Employment trends and job market analysis for the UAE
Best known for its highly-developed infrastructure and celebrated diversity, the United Arab Emirates (or UAE) is an economic powerhouse of the Middle East and is widely known as a business-friendly country in the region that welcomes foreign workers and investments.
The UAE’s economy is the 5th largest in the Middle East, with a gross domestic product of US$501 billion (AED 1.84 trillion) in 2022.
The economy in the UAE relies on revenue from the natural gas and petroleum industries. One of its bigger non-oil revenue sources is tourism, and the UAE’s thriving services sector is contributing to the diversification of the economy. Across the nation, there is currently $350 billion worth of active construction projects in process.
Monthly or bi-weekly
United Aram Emirates Dirham (AED)
Payroll and taxes in the United Arab Emirates
The UAE does not have any enforced federal income tax legislation for general business. Each Emirate has enacted an income tax decree, but in practice, the enforcement of the decrees is restricted to oil companies and foreign banks.
There is no personal income tax law enacted in the UAE. This means that there are no individual tax registration or reporting requirements.
Employers are required to contribute to staff pensions, but we will cover this later on in the guide.
Social security contributions
Social security contributions are only applicable to UAE nationals. Both the employer and employee will need to make these contributions. The rates are as follows:
Employer - 12.5% of the employee’s monthly salary
Employee - 5%
Government - 2.5%
These rates differ in Abu Dhabi, where contribution rates are as follows:
Employer - 15%
Employee - 5%
Government - 6%
Employee contributions are deducted from the employee’s salary on a monthly basis. Payment is due before the 15th of the following month and processed through the UAE Funds Transfer System. There is a late payment fee of 10%.
Labour laws to be aware of in the UAE
The recent implementation of the UAE Labour Law in February 2022 has brought about significant changes in the employment landscape. Companies operating in the private sector (excluding the DIFC and ADGM) are now required to employ individuals on fixed-term contracts.
However, the three-year limit initially imposed on fixed-term contracts was removed in October 2022, affording flexibility to both parties involved. This means that the duration of the fixed-term can now be tailored to the specific needs and preferences of the individuals involved, although the inclusion of a fixed-term provision remains mandatory.
Moreover, the removal of the maximum term limit, combined with the right of either party to terminate the contract before its expiration, can render the fixed-term aspect of the agreement virtually insignificant. For instance, even if a five-year fixed-term contract is agreed upon, it essentially functions as a permanent employment contract.
These recent amendments have undoubtedly introduced a unique dynamic in terms of contractual obligations within the UAE.
Minimum retirement age in the United Arab Emirates
Employees are entitled to a pension from the age of 50.
Minimum wage in the United Arab Emirates
There is currently no minimum wage in the UAE, as there is no basic salary percentage under UAE Labour Law. However, common practice dictates that the average salary is around 60% of the gross salary, with allowances at 40%.
Working hours in the United Arab Emirates
In the UAE, the working week is typically Sunday to Thursday with some businesses open six days a week, closing on Fridays.
However, according to the UAE's new labor law which took effect in February 2, 2022, it is no longer mandatory for employers to implement rest days on Fridays. Rest days can now be implemented on any day of the week based on an agreement between the involved parties.
Additional changes also include a Monday to Friday work week ( with a half day on Fridays) for all government employees. While this is not implemented in the private sector, it is reported that many private sectors companies are making plans to instill a Monday to Friday work schedule.
Usual business hours are from 8am to 1pm, resuming at 4pm (once temperatures have reduced) and continuing until 7pm.
Employee benefits in United Arab Emirates
In the UAE, it is compulsory to register employees with the national government pension programme and contribute to it regularly. All employees working in the UAE that come from countries that make up the Gulf Cooperation Council (Saudi Arabia, Kuwait, Qatar, Bahrain, and Oman) are entitled to pension programmes of their home countries.
The total mandatory pension contribution required by employers is 20% of the employee’s overall salary. These contributions are subject to a statutory minimum and maximum salary amount (AED 1,000 and AED 50,000, respectively), against which the pension contribution is calculated.
When it comes to providing benefits for employees in the UAE, it’s useful to have a strong understanding of the economy and local expectations so that you can provide genuine value for your employees. Your benefits plan must address your workers’ needs as well as give you a competitive advantage in the careers market.
You can offer a variety of supplementary benefits to set your company apart, including:
Access to mental health support and counselling
Training and development courses
Financial advisory services
Wellness and health events
Employee rights to be aware of in the UAE
Employees in the United Arab Emirates are entitled to certain rights and protections under the labour laws mentioned above. These rights include:
Employees have the right to be treated fairly and without discrimination on the basis of race, nationality, religion, gender, or age. Discrimination in hiring, promotion, or any other employment-related decision is prohibited.
Written employment contract
Employees have the right to a written employment contract that clearly outlines the terms and conditions of employment, including job description, compensation, working hours, benefits, and other relevant details.
Wages and payment
Employees have the right to receive their wages on time, usually within a month of completing the work. Wages should be paid in the local currency (UAE Dirhams), and there are regulations in place to ensure the timely payment of wages.
Employers are required to provide a safe and healthy working environment for their employees. They should adhere to safety standards and regulations to ensure the well-being of workers.
Types of leave available in the United Arab Emirates
Employees are entitled to the following:
Two days' leave for every month if their service is more than six months and less than one year of continuous employment
A minimum of 30 vacation days a year if their service exceeds one year of continuous employment
Annual leave is usually calculated on the basis of a calendar month rather than by working days.
According to the New 2022 Labour Law, employees can be required to use up all their annual leave in the applicable annual leave year, and employers are encouraged to update any policies that limit carry-over of leave.
If an employee is sick or has injuries that prevent them from working, they should report to their employer within a maximum of two days.
Employees in the UAE are not entitled to sick pay during their probationary period, but after a period of three months following probation, sick leave is applicable as follows:
The full wage for the first 15 days
Half wage for the next 30 days
Any sick leave exceeding 30 days must be taken unpaid. If the illness has been directly caused by misconduct, e.g. excessive drinking, the employee is not entitled to sick pay. Employees are required to provide evidence of their illness via an official medical certificate.
Workers can resign during their sick leave, provided that the reason for resignation is approved by a physician. In this case, employers must pay all the wages the employee is entitled to until the end of the 45-day period of sick leave entitlement.
Employers are not permitted to dismiss an employee during their sick or annual leave unless the employee has used up all of their sick leave and is unfit to return to work. In this instance, the employee should receive a full gratuity and end-of-service entitlement. They will not be entitled to wages for the days they have not reported to work after the end of their leave.
If an employee does not report back to work within seven days from the day they were due back, employers are within their rights to terminate the employment agreement.
Maternity and paternity leave
Maternity leave in the UAE is applicable for 50 calendar days. Maternity pay is as follows:
Full pay for the first 45 days
Half pay for the remaining 15 days
Employees are also entitled to take maternity leave if they have miscarried after six months of pregnancy or in the event of a stillbirth or death of the child following birth. This leave will be the same as is detailed above.
If an employee gives birth to an infant with an illness or disability, they are entitled to an additional 30 days of leave, which can be further extended by another 30 days of unpaid leave if necessary.
At the end of the maternity leave, employees are allowed to extend their leave for a maximum of 45 days without pay.
During the six months following the birth of a child, employees who are nursing are entitled to two daily half-hour intervals to nurse their baby. These intervals are considered working hours and should not incur a wage deduction. According to the New 2022 Labour Law, employers cannot terminate an employee because they are pregnant or taking maternity leave.
Paternity leave is not provided for under the New 2022 Labour Law.
In the UAE, compassionate leave is as follows:
Five days in the event of the death of a spouse
Three days in the event of the death of a parent, sibling, child, grandchild or grandparent
Employees who have worked at a company for more than two years can take ten days of study leave per year. This leave allows them to sit examinations. They will need to be affiliated with an approved UAE educational institution to qualify for this leave.
Public holidays in the United Arab Emirates
The UAE observes the following national holidays:
New Year’s Day
Eid al-Fitr (celebrated on five consecutive days)
Eid al-Adha (celebrated on three consecutive days)
Islamic New Year
Prophet Muhammad’s Birthday
National Day (celebrated on two consecutive days)
Attracting talent in the United Arab Emirates
The UAE’s low-tax environment, low crime rate and advanced business culture make it an excellent choice for business expansion.
However, these factors also make the UAE a competitive environment for companies looking to attract talent. To differentiate your organisation from others in the UAE, consider employee benefit programs that provide a unique experience reflective of the rewarding nature of the UAE market.
Here are some tips on how to hire people in the UAE:
High performers are always looking for ways to learn new things and will more than likely want to join a company that provides career growth opportunities. These opportunities could take the form of professional developmentplans or 1-2-1 mentorship. Regardless, organisations should focus on offering potential employees clear information about potential career pathways they can take within the company.
Build policies that promote a good work-life balance
The COVID–19 pandemic introduced some significant changes in the way organisations around the world do business. Employee perspectives changed, and now workers place a high amount of value on companies that promote flexibility and employee well-being.
Where possible, organisations should offer a flexible working routine that incorporates both remote and non-remote arrangements.
Exciting projects to work on UAE
A small local population and wealth of energy resources creates opportunities for expat expertise. Because of the huge growth potential in the region, this is even true in areas with strict local content policies. Large capital development projects on the horizon could provide jobs for locals and expats for the next two decades. Not only are they investing $40-60bn dollars to increase oil production, but the nation also plans to invest into diversified energy projects. Consider the Barakah Nuclear Plant, The Mohammed bin Rashid Al Maktoum Solar Park projects, and the showcase event, Expo2020. These three projects place sustainable energy as a key agenda focus.
Hiring best practices in the UAE
Expanding a business to the United Arab Emirates (UAE) involves a series of strategic decisions, including hiring the right talent to ensure the success of the venture. Here are some hiring best practices for companies expanding to the UAE:
Understand local labour laws
Before you start hiring, familiarise yourself with the UAE's labour laws and regulations. Seek legal counsel if needed to ensure full compliance with employment laws and visa requirements.
Local market knowledge
Leverage the knowledge of local experts or global employment outsourcing consultants who understand the UAE job market. They can help you navigate cultural nuances and employment trends specific to the region.
Research salary benchmarks in the UAE to offer competitive compensation packages. Consider benefits such as housing allowances and healthcare, which are often part of employment packages.
Onboarding and orientation
Develop a comprehensive onboarding process that helps new hires acclimate to the company's culture and work expectations. Cultural sensitivity training may be beneficial.
Ensure all employment contracts comply with local laws and clearly define the terms and conditions of employment, including benefits, termination clauses, and probationary periods.
Implement performance evaluation systems that align with local expectations and standards. Regular feedback and goal-setting can help motivate employees.
Offer competitive benefits packages, including healthcare, retirement plans, and wellness programs, which can be attractive to potential hires.
Focus on employee retention strategies, as turnover can be costly. Provide opportunities for growth and development, as well as a positive work environment.
Market your brand
Build a strong employer brand in the UAE by showcasing your company's values, culture, and career opportunities through various marketing channels and within job postings. Strong marketing can also attract passive candidates who are not necessarily seeking work, but would be open to a career move if the right opportunity presented itself.
Engage with employees to understand their needs and concerns. Happy and engaged employees are more likely to contribute to the success of your expansion.
What should the ideal onboarding process look like in the UAE?
The onboarding process in the UAE should be a seamless blend of legal compliance, cultural awareness, and role-specific training.
Orientation is crucial, introducing your new hires to the company's culture, values, and local business etiquette. Cultural sensitivity training is vital for fostering an inclusive work environment.
Employees should be guided through documentation and contracts, with a clear understanding of their rights and responsibilities under UAE labor laws. Role-specific training should equip them with the skills necessary for success.
Language proficiency, if needed, should be assessed and addressed to facilitate effective communication. Clarify compensation structures, benefits, and end-of-service benefits, and ensure employees understand their rights.
Safety procedures, compliance training, and company policies should be thoroughly explained. Provide ongoing support and feedback channels and foster social integration through team-building activities. Discuss opportunities for professional growth and outline the exit process.
Termination of employment in the United Arab Emirates
According to the New Labour Law, employees must be engaged through fixed-term contracts. These can last for up to a maximum of three years. As of February 2022, employers in the UAE have up to one month to transfer employees from unlimited-term contracts to limited-term contracts.
In the event of a dismissal, in addition to notice, employers must pay compensation of up to three months’ wages if the dismissal results in a valid claim to the court.
The minimum notice periods for a fixed-term employment contract, introduced by the New Labour Law, are stipulated as follows:
30 days if the period of service is less than five years
60 days if the period of service is higher than five years
90 days if the period of service is higher than ten years
However, these notice periods are not applied for limited-term contracts, where employees are permitted to agree to a notice period with their employer. This period must be a minimum of 30 days and no more than 90 days.
Employees are entitled to a gratuity for the severed fraction of the year. This is on the condition that they complete one year of continuous service.
What are my options for hiring employees in the United Arab Emirates?
If you’re looking to expand your business to the UAE, a company like Airswift can help you get started with your remote hiring process. We offer employment solutions designed to ensure you stay compliant across all local legal requirements, including tax, payroll, termination procedures and working hour obligations.
Our in-country teams have the expertise and knowledge necessary to save your organisation from unnecessary risk, freeing up your time to focus on the other prospects of international business growth.
Hiring options businesses can explore include:
Airswift can source and deliver the talent you need across a wide range of industries by leveraging our expertise and employee networks across the UAE.
Whether you want to hire contractors for an urgent project or need to hire locally to cover a staffing shortage, we are committed to finding a contractor to suit your needs. Our contract hire services are catered to organisations that need temporary hires to fulfil a range of requirements.
Finally, if you’re looking to hire candidates that can grow with your company, we have professional search services that provide access to highly skilled job seekers who are ready for work. We also take care of all the administrative processes, from shortlisting candidates to screening and onboarding them.
Employer of Record
We understand that hiring staff and expanding globally is a complex process and an Employer of Record in the United Arab Emirates can help you hire employees without setting up a local entity. Working with an Employer of Record in the UAE allows you to get up and running in as little as 72 hours. Once your employee has been given the green light, we will take care of everything from onboarding and benefits management to tax filings and annual leave allowance.
*Although the information provided has been produced from sources believed to be reliable, no warranty, express or implied, is made regarding the accuracy, adequacy, completeness, legality or reliability of any information. For the latest information and specific queries regarding particular cases, please contact our team.
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