Significant changes in the NEW LABOUR LAW in the UAE

Federal Decree – Law No. 33 of 2021 on the regulation of labour relations in the private sector came into force on February 2022. The law is designed to enhance employment rights and boost the competitiveness of the UAE as a place to live and work, helping the region to attract and retain world class talent. Family leave rights, discrimination regulations, employment termination, and “non-compete” clauses in employment contracts have all seen significant modifications. The new law also includes provisions for enterprises to implement flexible and part-time employment schedules.

All workers in the UAE, whether they are nationals or foreigners, must abide by the law. It does not, however, apply to:

  • employees and workers of the federal government and the local government entities
  • employees of the armed forces, police and security
  • domestic servants.

The significant changes are:

Employment Contract: All employees must be employed on a fixed term employment contract, not exceeding three years in length. Contracts can be renewed, and any renewal is included in total period of service. Requirement for MoHRE/free zone contract remains. However, changes can now be made to MoHRE template contract and different forms exist depending on type of visa/work model.

Probationary Period: The maximum six-month probationary period remains. However, employers must give 14 days’ notice to dismiss. Employees must give:

  • 14 days’ notice to resign if they are leaving the UAE
  • one month notice required if they are leaving to join another employer in the UAE

Where an employee leaves during the probationary period to join another employer in the UAE (or returns to the UAE to work within three months), the old employer may claim the costs of recruitment from the new employer.

Types of employment: New types of employment are introduced, which includes:

  • full-time
  • part-time, for one or more employers
  • temporary
  • flexible
  • remote working
  • job sharing

All employees have the same entitlements, however some of these may be pro-rated.

Payment of salary: By agreement between the employer and the employee, wages may be paid to employees in AED or currencies other than AED.

Maternity leave and maternity pay: Maternity leave entitlement has been increased to:

  • 45 days at 100% pay; plus
  • 15 days at 50% pay.

There is now no minimum qualifying service requirement. This maternity leave is now available to women who suffer from a miscarriage or still birth after six months of pregnancy.

An additional 45 days’ unpaid leave is available where the employee suffers from a pregnancy related illness, and an additional 30 days’ paid leave and 30 days’ unpaid leave is available where the employee’s child has a disability.

New entitlements such as study leave and compassionate leave were introduced. Employees with more than two years’ service are entitled to ten days’ leave per year in order to sit exams. To be eligible, the employee must be studying at a government approved UAE educational institution.

When a family member passes away, all employees are entitled to a compassionate leave of absence, that is, five days of leave upon the death of the spouse; three days upon the death of a parent, child, sibling, grandchild, or grandparent.

Notice periods: Minimum notice period of 30 days continues. However, a maximum of 90 days’ notice period has been introduced. For employees leaving while still employed on unlimited term contracts, minimum notice periods apply of:

  • 30 days for employees with up to five years’ service
  • 60 days for employees with between 5 and 10 years’ service
  • 90 days for employees with 10 years’ service or more.

End of service gratuity: Employees with over one years’ service continue to be entitled to ESG, calculated on the same basis as before. Employees summarily dismissed now retain their entitlement to ESG, and no reductions apply where an employee resigns. Payment of ESG, together with all other termination payments, must be made within 14 days of the termination date.

Discrimination, bullying and harassment: The law protects employees from being subjected to employment discrimination on the basis of their employer, supervisor, colleagues, or coworkers’ race, color, sex, religion, national origin, social origin, or disability, all of which are illegal. Additionally, it is against the law for employers to fire or threaten to fire a worker who is expecting or on maternity leave. Although discrimination is not specifically punished, employers who violate the law could face fines of up to AED 1,000,000.

There are now explicit rights against sexual harassment, bullying, and any other forms of verbal, physical, or psychological abuse against employees.

Fines: The UAE courts are now able to levy fines against employers for breaches of the Labour Law. Fine ranges are:

  • AED 20,000-100,000 for providing false information to recruit an expatriate employee;
  • AED 50,000-200,000 for illegally employing an individual or recruiting an employee without having work to provide; and
  • AED 5,000-1,000,000 for any violation of the UAE Labour Law.

Fines can be doubled by the court for repetition of violations.

A number of initiatives are included in the New Law that are intended to modernize employment law and align it with global best practices. UAE businesses should be aware of these changes and check their contracts, employee handbooks, and any other employment rules and processes to make sure they are compliant with the New Law. This goes for both onshore and free zone businesses (with the exception of those in the DIFC and ADGM).