Starting a business in the UAE is an exciting opportunity, but as a new employer, understanding the country’s labor laws is crucial to ensure compliance and avoid legal pitfalls. From employment contracts to visa processing and worker rights, navigating UAE labor regulations can be complex. It is crucial to have experts support you with the basics, compliances and how to establish a legally sound and efficient workforce.

The backbone of the labour market in the UAE is Ministry of Labor (MOL) or MOHRE (Ministry of Human Resources and Emiratization). It ensures employees’ salaries are paid on time as per employment contracts and ensures no malpractices or ill-treatment are tolerated from either companies or employees. They are also responsible in reviewing and approving applications for employees’ UAE residence visas and work permit.

Key Employment Regulations in the UAE

The UAE introduced Federal Decree-Law No. 33 of 2021, which came into effect on February 2, 2022, to regulate labor relations in the private sector. This law replaced the previous labor law (Federal Law No. 8 of 1980) and introduced significant changes to enhance employer-employee relationships, ensure worker rights, and align with global labor standards.

1. Employment Contracts and Work Models

Mandatory Fixed-Term Contracts: All employment contracts must be for a fixed term, not exceeding two years, with the option for renewal.
New Work Models: Introduced part-time, temporary, flexible, and remote work arrangements to support diverse work environments.

2. Working Hours and Overtime

Standard working hours: 8 hours per day or maximum 48 hours per week.
Overtime pay: Employees working beyond standard hours are entitled to 125% of regular pay (150% for night shifts, weekends or public holidays).
Remote & Flexible Work Options: Employees may request non-traditional work arrangements.

3. Wages and Payroll Compliance

Salaries must be paid via the Wages Protection System (WPS) for mainland companies. Some Freezones such as DMCC (Dubai Multi Commodities Center) and JAFZA (Jebel Ali Free Zone Authority) has also mandated the salary payments through WPS for companies under their authority.
Employees must receive wages as per the agreed due date as specified in the employment agreement. For most companies who follow the end-of-the-month policy, salary should be processed maximum 15 days after the due date to avoid being flagged by labor. Late Payment Penalty: If salaries are not transferred by the 15th day of the month following the due date, the company may be blocked from the WPS system and ministry of labor which will prevent company to transact any applications for residence visa and the likes.
80% of an employees’ Total WPS salary must be paid to avoid any issues with the Ministry of labor.

4. Leave and Employee Benefits

Annual Leave: 30 days per year after one year of service. This can be adjusted to working days depending on company policy (in relation to applicable weekly day offs) as long as it is equivalent to 30 calendar days.
Sick Leave: 90 days (first 15 days full pay, next 30 half pay, last 45 unpaid).
Maternity Leave: 60 days (45 fully paid, 15 half paid).
Paternity Leave: 5 paid days within six months of childbirth.
Bereavement Leave: From 3 days up to 5 days depending on relationship to the deceased.

5. End-of-Service Gratuity

Employees completing one year of service are entitled to gratuity.
Calculation is based on 21 days’ salary per year for the first 5 years and 30 days per year after that.
Full gratuity applies even if the employee’s exit is through resignation (previously reduced under old law) or termination.

6. Workplace Compliance and Termination Rules

Employers cannot withhold employee passports or force resignation.
Termination must follow a fair process—wrongful dismissal can lead to compensation claims.
Notice period ranges from 30 to 90 days, depending on contract terms.

7. Emiratisation and Hiring UAE Nationals

Emiratisation quotas apply to private sector companies with 50+ employees.
Firms must hire 2% UAE nationals annually in skilled roles (for certain sectors).
Non-compliance leads to fines up to AED 96,000 per year per unfilled quota.
Selected group of establishments (depending on Industry) employing 20 to 49 employees across 14 specified economic activities are also covered by Emiratisation policies, requiring them to employ at least one Emirati and retain any Emiratis employed prior to 1 January 2024. Penalty also applies for non-compliance.
The General Pension and Social Security Authority (GPSSA) has launched a new digital pension platform called Ma’ashi to simplify the payments of Local’s pensions online.

Why HR Compliance Matters Under UAE’s New Labor Law

With the introduction of Federal Decree-Law No. 33 of 2021, businesses operating in the UAE must strictly adhere to labor regulations to ensure smooth operations, avoid penalties, and protect employee rights. Having well-structured HR policies and expert guidance is critical for compliance, as failure to follow labor laws can lead to legal disputes, fines, and reputational damage.

1. Employment Contracts & Legal Documentation

UAE labor law mandates written employment contracts that clearly define terms, salaries, benefits, and working conditions.
Companies must transition to fixed-term contracts to stay compliant.
Failure to provide proper contracts can lead to employee disputes and legal claims in the future.

2. Payroll and Wage Protection System (WPS) Compliance

Salaries must be processed through the WPS to ensure timely and transparent wage payments.
Companies failing to comply face heavy fines, business license suspension, block in Ministry of Labor and legal action.
Mismanaged payroll can cause employee dissatisfaction, leading to resignations and lawsuits.

3. Employee Rights and Benefits Compliance

UAE labor law guarantees annual leave, sick leave, maternity/paternity leave, and end-of-service gratuity.
Non-compliance in granting these benefits can result in lawsuits, compensation claims, and fines which is disadvantageous to companies especially for start-ups.
Employers must provide equal pay and prevent discrimination, harassment, or wrongful termination.

4. Termination & Offboarding Compliance

Employers must follow due process when terminating employees, including proper notice periods (30-90 days) and gratuity payments.
Wrongful termination claims can result in compensation claims of up to 3 months’ salary depending on notice period required as per employment contracts.
Failing to follow labor law in offboarding can damage company reputation, decrease company tier classification (the lower tier classification, the higher the cost for employee work permits) and increase legal risks.

An HR Management System (HRMS) is essential for businesses to comply with UAE labor laws efficiently. It automates key HR processes like employment contracts, payroll management, leave tracking, and compliance reporting, reducing manual errors and ensuring businesses meet legal requirements. HRMS ensures Wages Protection System (WPS) compliance, timely salary payments, proper leave calculations, and accurate end-of-service gratuity processing. It also helps companies track visa expirations, employee benefits, and Emiratisation quotas, avoiding penalties and legal risks. Correlation to HRMS, the Human Resources Team should be responsible in making sure HRMS’s policy implementation is up-to-date as per the new labor law and ensure timely execution of HR operations. Both HRMS and HR Team plays a vital role in simplifying compliance, streamlines operations, and keeps businesses aligned with UAE labor laws.

Common Challenges for New Employers & How to Overcome Them

Starting a business in the UAE comes with exciting opportunities, but new employers also face several challenges in managing employees and staying compliant with labor laws. Understanding these HR and compliance aspects is crucial for a smooth business journey. Here’s how to tackle these challenges effectively.

1. Navigating Visa and Work Permit Requirements

Challenge: Employers must ensure all employees have valid work visas and permits under UAE laws. The process can be complex, requiring sponsorship, medical tests, and government approvals. Mistakes in visa applications or renewals can lead to fines or legal issues.

Solution: Work with HR experts or business consultants to streamline visa processing and ensure compliance with MOHRE (Ministry of Human Resources and Emiratisation) regulations.

2. Ensuring Compliance with Emiratisation Policies

Challenge: Companies with 50+ employees must meet Emiratisation quotas by hiring UAE nationals in skilled roles. Non-compliance leads to fines of up to AED 96,000 per missing Emirati hire per year and can affect government approvals.

Solution: Employers should plan for Emiratisation by implementing structured recruitment strategies and offering competitive roles for UAE nationals. Consult HR firms and experts to develop Emiratisation plans, connect with qualified local talent, and ensure full compliance to avoid hefty penalties.

3. Managing Employee Disputes and Labor Complaints

Challenge: Disputes over unpaid wages, wrongful termination, or workplace conflicts can lead to complaints filed with MOHRE, damaging a company’s reputation and operations. Without proper HR policies, businesses may struggle to handle grievances fairly.

Solution: Employers should have clear HR policies (from Attendance and leave, code of conduct to disciplinary actions), transparent contracts, and employee dispute resolution mechanisms in place. HR outsourcing and compliance support can help start-up businesses navigate labor disputes professionally while minimizing legal risks and without spending much on legal consultation fees from Lawyers.

At Peak Group, we offer end-to-end HR management, business consultancy, HR Policy Development, HR Consultancy and labor law compliance services to help you focus on growing your business while we handle your workforce needs.

Need expert HR and compliance support? Contact us today for a free consultation and ensure your business is fully compliant with UAE labor laws. Reach out to us at april@peakconsultancy.com or call +97156 606 4555.

How to Navigate UAE’s Labor Laws as a New Employer