in the event of the death of a spouse

• Three days in the event of the death of a parent, sibling, child, grandchild or grandparent

Study leave

Employees who have worked at a company for more than two years can take ten days of study leave per year. This leave allows them to sit examinations. They will need to be affiliated with an approved UAE educational institution to qualify for this leave.

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Public holidays in the United Arab Emirates

The UAE observes the following national holidays:

• New Year’s Day

• Eid al-Fitr (celebrated on five consecutive days)

• Arafat Day

• Eid al-Adha (celebrated on three consecutive days)

• Islamic New Year

• Prophet Muhammad’s Birthday

• Commemoration Day

• National Day (celebrated on two consecutive days)

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Termination of employment in the United Arab Emirates

According to the New Labour Law, employees must be engaged through fixed-term contracts. These can last for up to a maximum of three years. As of February 2022, employers in the UAE have up to one month to transfer employees from unlimited-term contracts to limited-term contracts.

In the event of a dismissal, in addition to notice, employers must pay compensation of up to three months’ wages if the dismissal results in a valid claim to the court.

Notice period

The minimum notice periods for a fixed-term employment contract, introduced by the New Labour Law, are stipulated as follows:

• 30 days if the period of service is less than five years

• 60 days if the period of service is higher than five years

• 90 days if the period of service is higher than ten years

However, these notice periods are not applied for limited-term contracts, where employees are permitted to agree to a notice period with their employer. This period must be a minimum of 30 days and no more than 90 days.

Probationary periods

The legal probationary period in the UAE is a maximum of six months, according to Article 9 of the Federal Decree-Law No. (33) of 2021.

Severance pay

Employees are entitled to a gratuity for the severed fraction of the year. This is on the condition that they complete one year of continuous service.

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Do you need to hire employees in the United Arab Emirates?

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Talk to us

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Contact

Mrs. Emanuela Ferina

Head of Global Payroll

emanuela.ferina@studio-bcs.com

Phone 0039 0 363 360254

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