Hiring Employees in the UAE: Requirements, Contracts, and Payroll

The United Arab Emirates is not governed by a single set of rules, since Dubai's and Abu Dhabi's financial free zones operate their own employment laws separate from the federal code that applies elsewhere, and the correct answer to a compliance question often depends on precisely where an employee is based.

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This guide walks through what employers need to know to hire and manage employees in the UAE, from contracts and payroll to leave, benefits, and termination.

Overview

The UAE is a federation of seven emirates, and most employment relationships across the mainland fall under Federal Decree-Law No. 33 of 2021, the federal labor law that replaced the country's older labor code in 2022 and remains the main reference point for contracts, leave, and termination today.

Free zones add a layer of complexity to that picture, since two of them, the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), maintain entirely separate employment laws with their own rules governing notice periods, overtime, and end-of-service benefits, while most other free zones follow the federal law but issue their own work permits. Employers should confirm exactly which regime applies to a given employee before drafting contracts or setting up payroll.

Roughly nine in ten UAE residents are expatriates, and for most of them, the right to live and work in the country is tied directly to their employer through visa sponsorship. Employers should also be aware of Emiratisation quotas, which require companies above a certain size to hire a minimum number of UAE nationals and carry penalties for falling short.

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Employment Contracts

All new private sector contracts must now be fixed-term, capped at three years and renewable by agreement, replacing the open-ended contracts that were once standard and are no longer issued to new hires.

Contracts must be in writing and should set out the employee's job title and duties, salary and allowances, contract length, working hours, and leave entitlements. Basic salary should be clearly separated from allowances in the contract, since basic salary alone determines how overtime and end-of-service gratuity are calculated later on.

Probation may run up to six months, and either party may end the arrangement during this period, though the notice owed depends on who is ending the contract and why. An employer generally owes at least fourteen days' notice, an employee resigning to join another UAE employer owes thirty days, and one leaving the country entirely may need to give only fourteen, and time spent on probation still counts toward continuous service and gratuity eligibility, provided the employee continues into confirmed employment.

Non-compete clauses are permitted, provided they remain reasonable in duration, capped at two years, as well as in geographic reach and the scope of work restricted.

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Working Hours and Overtime

Standard working hours run to eight per day or forty-eight per week, and employees may not work more than five consecutive hours without a break of at least one hour, which does not count toward working time. During Ramadan, working hours are reduced by two hours per day for all employees, not only those who are fasting.

Overtime is capped at two hours per day, with total hours including overtime not exceeding 144 across any three-week period, and it is calculated on basic salary alone rather than the full pay package. The rate that applies depends on when the extra hours are worked, as shown below.

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Employees are entitled to at least one paid rest day per week, usually Friday, and most private sector salaries must be paid through the Wage Protection System, which confirms that wages are transferred in full and on time through approved banks.

The DIFC and ADGM cap working hours at forty-eight per week by default but do not require the same overtime pay multipliers as the federal law, so overtime in these zones is generally governed by the terms of the contract.

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Minimum Wage

There is no general minimum wage in the UAE, and salaries for the great majority of employees, expatriates included, are set through negotiation, shaped by role, industry, and prevailing market rates.

Emirati employees are the one exception. As of January 1, 2026, private employers must pay UAE nationals at least AED 6,000 per month, up from an earlier threshold of AED 5,000, and existing Emirati staff must be brought up to this level by June 30, 2026. Falling short after that date risks losing Emiratisation credit and having new work permits suspended.

Because no wage floor exists for expatriates, many employers still reference informal salary benchmarks by qualification level, such as university graduates, skilled technicians, and laborers, when structuring offers, though whatever salary is agreed must still clear the Wage Protection System each pay cycle.

Payroll and Taxes

There is no personal income tax in the UAE, so gross salary is take-home salary, which remains one of the country's principal draws for employers and employees alike.

Salaries typically consist of basic salary plus allowances, most commonly housing and transportation, and must be paid in AED through the Wage Protection System. The basic salary figure should be documented clearly, since it forms the basis for both overtime and gratuity calculations rather than the total package.

On the corporate side, the UAE applies a 9% corporate tax on business profits above a set exempt threshold, with a 0% rate below it and separate treatment for qualifying free zone income. This tax applies at the business level rather than through payroll, but it is relevant to any employer establishing an entity to hire directly, and since free zone tax treatment can become technical, employers should confirm current rules with a tax advisor before finalizing their setup.

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Social Security Contributions

Social security works differently depending on nationality. UAE and GCC nationals are enrolled in a pension scheme administered by the General Pension and Social Security Authority (GPSSA), funded through contributions from the employee, employer, and government, with the employer bearing the largest share, and employers of Emirati staff must register with GPSSA and remit contributions monthly.

Expatriate employees are not covered by GPSSA at all, so they neither contribute to it nor draw from it, and their long-service benefit takes the form of end-of-service gratuity instead, discussed below. Some free zones offer their own savings schemes in place of gratuity, most notably the DIFC's Employee Workplace Savings plan, which is mandatory for eligible DIFC employees.

GPSSA contribution rates have shifted more than once in recent years, so employers hiring Emirati staff should verify current rates directly before setting up payroll.

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Leave Entitlements

The table below summarizes each leave category, with notes on the points employers most often need to watch for beneath it.

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A few conditions extend beyond what the table captures. Where a medical certificate confirms that a newborn requires constant care due to illness or disability, up to 45 additional unpaid days of maternity leave may apply, and sick leave taken during probation itself is unpaid unless the employer decides otherwise.

An employer may end employment if an employee remains unable to return to work after exhausting sick leave, though the employee still keeps all other final dues, including gratuity.

Employers may not dismiss an employee, or issue a termination notice, while that employee is on paid sick leave or on maternity leave, and study leave is also available to employees enrolled in accredited UAE institutions.

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Employee Benefits

Health insurance stands as the most significant mandatory benefit. As of January 1, 2025, employer-funded health insurance has been required for all private sector employees across all seven emirates, including part-time and contract staff, and the employer bears the full premium, which may not be deducted from salary or offset against gratuity. In Abu Dhabi, coverage must extend to an employee's spouse and up to three children under eighteen.

Beyond insurance and statutory leave, common benefits include housing and transportation allowances, often built into the salary itself, annual flights home for expatriate staff, and GPSSA pension contributions for GCC nationals. Employers should also budget for visa sponsorship costs, including entry permits, Emirates ID processing, and labor card fees, which typically fall to the employer.

End-of-service gratuity is not paid until termination, but it is best treated as a liability that accrues throughout employment rather than a concern reserved for its final stage.

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Termination Requirements

Termination is governed by rules on notice, cause, and final payment that apply consistently whether an employee resigns, is dismissed, or simply reaches the end of a contract that is not renewed.

Notice period. Outside of probation, notice runs from thirty to ninety days depending on the contract and must be given in writing by either party, and dismissal without notice is permitted only in specific, serious misconduct cases, such as fraud or repeated unexcused absence.

Any employee who completes at least one year of continuous service is owed end-of-service gratuity upon leaving, whether they resigned, were dismissed without cause, or their contract simply was not renewed, and it is calculated on the employee's last basic salary rather than the full package, as set out below.

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Paid leave counts toward the qualifying service period, while unpaid leave does not and is deducted from it, and gratuity cannot be waived by contract, since any clause attempting to do so will not hold up. Employers must settle gratuity and all other final dues within fourteen days of the employee's last working day.

Terminating an employee without a genuine reason tied to performance, conduct, or legitimate business need may constitute arbitrary dismissal, which entitles the employee to compensation, though not reinstatement, and certain terminations are prohibited outright regardless of cause, including dismissing an employee while on approved sick or maternity leave, or in retaliation for filing a labor complaint.

💡 The DIFC and ADGM maintain their own termination and notice rules under separate employment laws, so these should be verified independently rather than assumed to follow the federal framework.

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Hiring Through an Employer of Record (EOR)

An Employer of Record allows a company to hire in the UAE without establishing a local entity or determining which free zone best suits its needs, since the EOR becomes the legal employer on paper, handling the contract, visa sponsorship, payroll, Wage Protection System compliance, gratuity accrual, and leave administration, while the hiring company continues to direct the employee's actual work.

This model tends to suit companies testing the UAE market, hiring a small number of employees, or seeking to move quickly without becoming entangled in the federal and free zone framework, and it also removes the ongoing burden of tracking gratuity liabilities, insurance renewals, and visa deadlines.

For those weighing whether an EOR makes more sense than establishing an entity in the UAE, Knit offers a flexible way to hire compliantly without establishing a local entity.

Book a consultation or explore our hiring guides if you want to know more about building a workforce in other markets.

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Frequently Asked Questions

Does the UAE have a minimum wage for foreign employees?

No. Expatriate salaries are set through negotiation rather than statute. The only mandatory minimum wage, AED 6,000 per month, applies specifically to Emirati employees in the private sector as of 2026.

Must UAE employment contracts be fixed-term?

Yes. Since the 2022 reform, all new private sector contracts are limited to three years and renewable by agreement. Open-ended contracts are no longer issued.

Is gratuity owed if an employee resigns?

Yes. Any employee with a year or more of continuous service is entitled to gratuity regardless of how the employment ends.

Is health insurance mandatory?

Yes, across all seven emirates since January 2025, and the employer bears the full cost.

Do UAE nationals and expatriates receive the same social security treatment?

No. Emiratis and GCC nationals are enrolled in the GPSSA pension scheme. Expatriates are not covered by it at all and rely on end-of-service gratuity instead.

Do the DIFC and ADGM follow the same labor law as the rest of the UAE?

No. Both maintain independent employment laws with their own rules on working hours, termination, and end-of-service benefits. Most other free zones follow the federal law but manage their own work permits.

How much notice is required to end employment?

Between thirty and ninety days depending on the contract, aside from probation, which generally requires fourteen days, or cases of serious misconduct justifying immediate dismissal.