UAE Labor Law Changes Are Here
Changes to the way private sector employment works in the UAE – including flexible working and shared jobs – were introduced in early 2022.
These amended labor laws were first outlined by UAE government officials in November of 2021, and they include stipulations that serve to strengthen employee rights and privileges. Some of the main changes include shorter, fixed-term contracts for many private sector employees, the ability to stay in the country for up to 180 days after leaving a job, and the introduction of job shares. In addition, there are some significant changes to existing maternity leave policies.
Keeping up with all of these changes on your own can prove difficult. And that’s why we’ve penned this article, to help you keep abreast on everything you need to know about 2022 labor contract updates in the UAE. So, if you’re ready to learn more, you’ve landed on the right page, brought to you by your friends at MSZ Consultancy!
So, How Does a Labor Contract Work in the UAE?
A labor contract is essentially an official agreement between an employer and an employee. It’s signed by both parties and then legally binds both parties to the particular terms of the work agreement in question.
Labor contracts serve to delineate the nature and scope of an employee’s work, including employee expectations, timeframes, and schedules. And a labor contract doesn’t just bind the employee to certain expectations; it binds the employer, as well. Any employer is required to meet certain terms as it regards employee payment, benefit dispensation, etc.
Examples of UAE Labor Contracts
The UAE labor contract law speaks to a range of different contract options, which offer greater flexibility for both employer and employee alike. Here are the major categories of labor contracts included:
1. Limited (Fixed-Term) Contracts
Fixed-term contracts work best for an organization that only needs employees for a specific project. These limited contracts only solicit an employee to work for a set period of time, and they also obligate the employer to provide compensation for said work during that established timeframe. These types of contracts set both an employment start date and end date, and unless both parties choose to renew, the contract will end at the decided end date. Fixed-term contracts can now be established for up to 3 years, per UAE Federal Decree-Law No. 33.
2. Flexible (Unlimited) Contracts
Unlike a limited contract, flexible (or unlimited) contracts have no set end dates. This type of contract typically only ends once both parties mutually agree to a termination of the contract. However, there are allowances where either party can terminate without the other party’s consent. The employee is still required to give a 30-day notice, but the employer has the option to terminate without notice under certain circumstances. These circumstances can include things like breaking company policies, violating non-disclosure agreements, committing safety violations, unlawful work absences, etc.
3. Full-Time, Part-Time, and Temporary Contracts
A full-time contract in the UAE obligates an employee to work 48 hours per week, usually equating to six 8-hour workdays. If and when an employee works more than 48 hours in a given work, that employee must be paid overtime, which can range from time-and-a-quarter to time-and-a-half. A part-time contract, on the other hand, obligates employees to work less than 48 hours per week. Part-time employees have the option to work part-time for multiple employers, but in order to do so, they must first obtain a permit from the Ministry of Human Resources and Emiratisation (MOHRE).
There are also temporary contracts, which are specific work contracts for a 90-day probationary period. Upon the conclusion of a temporary contract, the employer then has the option to move forward with offering either a full-time or part-time contract to the employee.
4. Special Employment Contracts
Another category of employment in the UAE is the special employment contract. Public sector companies sometimes like to use this option to appoint employees to be special (often high-ranking) roles within the organization. These special appointments must be approved by the relevant minister, and contracts of this nature can be extended for two years at the most.
5. Job Sharing Contracts
Job sharing contracts are one of the newer innovations in UAE labor contract law. This type of contract allows an employer to split a specific full-time role among multiple different employees. Each employee is given a part-time contract, and that contract stipulates exactly which roles and work hours are assigned to that respective employee.
Which Labor Contract Changes Were Brought About by UAE Federal Decree-Law No. 33?
Federal Decree-Law No. 33 brought about some sweeping changes to UAE employment contracts, affecting the rights and obligations of both employers and employees alike. Most of these changes were implemented with the intent of granting more rights to employees, and some of the changes offer more flexibility to employers as well. Here’s a survey of some of the high points as it pertains to UAE employment:
1. Fixed-Term Contract Requirements
One of the key changes brought about by this law is that all employment agreements must be switched to fixed-term employment contracts. Employers now have until February 2023 to make the full transition to fixed-term employment contracts for all employees.
2. Employment Contract Probation Terms and Notice
Employers may place an employee on a period of probation for performance issues for a period of no more than six months. Employers can also require an initial probation period for any new hires if they so wish. An employee on probation must be given a 14-day notice before termination by the employer and must also give a 14-day notice if they intend to resign. If the employee plans to leave and join another UAE employer, then they must give their current employer a 30-day notice.
3. Flexible Arrangement Contracts
A flexible arrangement contract is really just that. It allows much more flexibility between employer and employee in deciding exactly when an employee will work. Even so, the employer must still abide by all applicable workload limits and overtime regulations.
4. Non-Compete Agreements
Employers have permission to include non-compete restrictions in a labor contract. At the same time, employers may not prohibit part-time employees from seeking to work other hours with another non-competing employer.
5. Rest Day Agreements
All employers are required to include a rest day for all employees each week. Previously, Friday was the designated rest day, but now employers have the freedom to choose when the rest day will be. Any employee who works on their rest day must either be given overtime pay or must be granted a substitute rest day.
6. Currency Agreements
Employers and employees may decide upon any mutually agreeable form of payment currency. But be advised that the Wages Protection System (WPS) is only set up to handle UAE Dirham. If your business leverages the WPS, you’ll need to convert your payments to UAE currency first.
7. Leave Entitlements
Employees in the UAE are entitled to accrued leave at a rate of two days per month for the first six months. Once you’ve worked for an employer for a year, you then have a legal right to 30 days of leave. Federal Decree-Law No. 33 also makes stipulations for maternity leave, compassionate leave (also known as bereavement leave), and study leave at UAE-approved educational institutions.
8. Contract Terminations
Employers can terminate fixed-term contracts over just cause or redundancy, but they’re obligated to give employees fair notice first. Stipulations for the amount of notice required to correspond to the employee’s length of service. The law also lays out other contract termination and suspension guidelines in regard to fixed-term contracts and unlimited contracts.
9. End-of-Service Gratuity
Thanks to the new law, all employees are now entitled to full end-of-service gratuity. But in order for an employee to qualify, they must have worked for the employer for at least one year.
10. Workplace Policy Guidelines
Significant changes were made to other workplace policies as well, including making provision for the following:
• Non-discrimination against protected classes
• Gender pay equality
• Prohibition of physical, verbal, and sexual harassment
• An employee handbook must be provided to all employees
• Employment records must be maintained for a period of up to two years after employee termination
11. Labor Contract Law Exceptions
A couple of exceptions apply to these new UAE labor contract regulations, as well. This new contract law does not apply to either the Dubai International Finance Center or the Abu Dhabi Global Market. Each of these particular organizations has its own unique set of labor laws.
12. Ministry of Human Resources and Emiratisation (MOHRE)
For more details regarding Federal Decree-Law No. 33 and about UAE labor regulations in general, you can head over to their link here.
MSZ Consultancy Is Here to Help!
If you’re a current UAE business leader, or if you’re thinking about launching your own UAE business, you may have other questions about UAE labor laws. The pros at MSZ Consultancy are here to help! We’re a locally-based business consultancy with an office right here in Dubai, and we can help you to navigate the entire UAE business foundation process with ease. Need help with work licenses in the UAE, work permits in the UAE, Dubai work permits, or UAE work visas? We’ve got you covered, and we provide lots of other valuable business services, too!
Reach out today, and let’s book your FREE consultation. You can get the conversation started by shooting us an email at email@example.com, or for a faster response, you can just give us a call at +971 52 544 1248. Why wait? MSZ Consultancy can help make your UAE business dreams a reality for you!