Overhaul of the UAE labour law. The Ministry of Human Resources & Emiratisation (MOHRE) has radically reshaped the UAE labour law with the promulgation of Federal Decree Law No. 33 of 2021 Regulating Labour Relations.
It also published the Supporting Executive Regulations pursuant to Cabinet Resolution No. 1 of 2022. These are together referred to as the ‘New Law’, which became official on 02 February 2022.
UAE Shifts to Fixed-Term Employment Contracts Only
The New Law abolished the concept of unlimited term contracts and imposed the requirement of concluding fixed-term contracts for a maximum of three years.
This means that employers need to move all existing employees who are on an unlimited contract to fixed term contracts by 2 February 2023, as per the UAE labour law. This notable change is part of the bigger reform that comes with the new UAE labour laws.
Gratuity cannot Be Reduced or Forfeited Under the UAE Labour Law
Earlier, the employer deducted an employee’s gratuity on termination of employment if the employee left without serving for five years in unlimited term contracts. On fixed-term contracts, they lost the gratuity completely. Moreover, if the employer dismissed an employee summarily, the employee forfeited the gratuity. But the New Law does away with all these provisions.
Today, employees are given their full gratuity on termination of employment, no matter the reason for termination.
(Note: The abbreviated gratuity terms continue to apply up to 1 February 2023 for employees leaving under unlimited term contracts before that date.)
Additionally, employers must pay all statutory and contractual end-of-service benefits within 14 days of an employee’s termination. In the event of non-compliance, MOHRE may impose penalties ranging from AED 5,000 to AED 1,000,000.
Furthermore, UAE labour law medical insurance requirements and the new medical insurance in UAE labour law requirements also bring out the employers’ roles to provide adequate health coverage to the employees.
Briefly, these amendments have a significant effect on the way retail companies manage employee contracts. As such, employers need to review and update their template employment contracts, policies, and procedures to be completely compliant with the New Law and Executive Regulations.
Understanding Probation Period Notice under UAE Labour Law
While probationary notices remain at six months, the UAE labor law currently mandates a minimum of 14 days’ notice on both sides to end employment while on probation. Additionally, if the employee is moving to a new employer based in the UAE, he or she is required to give at least 30 days’ notice. The cost of recruitment can also be recovered by employers from the new employee.
UAE labour law also supports different flexible and non-standard employment arrangements. These arrangements consist of part-time work with proportionate benefits, temporary work on specific projects, flexible work with variable days and hours based on the needs of the employer, and job-sharing, although MOHRE has not yet published detailed regulations regarding job-sharing.
As far as working hours and days are concerned, Fridays are no longer compulsory days for rest. Employers now have to offer employees a minimum of one rest day a week, which can be any day. The statutory upper limit for working hours remains eight a day and 48 a week (for a six-day week, presumably) and hours of overtime.
However, the Executive Regulations offer an exception of up to 56 hours a week under exceptional circumstances.
Staff now have to take their annual leave within the year in which they accrue it. It is not allowed to carry forward unused days to the next holiday year without the employer’s approval, or where the staff member could not take leave.
Leave that is not used is forfeited beyond recall without pay, except in exceptional circumstances or on termination of employment, where payment is basic salary only.
The UAE labor law also enhances leave entitlements:
Maternity leave is extended to 60 calendar days (45 days on full pay, 15 days on half pay), including in cases of miscarriage after six months.
Compassionate leave provides five days for the passing away of a spouse and three days for the passing away of a parent, grandparent, child, grandchild, or sibling.
Parental leave allows five days for each parent to be taken after six months since the child arrived.
Study leave is awarded 10 days per annum for examination to employees with over two years of service studying at recognized UAE institutions.
The UAE labor law now explicitly protects employees from race, color, sex, religion, national or social origin, and disability. Although maternity and pregnancy are not enumerated, employers do not have the right to dismiss or threaten the dismissal of employees on the grounds of pregnancy or maternity leave. Men and women doing equal work must also be paid equally.
In termination, the UAE labour law allows fixed-term contracts to be terminated by notice for “legitimate reasons,” as long as the notice period of the contract is honored. Termination on grounds of non-performance or misconduct and redundancy on grounds of bankruptcy, insolvency, or economic hardship—concepts now clearly accepted by law—are allowed.
The old blanket compensation for unfair dismissal has been essentially removed; compensation is now only available in specific situations. How the UAE Labour Courts interpret these changes remains to be seen, though.
Conclusion
The new UAE Labour Law is a serious overhaul that makes sweeping changes to protect workers’ rights and modernize work rules. From the elimination of the unlimited contract with fixed-term contracts to ensuring full gratuity payment and modifying leave entitlements, the law brings greater clarity and fairness to both employers and workers.
Workers are now better safeguarded, enjoy more flexibility in working terms, and have clearer termination conditions. In order to remain compliant, employers and employees alike need to be aware of these changes and amend their contracts and practices as a result.
For experienced legal advice, Khairallah Law Firm is on hand, recommended by many as one of the Best Lawyers in Dubai for labour and employment issues.
Having said that, contact Khairallah Advocates & Legal Consultants and benefit from our free 30-min legal consultation.
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