UAE Labour Law: 11 key terms every employee should know

Starting work in the UAE soon? Congratulations! Before you sign your contract, however, it’s best to get acquainted with all the terms related to the UAE labour law, so that you are not caught by surprise at any point. We break down the meaning of each term, how it relates to the UAE Labour Law, and what it means for you. Here are 11 key words everyone working in the UAE should know: 1. Fixed-term contract For a long time, the UAE followed Federal Law No. 8 of 1980 as its labour law. This changed on February 2, 2022, when Federal Decree Law No. 33 of 2021 took effect, repealing and replacing the previous law completely. With this change, came the abolishment of unlimited contracts. All employers in the UAE have since been required to place all employees on limited or fixed-term employment contracts, with a maximum of three years. Contract terms can be shortened, if agreed upon by both parties, and employers can continue to issue fixed-term contracts successively, at their discretion – there is no maximum number. Any extension or renewal of the terms of the employment contract are added when calculating an employee’s end-of-service benefits. 2. Probation period Employers often use a trial period for new hires, in order to monitor the employee’s performance, skills, and to check if they are a good cultural fit for the organisation. Although a probation period is not legally mandatory in the UAE, it is standard practice. The Federal Decree-Law No. 33 of 2021 asserts that probation periods can last for a maximum of six months. Once completed, the employment contract can be either continued or terminated by both parties. If the employee remains with the company, the probation period is calculated as part of his/her service. However, if the employer wants to terminate the worker, then 14 days’ prior written notice is necessary. Similarly, if the employee wants to resign with the intention of leaving the job and the UAE, he/she must provide prior written notice of 14 days. After leaving, if the employee returns to the UAE within the notice period, on a new work permit, his/her new employer can compensate the former employer for any recruitment costs (unless otherwise agreed upon, between the current employer and employee). 3. Basic wage A basic wage or basic salary is the salary that is specified in your employment contract, paid in consideration of the work you have completed. There is no minimum salary stipulated in the UAE Labour Law, however it includes general provisions requiring wages to be sufficient to meet the basic needs of employees. It is important to note that your end-of-service benefits (see below) are calculated based on your basic wage. However, many employment contracts may also provide allowances for housing, transport and other incentives, which are added to the basic wage to produce your salary total. Wages are paid in accordance with the Ministerial Resolution No. 598 of 2022 Regarding Wages Protection System, which states that an employer is considered late in paying the wage, if the payment is not made within the first 15 days after the due date, unless the employment contract specifies a shorter period. 4. Notice period If you are planning on quitting your job, you are required to serve a notice period to your employer – a designated period of time between your resignation and your final day of work. According to Article 43 of the UAE Labour Law, workers who have completed probation and are employed under a valid fixed-term contract must serve the notice period agreed upon in their employment contract, set at between 30 and 90 days. 5. Non-compete clause A non-compete clause is a provision in the UAE Labour Law that protects the rights and interests of employers, with the aim of preventing workers from moving to a competing business and taking confidential information or valuable business secrets with them. Article 10 of the UAE Labour Law permits employers to include non-compete restrictions in employment contracts. The maximum restrictive period is for two years from the date of the expiry of the employment contract. 6. Gratuity Gratuity is also known as end-of-service benefits or severance pay. It is awarded to workers who have completed at least one year of continuous services, upon termination of their contract. According to Article 51 of the UAE Labour Law, once they have completed one year of continuous service, workers are entitled to gratuity for fractions of a year, proportionate to the time served before they leave the company. The severance pay is calculated based on the basic salary of the employee, so it does not include allowances. Employers in the UAE are obligated to pay all outstanding wages, entitlements and gratuity within 14 days of the termination of the contract, and can deduct any amounts owed by the worker from the gratuity. 7. Arbitrary dismissal Arbitrary dismissal occurs when an employee’s contract is terminated by the employer illegally. According to Article