EMPLOYEE BENEFITS IN THE UAE

Employee benefits in the UAE are dealt with in the Labour Law (Federal Law No.8 Organisation of Labour Relations, 1980), amended by Federal Decree-Law No. 33, in February 2022. The UAE is a federation of seven Emirates that generally follow federal employment legislation. However, two Free Trade Zones, the Abu Dhabi Global Market and the Dubai International Financial Centre, have their legal system and employment regulations. Some other FTZs implement different rules regarding the employment of foreigners, salary payments, health and safety and termination of contracts.

International companies hiring employees in the UAE must establish a legal entity in one of the Emirates and then operate within the relevant legislative framework, which provides safeguards and guarantees for the workforce. Minimum guarantees include paid vacations, working hours, termination, severance and notice periods, sick leave, maternity allowances and benefits. Foreign companies’ responsibilities reach beyond simply complying with social security and payroll regulations – although these still add up to a demanding workload. Failure to comply with specific rules applying to benefits and entitlements runs the risk of fines and sanctions. Employers must have a firm grasp of what is guaranteed for their employees, which will affect the employer-employee relationship.

This is where Bradford Jacobs points you in the right direction, drawing on over 20 years of experience as a Professional Employment Organisation (PEO) and Employer of Record (EOR). We deal with the complexities while your staff focus on work and building the business.

What are the Compensation Laws in the UAE?

The Labour Law (Federal Law No.8 Organization of Labour Relations, 1980) is the main raft of legislation governing federal employment laws in the Emirates. This was amended in February 2022 by the Federal Decree-Law No. 33, which applies to all private companies and is referred to as the New Labour Law.

National Minimum Wage (NMW): Minimum monthly wages for UAE nationals depend on education. Without a high school certificate – AED 3,000 (EUR 784, USD 816); with a high school certificate – AED 4,000 (EUR 1,045, USD 1,090); degree or higher, AED 5,000 (EUR 1,307, USD 1,360). No minimums apply to expatriate workers.

Sick Leave and Benefit: Entitlement is a maximum of 90 days of sick leave per year, continuously or in parts, with the employee producing a medical certificate within three days of stopping work. The benefit is full pay for the first 15 days, half salary for the next 30 days, without pay for the remaining days. Probationers are not paid during their trial period if becoming unwell.

Working Hours and Breaks: The New Labour Law does not specify Friday as the weekly rest day, allowing private sector employers flexibility to amend work schedules. The Law reduced the public sector working week to four-and-a-half days, with the weekend running from Friday afternoon to the end of Sunday. Private sector employees work eight hours daily up to a maximum of 48 in a six-day week. Under the new Law, employees contracted to 40 hours a week can compress their hours into fewer days. During the holy month of Ramadan, working hours are reduced by two per day. Employees are entitled to unpaid breaks totalling one hour if they work more than five consecutive hours. Under the new Law, total working hours, including overtime, cannot exceed 144 hours over three weeks.

Overtime: Employees cannot work more than two extra hours per day, remunerated at 25% above their basic hourly wage, or 50% more if asked to work between 9 pm and 4 am. Employees asked to work on their rest day or during leave, as specified in the contract or workplace conditions, are entitled to the 50% premium or a substitute day off in lieu.

Paid Vacations: Entitlement is 30 calendar days for employees with more than one year’s service or two days for each month worked for those employed between six months and one year. Employers can set the windows for leave but must give employees at least one month’s notice. Leave should be used in the entitlement year, but employers can agree to unused leave being carried over to the following year. Any public holidays or sick leave falling within the holiday are counted as leave.

Public Holidays: Islamic holidays are determined by moon sightings. The dates of two official holidays celebrated within Islam, Eid-al-Fitr and Eid-al-Adha, vary between years. Eid-al-Fitr marks the end of the month-long Ramadan, while Eid-al-Adha marks the end of the Hajj.

  • New Year’s Day, January 1
  • Day of Arafat, July
  • Islamic New Year, July / August*
  • Prophet’s Birthday, September / October *
  • Commemoration Day, November 30
  • National Day, December 2

*Dates vary.

Maternity / Paternity / Parental Leave and Benefits: The New Labour Law allows 45 days leave at full pay, plus 15 days at half pay, without a minimum qualifying period for women employed in the private sector. An extra 45 days of unpaid leave is allowed when a woman is ill due to pregnancy. An additional 30 days of paid leave and a further 30 days of unpaid leave applies if the child has a disability. The employee is entitled to full maternity leave for stillbirth at any stage of the pregnancy from six months on. A woman’s employment cannot be ended during pregnancy or when she informs her employer that she is pregnant. Women working in public sector government departments receive 90 days of paid leave. Fathers receive three days of paid paternity leave. Mothers and fathers are entitled to a combined five days of paid parental leave until their child is six months old.

Discrimination: Specific clauses have been introduced by the New Labour Law, safeguarding employees against discrimination based on race and national origin, gender, social status, religion, or disability. Additionally, the new Law introduces protection against sexual harassment, bullying and any form of verbal, psychological or physical violence.

Health and Social Insurance: Social security contributions apply only to UAE nationals and citizens of other Gulf Cooperation Council (GCC) nations. In this case, both employers and employees pay into the system. Private sector employers contribute 12.5% to the General Pension and Social Security Authority (15% in the public sector), with employees contributing 5% and an additional 2.5% from the government. In Abu Dhabi, a total rate of 26% comprises 15% from the employer, 6% from the government and 5% from the employee. Expat employers and employees are not required to make contributions. The UAE proposes an unemployment insurance scheme for private and public sector workers to be implemented in 2023, covering up to 60% of basic salary. Employees will be compensated with up to AED 20,000 (EUR 5,220, USD 5,445) in the event of unemployment.

13th Month Salary: There is no statutory provision to pay a 13th month’s salary.

Guarantees and Restrictions on Employee Benefits in the UAE

Guaranteed Benefits:

Guaranteed minimum employee benefits in the United Arab Emirates (UAE) are laid down by the Labour Law (Federal Law No. 8 Organization of Labour Relations, 1980) and the Federal Decree-Law No. 33, updated in February 2022 and which applies to all companies in the private sector and is referred to as the New Labour Law. Entitlements include:

  • Maternity Leave and Benefit: Under the New Labour Law, 15 days of leave on half pay was added to the existing 45 days on full pay. If the mother becomes unwell due to pregnancy, she is permitted a further 45 days of unpaid leave; 30 days of paid leave and a further 30 days of unpaid leave applies if the child is disabled.
  • Sick Leave and Benefit: Maximum annual sick leave is 90 days, with the first 15 on full pay, the next 30 on half pay and the remainder unpaid. Probationers are unpaid if ill during their trial period.
  • Paid Vacations: Employees who have worked more than one year receive 30 calendar days of paid leave. Those who have worked between six months and one year receive two days for each month worked.

Restrictions:

  • Paid Vacations: Employees must have worked one full year for an employer to be entitled to their full allowance of 30 calendar days of paid leave.
  • Sick Leave: Employees are not entitled to sick leave with pay during a probationary period; if illness results from misconduct due to alcohol or drugs; or if they suffer illness or injury through ignoring safety regulations as detailed in workplace bulletins.

Social Security in the UAE

Social security contributions apply only to UAE nationals and citizens of other Gulf Cooperation Council (GCC) nations. Private sector employers contribute 12.5% to the General Pension and Social Security Authority, GPSSA (15% in the public sector) with employees contributing 5% and an additional 2.5% from the government. In Abu Dhabi, a total rate of 26% comprises 15% from the employer, 6% from the government and 5% from the employee. Foreign employers and employees are not required to make contributions and are not covered by the system. The GPSSA provides various pension-related services to Emirati citizens employed in the public and private sectors but not those in Abu Dhabi or Sharjah.

The system covers retirement, death, disability, occupational illness or injury, and employees are eligible after completing 20 years of service and being at least 50 years old. The pension increases by 2% for every year of service after 20 years up until 35 years, with a pension equal to salary after completing more than 35 years. The UAE plans to bring in an unemployment insurance scheme for private and public sector workers due to be implemented in 2023, covering up to 60% of basic salary. Employees will be compensated with up to AED 20,000 (€5,220, US$5,445) in the event of unemployment.

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