UAE Labour Law for the Private Sector: Key Provisions and Compliance Tips
The UAE Labour Law is a vital framework, designed to regulate employment relationships, ensure the protection of all parties and enhance the efficiency of the labour market.
With significant modifications made in recent years to adapt to the evolving demands of a modern and diverse workforce, it is essential for businesses to review and stay informed with the changes. Understanding and adhering to the UAE Labour Law not only ensures legal compliance but also promotes best practices and high standards in the workplace, helping the region to attract and retain top level professionals.
In this blog we will delve into the UAE’s onshore legislation, which extends to those businesses governed by the Ministry of Human Resources. A central piece of legislation is the Federal Decree Law, No. 33 of 2021 which outlines the regulations governing the relationship between employers and employees. We will explore the key provisions of this law and discuss how businesses can ensure compliance.
Key provisions: Federal Decree Law, No. 33 of 2021
Employment Contract: Employees can be hired on a full time, part time or temporary basis; however, all employment contracts must be for a fixed-term. As a result, private sector employers are required to convert existing contracts to limited durations. These contracts can be extended or automatically renewed under the same terms if both parties agree.
Probation Period and Working Hours: The probationary period is used to assess whether full time employment should be offered. The maximum probationary period of an employee is 6 months and must not be extended for another term. Standard working hours for the private sector is eight hours per day, or 48 hours per week. Please note, working hours may be reduced by 2 hours during the holy month of Ramadan.
Leave Entitlements: Employees are entitled to 30 days of paid annual leave after completing 1 year of continuous service; those who have completed six months of service, but less than a year are eligible for 2 days of annual leave per month. Employees are able to carry forward a maximum of half of their annual leave balance into the following year or opt for encashment of leave which is calculated based on the employee’s basic salary only. While the general approval of annual leave is at the employer’s discretion, other types of leave include, sick leave, study leave, maternity and parental leave, bereavement, and leave to complete Hajj (an Islamic pilgrimage to Mecca). The law sets out individual provisions for each type of leave.
Termination: An employment contract can be terminated for any legitimate reason, such as mutual agreement, contract expiry, either party’s request (with notice period), the death of the employer or employee, a court sentencing of at least three months for the employee, permanent business closure, employer bankruptcy, or failure to renew an employees work permit for reasons beyond the control of an employer. When terminating employment after the probationary period, either party must service a notice in writing, for a period not less than 30 days and not more than 90 days. During this period, the employee must continue working unless otherwise agreed, and is entitled to their salary for the period of notice. If terminated by the employer, an employee is permitted to take one unpaid day per week to search for another job, with prior notification.
End of Service Benefits: In the event of a resignation, retirement or termination, employees are entitled to end of service benefits. Eligibility begins after one year of full continuous service and the calculation is based off an employee’s basic salary, as follows: 21 days salary for each year of service up to the first 5 years, and 30 days salary for each year of service after 5 years. Additionally, employees may also be entitled to payment in lieu of unused annual leave accrued during their employment. All end of service entitlements must be settled within 14 days from the contracts end date.
Compliance Tips for Employers:
Stay up to date with the laws and regulations: The UAE Labour Law is regularly updated to reflect evolving businesses and international standards. Regularly review the law and revisions through official government sources or local experts / legal advisory channels.
Partner with a local entity: Consider outsourcing services to a local partner who can handle employment, pay-rolling or human resources. This is especially useful for businesses unfamiliar with local regulations, seeking compliant and streamlined operations.
Ensure clear and transparent contractual agreements: Ensure all employment contracts are written in a clear, concise language. Contracts must outline the terms and conditions of the employment relation, in accordance with UAE Labour Law.
Manage employee benefits and entitlements: Ensure transparency regarding employee entitlements such as annual leave, sick leave, maternity/paternity leave, and end-of-service benefits. Compliance with the labour law reduces the likelihood of disputes and enhances employee engagement and loyalty.
Promote a fair business environment: Foster an inclusive workplace where all employees are treated appropriately. Ensure that policies and practices are in place to prevent discrimination on the grounds of race, colour, religion, social origin or disability, as mandated by UAE law.
How can Charterhouse Labour Solutions help?
Charterhouse Labour Solutions offer’s tailored packages to streamline and simplify your entry or expansion into the UAE market. Our services include VISA processing, monthly payroll, HR support, leave management, end of service management, general consultancy or advise - all backed by extensive local knowledge.
For more information or a confidential discussion, reach out directly to: outsourcing@charterhouse.ae or connect with us at @CharterhouseLabourSolutions
