In the heart of the Middle East's economic landscape, the United Arab Emirates stands as a beacon of global business and diverse talent.
Navigating its complex employment laws, especially for expatriate hiring, is crucial for companies looking to harness this vibrant and rich resource pool. The UAE, home to a dynamic mix of over 88% foreign nationals, offers unparalleled opportunities for growth-minded businesses.
However, the real challenge lies in understanding and complying with the local regulatory framework – a task that can be daunting for even the most experienced global HR professionals. Let us jump in below to demystify the whole process
Hiring in the UAE
The UAE is a federation of seven emirates and around 45 free zones offering preferential tax and customs rates. Although employment regulations vary for each emirate, employers and organisations must have compliant employment contracts to ensure a safe and fair working environment.
In this challenging regulatory landscape, an employer of record, allows you to focus on your business objectives, knowing that you have an EOR’s expertise to support you every step of the way.
Employment Contracts in the UAE
When hiring in the United Arab Emirates (UAE), it's crucial to understand the distinct requirements for employing nationals versus expatriates.
Expatriates: Hiring expatriates in the UAE require a visa, which is directly tied to their employment with the sponsoring company. There are two primary categories of visas based on the skill level of the employee:
Skilled Visa: This visa is for individuals with specialised skills or professional qualifications. It includes roles that require advanced education, technical knowledge, or managerial capabilities. Examples could be engineers, doctors, IT professionals, or managers.
Unskilled Visa: Aimed at workers who perform jobs that don't require advanced education or specialised training. These roles are typically in sectors like construction, manufacturing, and certain service industries. Despite being labelled 'unskilled', these workers are essential to the day-to-day operations and infrastructure development within the UAE.
By entrusting Teamed with the visa sponsorship process, companies can focus on harnessing the best global talent without the administrative complexities of international hiring.
A key element to onboard an employee in the UAE is a compliant employment contract. For this, you need to know the critical elements of the employment contract like:
- UAE employees work 8 hours per day or 48 hours per week over a six-day working week.
- During Ramadan, the working hours are reduced by 2 hours, i.e., 6 hours per day or 36 hours per week.
- Employees can work up to 5 consecutive hours without breaks.
- The UAE government has a four-and-a-half-day working week with weekends on Saturdays and Sundays, but private organisations can set their own working weeks.
Overtime can be up to 2 hours per day. This is how you can calculate overtime hours and the amount to be paid to employees:
- Between 4 AM to 10 PM: 125% of the employee's regular salary
- Between 10 PM to 4 AM: 150% of the employee's regular salary
- On rest days: 150% of the employee's regular wage or another work day off
Understanding Compensation and Living Costs in the UAE
According to UAE Labour Law, there is no minimum wage for employees. However, salaries should be enough to meet basic needs. In addition many banks require a minimum wage of 6,000 AED to open a fully functioning account.
The cost of living for employees living in the UAE is as follows:
- For one person: AED 3,579
- For four people: AED 12,452
Therefore it is important to make sure the salary bracket for your employees falls between the same bracket as the average cost of living (at least). There are some set rules on how and when you'll be paying salaries to your employees:
- Employers must register with the Ministry of Human Resources and Emiratisation and subscribe to and pay employees through the Wages and Protection System.
- Salaries should be transferred directly to the employee's bank account within 15 days of the salary's due date.
- The pay is considered unpaid if the employer has yet to transfer the salary within the due date.
Note: For salary delays, employers can face fines, a ban on issuing work permits, or even be taken to court. To prevent this situation, use EOR payroll services like Teamed so that you can onboard foreign employees, pay them in multiple currencies and avoid delays in payments.
Although bonuses are not mandatory for employees in the UAE, it's a common practice to offer rewards to retain them.
The maximum probation for a new employee is 6 months, this can not be extended.
If an employee wants to change their job within the UAE during their probation period, they must submit a notice of 1 month. Employees who want to leave the country during their probation period must submit a notice of 14 days.
If the employee leaves the country during probation without submitting notice, they can get a one-year employment ban from obtaining a work permit. If an employee has a sick child and needs to take time off work to care for them, this may fall under the provisions of sick leave.
Termination and Severance
Employers can terminate their employees any time without stating the reason, with a notice period of 30 days. However, they cannot remove the employee while the employee is sick or on annual leave.
An employer can terminate the employee without notice if there is a significant violation of their contract.
If an employee is terminating a fixed term contract before its due date they will need to pay ‘early termination compensation’. This is a minimum 3-month remuneration including salary and allowances to be paid to the employer.
Employees who complete one year of employment or more with an organisation are entitled to receive severance pay or gratuity. If an employee is terminated, they'll receive severance pay in the following way:
- If the employment duration is between 1 and 5 years, the end-of-service benefit is calculated as 21 days of base salary for these years.
- If the employment duration is more than 5 years: End-of-service benefit is calculated as 21 days of base salary for the first 5 years + 30 days base salary for the remaining years.
Employee Benefits and Paid Leave in the UAE
To create a personalised (and localised) employee benefits package, you must know the different leave entitlements in the UAE. Below are the different types of employment that must be included in the contract:
Female employees are entitled to maternity leave of 60 days, out of which:
- 45 days will be fully paid leaves
- 15 days will be half-paid leaves.
If the female worker experiences illness due to pregnancy, they can take 45 days of unpaid leave. If the child is sick or is born with disabilities, the employer can provide an additional 30 days of paid leave, with the option to extend for another 30 days without the pay.
In addition mothers are entitled to 2 daily 30 min breaks for 6 months to breastfeed their child after returning to work.
Employees in the UAE receive annual leave after six months. Once they complete their dedicated months of services, they are permitted the following days of annual leave:
- If the employee has worked for six months: 2-day break in a month
- If the employee has worked for a year: 30 days.
Note: Annual leaves will be divided into two periods. Employes can choose to have a carry over policy for any unused annual leave, but this is at their discretion.
Employees in the private sector in the UAE are entitled to paid national holidays. These national holidays include:
- New Hajiri Year: 1 day
- New Year: 1 day
- Eid-Al-Fitr: 4 days
- Eid-Al-Adha and Arafat Day: 4 days
- National Day: 2 days
- Prophet Mohammed’s Birthday: 1 Day
Employees who work during public holidays are entitled to another work day off or pay a wage of at least 150% of their basic salary.
According to UAE Labour Law, an employee is entitled to paid sick leave 90 days after the end of the probationary period.
These leaves can be continuous or taken separately, and the salary is paid as follows:
- First 15 days: 100%
- Next 30 days: 50%
- Remaining 45 days: 0%
However, employees are not entitled to paid sick leave in the following situations:
- During their probation period
- If illness arises from an employee's misconduct, such as consuming alcohol or narcotics
- If the worker violates safety laws set by the government and the company, which the worker was aware of.
According to Article 31 of UAE Labour Law, employees must notify the employer about their sickness within three days and submit their medical report.
Note: If the employee resigns from their job during the first 45 days of their sick leave, they receive compensation for their unused leave.
In Dubai and Abu Dhabi, employers must provide health insurance to their employees.
While offering health insurance to employees in the UAE, here are a few things employers should know:
- Health insurance costs cannot be deducted from an employee's salary. Instead, the employer has to bear the costs of health coverage.
- The employer needs to provide a health insurance card to the employee.
- The employer must make the employee's emergency healthcare and medical intervention costs if there is no insurance.
If the employer fails to comply with the healthcare insurance law, they must pay hefty penalties.
💡Pro tip: Hire an employer of record in the UAE like Teamed to handle all the health insurance compliance and create an attractive local benefits package for your employees.
Emirati nationals are eligible to receive a pension after reaching the age of 60 years and have completed a insured service period of 15 years.
Early Retirement Pension. A Emirati national may be eligible for early retirement pension if:
- If an insured man reaches 55 years and completes 20 years of insured service.
- If an insured woman reaches 50 years and completes 20 years of insured service.
To be able to receive the retirement income Emirati’s most make contributions to the General Pension and Social Security Authority (GPSSA)
- Employees contribute approx 5% of their monthly salary*
- Employers contribute approx 12.5% of the employee's salary*
*There are some small difference between UAE and Gulf Cooperation Council
Employees working in the UAE who are non-UAE nationals from the Gulf Cooperation Council (Saudi Arabia, Kuwait, Qatar, Bahrain, and Oman) are entitled to pensions established by their home countries.
Expat workers working as employees are not entitled to receive a pension. However, they are entitled to severance payments.
Tax Thresholds in the UAE
UAE nationals and foreign employees receive tax-free salaries. This means employees in the UAE don't have to pay taxes on their income.
But, employers must make social security contributions for their employees:
- 15% in Abu Dhabi
- 12.5% in the remaining parts of the UAE.
Partner with an EOR to Onboard High-Quality Talent in the UAE
The UAE emphasises the compliance of employment contracts, which makes it essential for you to understand the federal and labour laws of the country, the localised benefits, and the different taxes that need to be paid.
Being versed with each of these elements at one's fingertips is hard. However, using an employer of record UAE and employer of record Dubai services like Teamed can streamline the entire process for you.