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Setting up a business in the UAE or hiring employees here? Understanding employee benefits is crucial for compliance and attracting top talent. As of January 2026, the UAE’s labour framework – governed by Federal Decree-Law No. 33 of 2021 (with amendments) – offers a competitive mix of mandatory protections and flexible options that support work-life balance and financial security.
This comprehensive guide covers everything employers and employees need to know about benefits in 2026, including recent updates like the growing adoption of voluntary gratuity savings schemes. Whether you’re completing UAE company incorporation or exploring business setup in Dubai, factoring in these benefits early helps avoid penalties and builds a strong team.
Mandatory Employee Benefits in the UAE
The Ministry of Human Resources and Emiratisation (MoHRE) enforces these mandatory benefits. Non-compliance can lead to significant fines, so employers should integrate them from day one of the UAE business registration process.
1. End-of-Service Gratuity (EOSB)
A key financial benefit for expatriate employees (Emiratis/GCC nationals receive pensions instead).
Traditional Lump-Sum System
21 days’ basic salary per year for the first 5 years
30 days’ basic salary per year thereafter
Eligibility: Minimum 1 year of continuous service
Capped at 2 years’ total salary
Must be paid within 14 days of employment termination
2026 New Update: Voluntary Gratuity Savings Scheme
Launched in 2023 and gaining strong adoption by 2026, this funded investment scheme replaces the traditional gratuity if an employee opts in.
Monthly employer contributions are invested in approved funds
More secure and portable between jobs
Popular among companies during Dubai free zone company formation for transparency
UAE Gratuity Calculation (Official Method)
To ensure accurate and compliant end-of-service calculations, always use the official UAE Government / MoHRE Gratuity Calculator. This tool provides exact figures based on your contract type, basic salary, and total years of service.
Use the official UAE Government Gratuity Calculator:
https://dda.gov.ae/en/gratuity-calculator/gratuity-calculator
(Source: MoHRE – End-of-Service Benefits, UAE Government Portal)
2. Health Insurance
Mandatory nationwide and fully enforced as of January 2026.
- Employer-provided basic coverage (Essential Benefits Plan for lower salaries).
- Abu Dhabi/Dubai: Often includes dependents.
- Fines up to AED 500,000 per uninsured employee.
(Source: Dubai Health Authority | Department of Health Abu Dhabi)
3. Paid Annual Leave & Public Holidays
- 30 calendar days after 1 year (pro-rated earlier).
- 13–14 paid public holidays annually.
4. Maternity & Paternity/Parental Leave
The UAE Labour Law (Federal Decree-Law No. 33 of 2021) provides comprehensive family support for private-sector employees.
Maternity Leave
Female employees are entitled to 60 days of maternity leave:
- 45 days with full pay
- 15 days with half pay
Medical Extension: Up to 45 additional unpaid days if medical complications arise (requires medical certificate from an authorized/licensed healthcare provider).
Parental Leave
Both parents receive 5 working days of paid parental leave within the first 6 months of the child’s birth.
Important Notes
- The law does not explicitly make leave conditional on marital status
- Employers may request standard documentation (medical/birth certificates)
- For specific situations (single or unmarried mothers), seek case-specific legal advice
- Some government programs may require additional documents like marriage certificates for extra benefits
5. Sick Leave
Employees are entitled to up to 90 days of sick leave per year after completing probation:
- First 15 days: Full pay
- Next 30 days: Half pay
- Remaining days: Unpaid
A valid medical certificate from a licensed medical facility is required (e.g., DHA-licensed clinics/hospitals in Dubai), as this document confirms the number of sick-leave days granted.
6. Unemployment Insurance (ILOE Scheme)
Mandatory for all employees (including free zones) as of January 2026.
- Low premiums (AED 5–10/month, employee-paid).
- Benefit: 60% of average basic salary for up to 3 months if involuntarily unemployed.
- Must subscribe for 12+ consecutive months to claim.
Recent improvements include easier cash payouts via exchanges, continuing into 2026.
(Source: Official ILOE Portal)
7. Other Mandatories
- Overtime: 125–150% of regular rate.
- Anti-discrimination & flexible work protections.
- Pension for Emiratis/GCC: 15% employer + 5% employee.
Mainland vs Free Zone vs Offshore: Benefits Comparison (2026)
Aspect | UAE Mainland | Free Zones (e.g., DMCC, JAFZA) | DIFC/ADGM Financial Centres | Offshore |
Gratuity System | Traditional or Voluntary Savings Scheme | Same as mainland (voluntary scheme popular) | Mandatory funded schemes (e.g., DEWS in DIFC) | N/A (no employees) |
Health Insurance | Mandatory | Mandatory | Mandatory (often enhanced) | N/A |
Pension (Emiratis) | Mandatory | Mandatory | Separate rules | N/A |
Labour Law Application | Full MoHRE | Full (some flexibilities) | Own employment regulations | N/A |
Typical Extra Perks | Housing/transport common | Competitive packages | High bonuses, global standards | N/A |
Planning UAE mainland company setup? Mainland offers full market access but stricter local sponsorship rules.
Optional Benefits Top Employers Offer in 2026
To compete for talent:
- Housing & transport allowances.
- Annual flight tickets.
- Education allowances for children.
- Wellness programs (gym, mental health, remote work).
- Enhanced parental leave & bonuses.
- Private pension top-ups.
These are especially common in competitive sectors like tech and finance.
Recent UAE Labour Updates
Nationwide health insurance enforcement.
- Growing shift to voluntary gratuity savings/investment schemes (more secure for employees).
- Stronger flexible/remote work guidelines.
- ILOE scheme expansions (easier claims, broader coverage).
- Continued anti-discrimination and wellbeing focus.
How Employee Benefits Impact Your Company Setup Costs
When estimating business incorporation cost UAE, include:
- Gratuity accruals (5–8% of payroll annually).
- Insurance premiums.
- Leave provisions.
Early planning during how to get Certificate of Incorporation UAE ensures smooth operations.
Conclusion
Employee benefits in the UAE continue to evolve, reflecting the country’s commitment to building a competitive, transparent, and employee-friendly labour market. Whether you’re setting up a business on the mainland, in a free zone, or expanding your existing operations, understanding these mandatory and optional benefits is essential for full compliance and strong employer branding.
In 2026, companies that prioritise fair compensation, robust benefits, and modern workplace practices not only attract top talent but also build long-term organisational stability. By integrating these requirements early into your HR and business setup strategy, you ensure smoother operations, reduced legal risks, and a motivated workforce that drives growth.
If you need expert guidance on structuring compliant employee benefits or refining your HR policies in the UAE, our team at Peak Group is here to support you every step of the way. contact us april@peakconsultancy.com or call us +971 56 606 4555
Employee Benefits in the UAE (2026) – FAQ
Q1: Is the gratuity savings scheme mandatory in the UAE?
No. It remains voluntary for mainland and most free zones. It is mandatory only in financial centres such as DIFC and ADGM. Many employers choose it for better transparency and employee security.
Q2: How is end-of-service gratuity calculated in 2026?
Gratuity is calculated based on basic salary:
21 days per year for the first 5 years
30 days per year after 5 years
Employees must complete at least 1 year of service.
Q3: Do UAE employee benefits differ between Dubai and Abu Dhabi?
Core federal labour laws apply across the UAE, but some emirates (such as Dubai and Abu Dhabi) have different health insurance rules, and free zones may have additional regulations.
Q4: What documents are required for maternity leave in the UAE?
Employees must provide a medical certificate confirming pregnancy and submit a leave application to the employer (and MoHRE if requested).
Q5: Is unemployment insurance (ILOE) mandatory in 2026?
Yes. All employees—including those in free zones—must subscribe to the ILOE insurance scheme to remain compliant.
Q6: Do free zone companies offer different benefits than mainland companies?
Most mandatory benefits remain the same, but free zones such as DIFC and ADGM follow their own employment regulations, including funded gratuity schemes.
Q7: What benefits should be planned during UAE company incorporation?
Employers must account for gratuity, health insurance, paid leave, maternity and paternity benefits, and employment contract compliance under MoHRE.