UAE Labour Law Guide for Employers: Contracts, Probation and Every Leave Type

The UAE labour law that governs every private-sector employment relationship today is Federal Decree-Law 33 of 2021 — universally called the “new labour law” because it replaced a 1980 statute wholesale when it took effect on 2 February 2022. It abolished unlimited contracts, capped probation at six months with formal notice rules, wrote a complete leave matrix into statute — including the compassionate and bereavement leave entitlements employers most often get wrong — and kept the 21/30-day gratuity formula that quietly accumulates on every balance sheet. This guide, updated July 2026, is the employer’s working map of the law: contracts, probation, hours, every leave type, termination and end-of-service, plus the enforcement reality that makes all of it a payroll problem — because MOHRE prices violations per employee, and the payroll function is where compliance is actually won or lost.

The 2022 reset: what changed and who it covers

Federal Decree-Law 33 of 2021, with its executive regulations and subsequent amendments, applies to private-sector employers across the UAE under MOHRE’s supervision — mainland and most free zones alike, with the financial free zones (DIFC and ADGM) running their own standalone employment laws. Searches for “uae labour law 2022” and “new uae labour law” all point at this statute; there is no newer replacement, only amendments layered onto it.

The headline structural changes from the old regime: fixed-term contracts only (the unlimited contract was abolished, and after a 2022 amendment the fixed term can be of any agreed duration, renewable); recognised work models beyond full-time — part-time, temporary, flexible, remote and job-sharing; anti-discrimination and anti-harassment provisions with statutory force; non-compete clauses capped at two years; and a compensation-based remedy for unlawful termination. Around the law sit the operational systems employers answer to monthly: WPS wage transfers, the ILOE unemployment insurance scheme mandatory since 2023, and Emiratisation quotas for establishments in scope — the machinery covered in our MOHRE employer guide.

Contracts and probation: the first six months decide everything

Every employee needs a written fixed-term contract matching the MOHRE-registered offer letter — the days of the informal “we’ll sort the paperwork later” arrangement are priced in fines. Renewal is straightforward, and continuity of service carries across renewals for gratuity purposes.

Probation is where SMEs make their most expensive early mistakes, because the rules are precise: maximum six months, no extension, no re-probation of the same person. Termination during probation requires 14 days’ written notice from the employer. On the employee side the law splits by destination: one month’s notice to join another UAE employer (with the new employer potentially liable for recruitment-cost compensation to the old), 14 days to leave the country — and a return within three months after leaving can trigger the compensation rule too. Notice skipped is notice paid; the wage-based cost attaches automatically.

The probation and notice framework matters double when a third party sourced the hire: agency placement guarantees are typically written around these exact clauses, and a mismatch between the MOHRE contract and the agency terms voids the replacement protection the fee paid for. How to structure that — fee models, Permit 64 verification and guarantee terms — is covered in our guide to choosing a recruitment agency in Dubai.

Working hours and overtime: premiums, not favours

The statutory baseline is 8 hours a day or 48 a week, cut by two hours daily in Ramadan for all staff. Overtime is capped at roughly two additional hours a day and paid at premiums: basic hourly rate + 25%, rising to + 50% between 10pm and 4am for non-shift workers, with rest-day work compensated by a substitute day off or the + 50% premium. Senior managerial roles sit outside the overtime rules — a genuine exclusion that does not stretch to cover a team full of inflated titles, as MOHRE inspections regularly conclude.

The finance point: overtime is a payroll calculation with legal consequences, and it fails in spreadsheets far more often than in payroll engines. The worked examples — including the basic-wage base that trips people up — are in our overtime calculation guide.

The leave matrix: what each type pays

Compassionate leave in the UAE — the bereavement entitlement in Article 32 — deserves its own paragraph because it is the one employers most often handle informally and incorrectly. The law grants paid leave of five days for the death of a spouse and three days for a parent, child, sibling, grandchild or grandparent, from the date of death. It is a statutory minimum, separate from annual leave, and payroll should code it as its own paid-leave type. Handling a bereaved employee’s leave as “take it from your annual days” is both unlawful and, from any management perspective, a poor trade for the goodwill it burns.

Every row of that table is also an accrual question — annual leave earned but untaken is a real liability, and the payroll treatment of leave accruals is where clean books and labour-law compliance turn out to be the same task. Maternity mechanics get their own deep treatment in our maternity leave employer guide.

Termination, notice and the cost of getting it wrong

Outside probation, termination requires a legitimate reason and contractual notice of 30 to 90 days, worked or paid in lieu. Article 44 lists the narrow cases permitting dismissal without notice — proven fraud, deliberate serious safety breaches, convictions involving honour or trust and similar — and each demands a documented investigation before the letter is signed. Termination held unlawful (retaliatory, or outside legitimate grounds) can cost up to three months’ wages in compensation on top of notice and end-of-service dues.

The quiet discipline here is documentation. UAE labour disputes run through MOHRE conciliation before court, and outcomes track the file: signed contracts, wage records matching WPS, warning letters that exist on paper rather than in memory. Employers with clean payroll archives settle disputes quickly and cheaply; employers without them fund settlements shaped by what they cannot prove.

Gratuity: the liability accruing while nobody looks

End-of-service gratuity for foreign employees follows Article 51: 21 days of basic wage per year of service for the first five years, 30 days per year thereafter, computed on the final basic wage, capped at two years’ total wages, with one year of service as the qualifying floor and unpaid absence excluded from the count. Alternative savings-scheme models can replace the accrual approach where formally adopted.

Two employer truths about gratuity. First, it is computed on basic wage, which makes the basic-versus-allowances split in every contract a long-term cost decision, not a formatting choice. Second, it is a real, growing liability that belongs in the monthly accounts as a provision — a company that meets its gratuity obligation for the first time in the month an employee resigns has been misstating its numbers for years. Run any employee’s figure through our UAE gratuity calculator, and see the formula worked in full for the edge cases.

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Every article of the labour law eventually becomes a line in payroll. If payroll is right every month, compliance is mostly done; if it is improvised, no policy manual will save you.

Enforcement: how the law actually bites

MOHRE enforces through inspections, the WPS wage-monitoring system and a per-employee fine schedule — the published framework applies AED 1,000 per worker for late wage payment, escalating on repetition, with parallel fines for permit and contract violations, and WPS blocks that freeze new work permits while wages sit unpaid. Add the corporate tax angle — fines are non-deductible, as our fine check guide explains — and a labour violation is one of the most expensive ways a UAE SME can save administrative effort. The wage-transfer machinery itself is unpacked in our WPS guide.

How Velmont Crest helps employers stay clean

Our payroll and WPS processing service exists to turn this entire statute into a monthly routine: wages calculated with the right overtime premiums, every leave type coded to its correct pay treatment, gratuity accrued as a real provision, WPS files submitted on time every time, and the payroll archive kept dispute-grade. Around it we run the wider compliance calendar — contracts renewed before expiry, ILOE confirmed, the MOHRE file checked alongside VAT and corporate tax dates — so labour compliance stops being a collection of near-misses and becomes a by-product of paying people correctly. If any part of your payroll still runs on memory and goodwill, that is the exposure; pricing it out is a conversation, and the fix is a tailored quote away.