Introduction 

The UAE is one of the most attractive global hubs for business, known for its ambitious economic vision, international workforce, and business-friendly environment. But while the incentives for operating in the region are clear, the labour laws are equally specific - and not knowing them can quickly derail even the most well-intentioned global plans.

In 2022, the UAE introduced sweeping reforms through Federal Decree Law No. 33, modernising labour relations and introducing greater flexibility. For HR leaders and employers working across borders, understanding the nuances of UAE labour laws is critical to staying compliant, supporting staff fairly, and avoiding reputational or legal risks.

Quick Tips

• All employees must have a fixed-term contract under the new labour law.

• End-of-service gratuity must be calculated accurately - it’s not optional.

• Working week is now Monday to Friday in most sectors, aligning with global norms.

• UAE nationals may be entitled to Emiratisation-linked protections.

• Employers must provide health insurance in most Emirates - failing to do so is a breach.

New Fixed-Term Contracts Are Now Mandatory 

One of the most significant legal changes is the shift from unlimited to fixed-term contracts. As of 2023, all private sector employees must be on a contract not exceeding three years (renewable). Employers should no longer be issuing ‘unlimited’ contracts, and those that haven’t transitioned may face penalties.

This shift aims to align labour rights with international standards while giving both employers and employees clearer expectations. However, it also places a burden on HR teams to review legacy contracts and standardise documentation across their UAE operations.

If your workforce still has older contract types, review them urgently. At ThinkGlobal HR, we recently supported a retail group to update 400+ contracts in line with the new framework, avoiding potential fines and simplifying future renewals.

End-of-Service Gratuity: Know the Rules 

Unlike pension schemes in other regions, UAE workers are entitled to an end-of-service gratuity - a lump sum payment based on length of service. It’s a legal obligation, and one that many international employers get wrong.

For every year of service, employees typically receive 21 days’ basic pay for the first five years, and 30 days thereafter. However, this can vary depending on termination circumstances and contract terms. It’s also calculated on basic salary only - not allowances or bonuses.

We helped a US tech company recently discover they were under-calculating gratuity due to including housing and transport in the base salary. Rectifying this before an employee left saved them from a costly dispute and ensured their payroll system was aligned going forward.

Working Hours, Rest Days, and Overtime 

The UAE has also reformed its standard working week, shifting to Monday to Friday for most private sector workers. This aligns with global practice and improves operational sync with Europe and the US.

Maximum working hours are capped at eight per day or 48 per week, with overtime attracting a 25–50% pay premium depending on timing. Employers must also provide one rest day per week (usually Sunday).

These working conditions are enforced through inspections and labour claims, particularly in free zones or high-turnover sectors like construction and hospitality. HR teams should ensure contracts, time-tracking, and payroll calculations are compliant.

A Real Example: UAE Growth Done Right 

One of our clients - a European engineering firm - set up in Dubai with ambitious hiring plans. Before a single offer went out, we helped them draft compliant contracts, register for health insurance, and set up their end-of-service calculations correctly.

This foresight meant they scaled quickly without operational hiccups, and were praised by local regulators during a spot audit six months later. Getting it right early created trust with employees and authorities alike.

Final Thoughts 

The UAE is a vibrant, opportunity-rich market - but it’s not a place to take shortcuts on labour law. From contract types to gratuity payments and working hours, the rules are clear, but the penalties for non-compliance can be steep.

If you’re operating or planning to expand into the UAE, now’s the time to ensure your people processes are fit for purpose.

What’s next for your global people strategy? 

Book a free compliance check-in or HR audit with ThinkGlobal HR. Whether you're entering the UAE for the first time or refining your existing setup, we’re here to help - with practical insight, local knowledge, and unwavering support.