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Key Employment Benefits under UAE Labour Law
July 29 , 2024|Article, Corporate, Employment
Written by Sakshi Jaiswal (Associate) and Priyasha Corrie (Partner)
In the United Arab Emirates (UAE), the legal framework governing employment relationships is established by Federal Decree-Law No. 33 of 2021, along with its associated Executive Regulations, namely Cabinet Resolution No. 1 of 2022 (collectively referred to as the “UAE Labour Laws”).
This article outlines the statutory benefits under UAE Labour Laws, including leave, gratuities, and health insurance, as well as customary employer-provided benefits.
1. Salary
In mainland UAE, salary is divided into basic salary and housing and transportation allowances. This distinction is crucial because certain employment benefits—such as end-of-service gratuity, overtime, and accrued leave which are calculated based on the basic salary rather than the total salary. Consequently, it is common practice for companies to structure salaries with a portion allocated to basic salary and the rest to allowances. Generally, the basic salary and allowance is split into a 60:40 or 50:50 ratio by employers.
While there is no official statutory minimum wage under the UAE Labour Laws, it grants the UAE authorities the power to potentially introduce a minimum wage in the future.
All remuneration must be paid in the UAE national currency, i.e, Dirhams.
To ensure timely and accurate payment of wages, the UAE excluding most free zones operates a statutory electronic Wage Protection System (WPS), mandating employers to pay employees’ wages through this system.
2. Insurance
Starting from 1 January 2025, health insurance will be mandatory across all Emirates. Until now, only Dubai and Abu Dhabi required it, but this change means every company in the UAE must ensure their employees are covered.
Employers in Dubai must adhere to the minimum requirements of Dubai Law No. 11/2013 on Health Insurance, ensuring the cost is not passed on to staff. In Abu Dhabi, under Abu Dhabi Law No. 23/2005, employers must also cover the employee’s spouse and dependents if they are under the employee’s sponsorship. Additionally, as per UAE Labour Laws, in case of disputes, if the employee’s allegations are substantiated, MOHRE may liquidate the insurance allocated to the employee to ensure payment of the employee’s entitlements.
3. End of service gratuity
In the UAE, public and private entities must register national employees with the General Pension and Social Security Authority (GPSSA) from their first month of employment. National employees receive pensions instead of end-of-service gratuity, regulated by Federal Law No. 7/1999. There is a new Federal Decree Law No. 57 of 2023 which enhances pension and social security services for nationals in both sectors. This law applies to nationals joining the labour market after 31 October 2023, while those registered before this date remain under the old law. In Abu Dhabi, the Abu Dhabi Pension Fund manages pensions, governed by Law No. 2 of 2000, with a 2023 amendment affecting all working citizens but excluding retirees.
However, foreign workers, after completing one year of continuous service, are eligible for gratuity calculated based on their basic salary: 21 days of salary for each year of service in the first five years, and 30 days for each subsequent year. Gratuity is proportional for partial years, excluding unpaid absences, and is capped at two years’ remuneration. Under the UAE Labour Laws, employers are entitled to deduct legally or judicially owed amounts from the salaries of the employee. The principal legislation governing pensions law in the UAE is Federal Law No. 7/1999, as amended by Federal Law No. 7/2007, which obliges the registration of all non-UAE GCC nationals employed in the UAE for pension in accordance with the schemes established in their home countries.
4. Leaves
Under UAE Labor Laws, employees are entitled to various types of leave:
· Annual Leave: For each year of service, employees receive paid leave based on their tenure: two calendar days per month for those with six months to one year of service, and 30 calendar days per year for those with more than one year of service. This leave is additional to the national holidays, with no obligation for employers to compensate if these holidays fall on weekends.
· Sick leave: Sick leave entitlements provide employees with 15 days of full pay, 30 days of half pay, and 45 days unpaid within a 12-month period.
· Maternity leave: It is granted to female employees with 45 days on full pay and an additional 15 days on half pay.
· Paternity leave: These provisions ensure that employees have access to necessary time off for health and personal matters. Parental leave can be taken for up to 5 days.
· Other types of leaves: Additionally, employees can be granted bereavement leave for up to 5 days and also can take study leave for up to 10 days for appearing for an examination. A national employee is also entitled to sabbatical leave to perform the national military and reserve force service.
5. Overtime
Generally, overtime in the UAE must not exceed two hours per day, unless it is necessary to prevent substantial loss or a serious accident, or to eliminate or alleviate its effects. Overtime pay amounts to 125% of an employee’s normal remuneration for the period of overtime worked. If the employee is required to work overtime during the hours of 10pm and 4am, the overtime pay increases to 150%.
6. Relocation and Flight Tickets
While not a statutory requirement, it is customary for businesses to provide an annual return flight to the employee’s home country, facilitating a smoother transition and ensuring employee well-being. Some employers also provide this benefit for dependants.
Employers are also responsible for covering all expenses related to the repatriation of the employee upon termination of employment by the employer.
