Recently, the UAE has approved widespread reforms to the country’s legal system; the most significant within its 50-year history. As a result, the existing federal employment and labour laws have been completely overhauled to bring them in line with internationally recognised business standards.

The new provisions, known as Federal Decree Law No.33 of 2021, replace the previous Federal Law No.8 of 1980 and address a wide variety of business practices.

This new law came into effect from 2 February 2022. However, a grace period of one year is given for employers to draw up new employment contracts and company policy guidelines.

The Federal Decree Law No.33 of 2021 will ensure the UAE keeps up with the ever-evolving economic landscape of the country, whilst providing fair and transparent regulations for both employers and employees.

What are the Key Changes in the new UAE Labour Law?

Labour Contracts

In the previous law, there was provision for two types of employment contracts: Limited and Unlimited. The new law has been amended with the removal of unlimited contracts.

Previously, unlimited term contracts were typically used in the UAE for permanent roles or positions in which the length of the project was unknown in advance.

In contrast, limited term contracts are used in situations in which the duration of the project is predefined, with the employee being hired for a specific period of time.

Now, the UAE’s new labour states that a contract’s conclusion and commencement dates must be specified in addition to the nature of the work, the place of the work, and the remuneration received.

This new contract has a maximum duration of three years, but is able to be extended or renewed one or more times for the same or shorter period, if agreed upon by the relevant parties.

Any existing unlimited employment contracts are still valid but must be amended to limited contracts before the grace period deadline of 1 February 2023.

Contract Termination During Probationary Period

Previously, the labour law had no provision for notice periods in the event of dismissal by the employer or resignation by the employee. However, the new labour law has amended this by enforcing the obligation of the employer to give a notice period of 14 days to terminate a contract within the probationary period.

If an employee wishes to change jobs within the UAE during the probationary period, they must give a minimum of 30 days written notice from the date they wish to terminate the contract. Also, the new employer is obligated to compensate the original employer for the recruitment costs incurred.

Similarly, if an employee wishes to leave the country, and subsequently terminates their contract within the probationary period, they must give a minimum of 14 days' notice. The new employer would then have to reimburse the previous employer for visa costs and hiring expenses, providing a provision for this has been included in the labour contract.

If an employee leaves the country but returns within a period of three months due to a new job in the UAE, the new employer must bear the visa costs and labour expenses of the previous employer.

Protection of Employees’ Passports and Right to Remain

The UAE’s new labour law states employers are forbidden from confiscating employees’ documents of identification and cannot be made to leave the country when their period of work has concluded.

Gratuity Settlement

Under the previous law, gratuity settlements were structured as follows:

• Less than one year of service – no gratuity given
• Between one and three years of service – 7 days basic salary per working year
• Between three and five years of service – 14 days basic salary per working year
• After five years of service – first five years paid at 21 days basic salary with subsequent years paid at 30 days basic salary per year

However, revisions to the law have been made and are as follows:

• Less than one year of service – no gratuity given
• Less than five years of service – 21 days basic salary per working year
• After 5 years of service – first five years paid at 21 days of basic salary with subsequent years paid at 30 days basic salary per year

Leave

As with the previous law, the new law entitles the employee to 30 days of leave per annum once one year of service has been completed, and two days per month if their service amounts to less than one year.

In addition, the new labour law allows for leave to be taken during the probationary period on an accrual basis.

Other forms of leave that have been introduced include the bereavement leave of 5 days for passing of spouse and 3 days for other direct family members, and the parental leave of 5 days for either parent during the first 6 months of the child being born.

Study leave will now be available for those who have completed more than two years with an employer. They will be entitled up to 10 days study leave when then are enrolled with an accredited institution within the UAE.

Maternity Leave

The UAE has given greater rights to new mothers with this labour law. Previously, 45 days at full pay was provided to private sector employees. Now, this has increased to provide mothers with a minimum of 45 days at full pay with an additional 15 days at 50% pay. However, if further leave is desired, an additional 45 days can be taken without pay.

In the event of complications post-partum or the delivery of a child with disability or illness, the mother is entitled to an additional 30 days at full pay which can be extended for another 30 days without pay.

Inclusivity, Diversity and Equality

UAE’s new labour law places emphasis on inclusivity, diversity and equality for both men and women. For example, it prohibits employers to discriminate against someone based on race, colour, sex, religion, national or social origin, or disability for the possibility of an opportunity, continuation of employment or enjoyment of their rights.

It also prohibits sexual harassment, bullying or any form of verbal, physical or psychological violence against an employee by the employer, their superiors, or colleagues.

Furthermore, the new law introduces equal pay for women when undertaking the same or comparable work as men.

How will employers and employees benefit from these changes?

These key changes will serve to protect both employers and employees, with employee rights improving significantly.

Now, employees will be better protected against harassment, discrimination and unlawful termination of employment contracts, along with improved leave allowances and gratuity settlements.

From an employers’ perspective, there is the assurance that the employee will abide by company standards and fulfil the obligations of their employment contract.

Are the changes for both public and private sectors?

This new labour law is applicable to all companies in both the private and public sector. It is also applicable to all UAE free zones except for Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), both of which operate under their own jurisdiction and are subject to their own employment laws.

How will this labour law impact the UAE market?

There is a period of transition for employers throughout the UAE. This is because new contracts and procedural guidelines will need to be drawn, and employees must be made aware of the implications of the new law and how it directly affects them.

It can be seen that these significant changes have brought the UAE closer to the societal norms prevalent in other parts of the world and is certain to have a positive impact on the market. It is likely that this new labour law will encourage further foreign investment within the UAE, as well as increasing the talent pool, in turn contributing to the country’s continued economic diversification and future success.

How can PRO Partner Group help?

PRO Partner Group are the experts in PRO and HR services and assisting in obtaining and maintaining UAE residence visas for clients and staff. Our professional team of government liaison staff, PROs and operations team can assist you to review your labour and immigration provisions to ensure that you are able to adjust your work contracts, staff visas and company HR policy guidelines.

If you need guidance in complying with the new UAE labour laws and any other related company setup, restructuring, local partner or PRO support matter in Abu Dhabi, Dubai, the wider UAE, Oman, Qatar or Saudi Arabia then please do get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, email us at info@propartnergroup.com or complete the contact form below and we will be delighted to assist you.