On February 2, 2022, the UAE implemented Federal Decree Law No 33 of 2021 replacing Federal Law No. 8 of 1980 related to the UAE Labor Law.
These changes have been informed to all regulatory entities and governing bodies and necessitate amendments to existing employment contracts, as well as modifications to policies and procedures concerning future agreements with new employees.
The UAE government has changed to a Monday–Friday work schedule (with a half day on Fridays) for all government employees. While not required in the private sector, many private sector companies have already implemented a Monday–Friday working week, while some are in the transition phase. The following is an overview of key changes to the UAE’s labor laws.
Employment Contract Duration All employment contracts must be fixed-term contracts not exceeding three years. Contract terms may be shorter if agreed upon. Each contract on completion can be renewed for another three year term and this can be done unlimited number of times on agreement between employer and employee. Employers have a deadline of February 2023 to make necessary changes to their existing agreements.
Probation Duration The probationary duration can vary from three months upto a maximum of six months and this remains unchanged in the new law. The addition to the new law however now requires the employer to provide at least fourteen days (previously one day) written notice as an intention to terminate the contract. If an employee decides to resign during the probationary period, the employee must:
give one month’s notice if resigning to join another employer in the UAE; or
give fourteen days’ notice if the employee plans to leave the UAE.
Rest Days Under the new law, employers are not required to implement a rest day on Fridays. It can be on any day of the week as long as agreed by both parties.
Salary Payments Employers may pay employees’ salaries in any currency as long as the same is agreed upon by both parties in the employment contract. A new regulation outlining this salary payment through WPS (Wage Protection System) is expected to be announced.
Annual Leave Under the new law, employees must use their annual leave in the same calendar year that it accrues, unless otherwise agreed by the parties. The new law does not provide detail on how to handle unused leave (i.e., whether it can be considered forfeited). Further details on this are expected to be announced by the Ministry of Human Resource and Emiratisation (MHRE). Employees are entitled to payment in lieu of unused leave upon the termination of employment calculated on the basis of an employee’s basic salary only.
Maternity Leave, Parental Leave, and Additional Leave Maternity Leave The new law increases maternity leave entitlements to sixty(60) calendar days; the first forty-five days are paid in full and the remaining fifteen days at one-half pay. The new law prohibits employers from reducing an employee’s maternity pay in the event that an employee has not completed one full year of employment at the time of availing of maternity leave. Employees are now entitled to maternity leave and pay in circumstances where the employee miscarries after six months of carrying, suffers a stillbirth, or experiences the death of an infant after birth. Employees who give birth to specially challenged or sick children whose health conditions require “constant companion[ship]” are entitled to an additional thirty calendar days of maternity leave (with full pay), which can be further extended for an additional thirty days (unpaid). The law reduces employees’ entitlement to nursing breaks from eighteen months to six months from the date of delivery. Employees still have extended unpaid time off after exhausting maternity leave for pregnancy related medical condition, but the entitlement has been reduced to forty-five days from 100 days.
Compassionate Leave In the event of the death of an employee’s husband or wife, the law entitles the employee to five days’ paid leave. In the event of the death of an employee’s parent, child, sibling or grandparent, the law entitles the employee to three days’ paid leave. Suspension Employers may now suspend employees for up to thirty days, with half pay during a disciplinary investigation. An employee will be entitled to reimbursement of all withheld pay if the employee is ultimately cleared of wrongdoing.
Contract Termination Notice Periods The minimum notice period for the termination of an employment contract remains thirty days, but the maximum notice period is now capped at ninety days. The new labor law also imposes minimum notice periods for terminating current unlimited-term contracts prior to implementing the new fixed-term contracts. In this instance, the employer must provide at least thirty days’ notice if the employee was employed for less than five years; at least sixty days’ notice if the employee was employed for more than five years but less than ten years; and ninety days’ notice if the employee employed for more than ten years.
Grounds for Termination Redundancy termination is considered a valid grounds for a termination of an employment contract under the new law. Under the prior law, redundancy was not recognized. There are additional grounds for “for-cause” termination, including where an employee: (i) abuses his or her position for profit or personal gain; or (ii) commences work for another employer without complying with the applicable rules and procedures.
Job-Search Leave Employees are now entitled to one day of unpaid leave per week during the notice period to look for new employment.
End-of-Service Gratuity Under the new law, employees will be entitled to full EOSG when they resign, provided they have completed at least one year’s service.
The old law calculated EOSG as a part or percentage of the monthly salary based on the duration of completed employment.
Payment of End-of-Service Entitlements Under the new law, all termination entitlements must be paid to employees within fourteen days after the termination date. Prior to the new law, there was no stipulated period for payment.
Non Competition Agreements The maximum restricted period for the enforcement of a noncompete agreement under the new law is two years after completion of contract or termination of employment.