Brent Yap
Mar 14, 2023 8 min read
The UAE Laws Series. 13 March 2023
Introduction
In our previous articles, we have talked about the different types of businesses and offering a guide to starting your business in the UAE which can be read here :
https://www.vikneshyap.com/post/setting-up-your-business-in-the-united-arab-emirates
https://www.vikneshyap.com/post/business-permits-and-licences-approval-in-uae-a-guide
Employment Contracts and Labor Laws in the UAE: An Overview
The United Arab Emirates (UAE) has undergone significant economic and social reforms in recent years, including updates to its employment laws. Employers and employees in the UAE should be aware of these changes to ensure compliance and a positive working environment.
This article provides a comprehensive overview of the UAE employment laws, the rights of employees and employer and a look at some of the elements which should be included in an employment contract.
Employment Contracts in the UAE
The new Labour Law (Law No. 33 of 2021 on the Regulation of Labour Relations in the Private Sector) that went into effect on February 28th, 2022, mandates that all employees in the UAE be employed on fixed-term employment contracts not exceeding three years, which can be extended for the same or a shorter period. Unlimited-term employment contracts are no longer allowed in the UAE. Employers who do not comply with this rule may face penalties.
The UAE Labor Law mandates that all employment contracts must be in writing and in Arabic, with an English version for non-Arabic speaking employees. The contract must contain details of the job title, duties, duration of employment, working hours, and compensation. If the employee is a foreign national, the contract must also include details regarding housing, airfare, and residency visa sponsorship.
The Labor Law also mandates that an employee can work for a company for a maximum of 2 years under probation, regardless of their job title. This probation period can be extended for a maximum of 6 months if it is specified in the employment contract.
The new law also mandates that all employees, regardless of their nationality, be entitled to receive gratuities upon completion of their contract. Additionally, employers must enter into non-compete agreements with employees if their role involves trade secrets, confidential information, or has a significant role in the company’s commercial secrets.
The law also regulates the termination of employment contracts, providing for various scenarios in which an employee or employer may terminate the contract. For instance, an employee may terminate a contract with immediate effect if their employer breaches the obligations set out in the employment contract, violates the law or regulations, or presents a danger to the employee’s health or safety. Additionally, the new law mandates that all employees, regardless of their nationality, be entitled to receive gratuities upon completion of their contract.
The UAE has also introduced new categories of employees under the new law, such as part-time employees, trainees, remote workers, and seasonal employees. These categories of employees have their unique working conditions and entitlements under the new law.
Regulations require that the wages attested to on foreign labor certification applications must be the average wage paid to all employees in the occupation in the geographic area of intended employment.
The UAE has subordinate executive regulations governing private sector labor and employment such as the Foreigners Law, which applies to all expatriate employees in the UAE.
Another important aspect of employment contracts in the UAE is non-compete agreements. Under the new labour law, it is now mandatory for employers to enter into non-compete agreements with employees if their job involves trade secrets, confidential information or has a significant role in the company’s commercial secrets. Non-compete agreements must be in writing and specify the period and geographical limits of the prohibition.
Finally, the UAE provides for equal treatment of employees, mandating that employers provide equal pay for equal work and prohibits discrimination based on gender, religion, race or nationality. The law also recognizes that workers have the right to form and join workers’ organizations and participate in collective bargaining with their employers.
Employers operating in the UAE must be aware of these employment law changes and ensure that their contracts of employment are compliant with the new regulations. Similarly, employees should make sure they understand their new rights and entitlements under the law to protect themselves from any potential exploitation by their employers.
Termination and Notice Periods
The employment laws in the UAE provide various scenarios in which an employee or employer may terminate the contract. An employee may terminate a contract with immediate effect if their employer breaches the obligations set out in the employment contract, violates the law or regulations, or presents a danger to the employee’s health or safety. The employer may also terminate the contract if an employee is involved in serious misconduct or has a poor performance record.
Employers must provide employees with notice of termination, and the length of the notice period depends on the length of service, as follows:
- Employees with less than five years of service must receive 30 days’ notice.
- Employees with five or more years of service must receive 90 days’ notice.
Wages and Working Hours
Employment laws in the UAE mandate that employees receive equal pay for equal work and prohibit discrimination based on gender, religion, race, or nationality.
The laws also regulate working hours and offer various protections to part-time, remote, and seasonal workers.
The UAE Labor Law mandates that employers must pay a minimum wage to all employees, which varies depending on the employee’s category and qualification level. The law also ensures employees receive overtime pay, which is calculated based on the employee’s basic salary or hourly rate plus a bonus of at least 25 percent of the salary.
The maximum number of working hours per week is set at 48, with a maximum of 8 hours per day, excluding breaks. Employees who work overtime are entitled to pay at a rate of 1.25 times their regular hourly rate for additional hours worked during the week, and twice their regular hourly rate. Additionally, the UAE mandates that employees receive at least one day off per week. Any additional hours worked beyond this limit is considered overtime and must be paid at a rate of not less than 125% of the regular wage.
However, it is vital to note that certain professionals, such as lawyers and doctors, may have different working hours.
Vacation and Sick Leave
Employees in the UAE are entitled to an annual paid leave of not less than 30 days after completing one year of continuous service with their employer. In addition, the UAE Labor Law also allows employees to take sick leave of up to 90 days for work-related injuries, and up to 30 days for non-work-related illnesses or injuries, per year.
Termination and End of Service Benefits
The UAE Labor Law specifies that either party, the employer or the employee, can terminate the contract of employment by giving notice period in writing. The notice period required for termination depends on the duration of the employment contract, ranging from one week to three months. The employee may also terminate the contract during the probationary period by giving seven days’ notice, while the employer may terminate the employment during the probationary period by giving 14 days’ notice.
Upon the end of the employment contract, the employer is obligated to pay the employee end of service benefits, which are calculated based on the employee’s length of service and the final salary.
Discrimination and Harassment
The UAE Labor Law prohibits employers from discriminating against employees on the basis of their gender, race, nationality, religion or sect. It also prohibits any form of harassment or mistreatment against employees.
Health and safety in the workplace.
Here we will discuss some of the key health and safety regulations that both employers and employees must adhere to in the UAE.
Employer Obligations
Under UAE law, employers have a legal obligation to provide a safe and healthy workplace environment for their employees. Some of the key obligations of employers include:
- Conducting Risk Assessments: Employers are required to conduct regular risk assessments to identify potential hazards and risks in the workplace that could cause harm or injury to employees. Employers must then take the necessary steps to minimize or eliminate those risks.
- Providing Personal Protective Equipment (PPE): Employers must provide their employees with appropriate PPE, such as gloves, safety glasses, and helmets, when necessary. Employers must also ensure that PPE is properly maintained and replaced when necessary.
- Providing Information and Training: Employers are required to provide their employees with information and training on the hazards and risks associated with their jobs. This includes proper usage of machinery and equipment, as well as emergency procedures.
- Providing First Aid and Medical Care: Employers must provide first aid facilities, first aid training, and access to medical care for their employees. Employers must also report any work-related injuries or illnesses to the relevant authorities.
Employee Obligations
While employers have a legal obligation to provide a safe and healthy workplace environment for their employees, employees also have certain responsibilities to ensure their own health and safety. Some of the key obligations of employees include:
- Reporting Hazards and Incidents: Employees are required to report any hazards or incidents in the workplace to their employers or supervisors immediately. This includes any accidents, injuries, or illnesses that occur while on the job.
- Cooperating with Employers: Employees must cooperate with their employers in the implementation of health and safety measures in the workplace. This includes following safety procedures, using PPE when necessary, and attending training sessions.
- Taking Care of Themselves: Employees have a responsibility to take care of themselves and their colleagues by following safe work practices, avoiding behaviors that could cause harm or injury, and reporting any unsafe conditions.
Key Elements of the Employment Contract
The key elements that should be included in an employment contract to ensure that both parties are protected.
Job Description
The job description is a critical part of the employment contract, as it outlines the duties and responsibilities of the employee in the job. The job description should be clear and specific and should include details such as the job title, location, working hours, and any requirements, such as qualifications or experience.
Remuneration
The remuneration section of the employment contract should outline the employee’s salary, including any bonuses, allowances, or benefits. The contract should also include details about any entitlement to paid leave, such as annual leave, sick leave, or maternity leave, as these are mandatory under UAE law.
Termination
The termination clause is an essential component of an employment contract, as it outlines the conditions under which either party can terminate the contract. The contract should specify the notice period required for termination and the reasons for which termination can occur, such as misconduct, redundancy, or the expiration of the contract.
Confidentiality
Confidentiality agreements are common in many industries, particularly those where proprietary information is involved. The contract should include a confidentiality clause that explains the employee’s obligation to protect confidential information belonging to the employer and the consequences of a breach of the agreement.
Non-Compete Clause
A non-compete clause restricts the employee’s ability to work for a competitor of the employer for a specified period after the termination of employment. The non-compete clause must be reasonable and proportionate to the legitimate interests of the employer, as excessive restrictions could be deemed to be a violation of the employee’s rights.
Intellectual Property
The intellectual property clause outlines the ownership of any intellectual property created by the employee during their employment. This could include inventions, designs, or software. The contract should specify whether the employee owns the intellectual property or if it belongs to the employer.
Dispute Resolution
The dispute resolution clause outlines the procedures to be followed in the event of a dispute between the employer and the employee. It could specify that disputes should be resolved through mediation, arbitration or litigation, or a combination of these methods.
Conclusion
A well-drafted employment contract protects both employers and employees in the UAE. It outlines the terms and conditions of employment, including remuneration, termination, confidentiality, non-compete, intellectual property and others. It is also becoming increasingly important for both the employer and employee to be aware of their respective rights and obligations under the UAE employment laws since the UAE is steadfast to become a major employment hub and economic growth in the coming years.
The UAE Laws Series in our ongoing weekly series published every Monday to talk about the different laws in the UAE concerning businesses, foreign investments and the related laws and regulations promulgated to provide a helpful and reliable guide whether you are seeking to be employed in the UAE or doing business in the UAE. This is not intended to substitute a qualified UAE lawyer or legal consultant’s legal advice. Our legal partners in the UAE are ready on hand to assist you in all of your enquiries and needs. You can email me at brentyap@vikneshyap.com to know more.
