In general, employment relationships in the UAE are governed by Federal Law No. 8 of 1980 (UAE Labour Law) (as amended) which sets out all the employment regulations which apply to workers in the UAE, including foreign nationals. The UAE Labour Law applies to all employees working in the UAE with the exception of public officials and civil servants; members of the armed forces, police and security officers; and domestic servants and agricultural workers.
If the employer operates in the DIFC or a free zone then the DIFC Employment Law No. 4 of 2005 (as amended) or the regulations for that free zone authority will also apply. Where there is a conflict between the free zone authority and the UAE Labour Law, the UAE Labour Law takes preference unless the provisions are less favourable than the free zone regulations.
Where no compulsory legislation applies, employment contracts in the UAE shall be governed by contract law.
All expatriate employees (with the exception of those employed by a Free Zone entity) are required to execute an employment contract in the form required by the MOL. This employment contract is registered with the Federal Ministry and constitutes the governing contract between the parties in the event of any dispute in the UAE.
Employment contracts may be for a limited period (a fixed term not to exceed two years) or an unlimited period. Upon the termination of employment in the UAE, employees with more than one years' continuous service are entitled to an end of service gratuity, calculated by reference to length of service (see below).
Minimum statutory obligations
The UAE Labour Law sets out the following minimum obligations on employers:
Minimum holiday entitlement
For each year of service, UAE employees are entitled to paid leave of not less than:
- Two calendar days per month, for an employee who has more than six months' service but less than one year's service.
- 30 calendar days per annum, for an employee with more than one year's service.
Leave is in addition to the seven national holidays. The MOL declares the length of each national holiday (which can fall on any day of the week each year) before the holiday takes place. The lunar calendar determines the dates of some national holidays.
If a public holiday falls on a weekend, employers are not obliged to provide an additional day off to compensate.
UAE employees are not entitled to paid sick leave during the probationary period (maximum of six months). If an employee has worked continuously for three months after the end of the probationary period, he will be entitled to 90 days' sick leave per year (either continuously or on aggregate).
While on sick leave UAE employees are entitled to sick pay as follows:
- First 15 days are with full pay
- Next 30 days are with half pay
- Remaining 45 days are unpaid
With effect from 30 June 2016 there will be a mandatory requirement on all Dubai employers to provide medical insurance to their employees.
Generally, overtime must not exceed two hours per day, unless the work is necessary to prevent substantial loss or serious accident (or to eliminate or alleviate its effects). UAE employees are entitled to overtime pay as follows:
- Overtime pay amounts to 125% of an employee's normal remuneration for the period of overtime worked (unless the employee is required to work overtime during the hours of 9.00pm and 4.00am, in which case this rises to 150%).
For overtime on Fridays and public holidays certain other calculations may apply.
End of service gratuity payment
To be entitled to a gratuity payment on termination of employment, an employee must have accrued one year's service and the dismissal must not be for gross misconduct. An end of service gratuity is calculated with reference to the employee's last basic pay before termination at the rate of:
- 21 days' pay for each year of service up to the first five years' service.
- 30 days' pay for each year of service in excess of five years' service.
In certain cases, such as resignation, the end of service gratuity may be reduced.
Relocation and Repatriation
All costs of recruitment of the employee and repatriation after the employment terminates should be paid for by the business.
In particular, the employee will be entitled to:
- The cost of a flight to the employee’s home country on termination of employment if no alternative employment in the UAE is obtained;
- The cost of obtaining a residency visa; and
- The cost of obtaining a UAE Labour Card.
Note – it is common practice to offer return flights to the employee’s home country once a year although this is not actually a statutory right.
Protection from dismissal
The minimum notice period is 30 days. If either party defaults on the agreed notice period, that party must pay compensation in lieu of notice based on the employee's current pay (in proportion to the number of days in default).
Employees are protected from dismissal generally and can only be dismissed in connection with a valid reason, typically understood to be a reason connected with performance.
Employers can dismiss an employee without notice if the employee commits an act of gross misconduct or is on probation. The offences which constitute gross misconduct are limited to the following:
- Adopting a false identity or nationality, or submitting forged certificates or documents.
- Making a mistake resulting in substantial material loss for the employer, if the employer notifies the MOL of the incident within 48 hours of becoming aware of its occurrence.
- Disobeying instructions concerning industrial safety or the safety of the workplace, if the instructions are in writing and displayed clearly. If the employee is illiterate, the employer should have read the instructions to them.
- Failing to perform their basic duties under the contract of employment and persisting in violating them despite the fact that they have been both:
- the subject of a written investigation;
- warned that they will be dismissed if their behaviour continues.
- Revealing company secrets.
- A competent court has sentenced the employee for an offence involving honour, honesty or public morals.
- Being found drunk or under the influence of a drug during working hours.
- Assaulting an employer, a responsible manager or a colleague during working hours.
- Being absent without a valid reason for more than 20 non-consecutive days, or more than seven consecutive days.
The standard Freezone or MOL employment contract will cover the above employment obligations. We recommend that employers also enter into a supplemental employment contract with their employees to ensure the business is adequately protected with regards to intellectual property, confidentiality and post-termination restrictive covenants.
If any of the above obligations are not complied with, this is likely to result in a labour dispute being raised against the employer.
A well drafted supplementary employment contract will enable an employer to be in the strongest position possible should an employment dispute arise.
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