Ever since introducing the Federal Federal Decree Law No. 33 of 2021, the government has continued to make changes and amendments to it for providing stronger employee protections, better mechanisms in place for dispute resolution, and be more clear on rules about gratuity and contract termination.
One of the biggest highlights has been unlimited contracts being rendered obsolete and fixed-term contracts becoming the legal standard across the entire emirates. Our guide covers all these changes and more that every employer and employee in the UAE should know about.
UAE Labour Law: The Current Legal Framework (2026)
Federal Decree Law No. 33 of 2021 applies to most private sector employers operating across the UAE, except free zones such as DIFC and AFGM.
This legislation is for modernizing workplace practices, improving labour market flexibility, and making employment regulations on par with international standards by establishing clear rules for the following;
- employment contracts
- working hours
- leave entitlements
- termination procedures
- employee benefits
- dispute resolution
- employer obligations
Current Contract Requirements: Fixed Term as the Standard
Fixed-term contracts are now the only legally recognised employment contract type for private sector employees. Employers have to make sure all their drafted employment agreements comply with what the Ministry of Human Resources and Emiratisation (MOHRE) requires of them.
Any employer who still continues to rely on legacy unlimited contracts without completing the required conversion will be considered in violation of the current labour regulations.
Fixed Term Contracts
Fixed-term contracts have a maximum duration of 3 years. These contracts are renewable for the same or a shorter period.
If both parties (employee and employer) continue the employment after expiry without signing a new agreement, the contract is automatically extended.
Usually, the contract duration reflects that of the expat employee’s UAE residence visa validity.
Flexible and Modern Work Arrangements
UAE’s labour laws have now formally recognized other modes of work than full-time employment. Since flexible employment models are now covered by the local employment laws, the contracts, employees’ rights, and benefits are all covered legally.
Employees working under flexible arrangements still have their rights covered, including their leave entitlements, gratuity rights, wage protection requirements, and insurance coverage.
Flexible and modern work arrangements include part time jobs, remote work, hybrid structure, and temporary or project-based employment.
Part Time Employment
With part-time employment being recognized, employees hired on part-time contracts can work reduced hours for 1 or more employers.
Remote Work
If your employees are working for you remotely on a permanent or hybrid basis, their employment contract and the internal policies at your organization should accurately reflect this.
Temporary and Project Based Employment
You can onboard workers for your specific projects, seasonal requirements, or temporary assignments using dedicated contract structures.
Abolition of Unlimited Contracts & What It Means for Employees
Unlimited term contracts have been fully abolished under the labour laws of UAE. All previously existing unlimited contracts were required to be converted to fixed-term contracts.
There were transition agreements and rules for workers who had been originally hired under the unlimited contracts before the reforms. That’s why employers are still expected to preserve employment records of past workers as the information can be relevant for calculating the end-of-service benefits of those workers.
Termination Rules and Notice Periods
UAE labour laws have very clear procedures for termination.
The notice period, once probation has been completed, should be at least 30 days and cannot exceed 90 days.
During probation, employees and employers can provide 14 days notice before terminating their employment contract.
Termination should be under lawful procedures and it should be supported by valid documents.
End of Service Gratuity: Calculation and Payment Rules
Gratuity is calculated on basic salary only, excluding allowances and bonuses. Here’s how you calculate gratuity for your employees:
- 21 days’ basic salary per year for the employee’s first 5 years of service
- 30 days’ basic salary per year for every year after those 5 years
Total gratuity cannot exceed the equivalent of 2 years’ basic salary. Moreover, the gratuity has to be paid within 14 days of contract termination, as per the amendments in 2024 and 2025.
Labour Claims: Limitation Period
The limitation period refers to the timeframe during which an employee can file a labour claim after their employment relationship ends. Effective from 31 August 2024, employees have up to 2 years from the date of termination to initiate a formal labour dispute.
The amendment provides additional time for employees to assess their potential claims and pursue legal remedies where necessary.
This extended timeframe means that employers are required to retain employment records, contracts, payroll information, disciplinary records, and workplace correspondence for a minimum of 2 years after termination.
Mandatory Compliance: MOHRE Requirements
MOHRE requires employers to perform the following actions to make sure they are not violating any of the labour regulations and incurring penalties, disputes, or administrative restrictions as a result:
- Maintain MOHRE-compliant employment contracts
- Register workers correctly
- Process wages through approved systems
- Make sure the employment terms meet the current labour regulations
- Regularly review contracts
Recent Reforms & Labour Disputes
Recent reforms have allowed MOHRE to order salary continuation while labour disputes are being investigated and resolved. This is to make sure that employees are not left without income during ongoing proceedings.
Separate Frameworks for DIFC and ADGM
DIFC employers comply with DIFC Employment Law No. 2 of 2019, including Amendment No. 1 of 2024 and related regulations. Whereas, ADGM employers are governed by the ADGM Employment Regulations 2024.
These jurisdictions maintain their own requirements relating to contracts, leave entitlements, discrimination protections, dispute resolution, and employee rights.
Businesses operating within these free zones should always cross-reference employment agreements against the latest jurisdiction-specific regulations before implementing their workforce policies.
Conclusion
Employers and employees should be aware of all the updates and amendments to the employment contracts and UAE labour laws. This helps them prevent any violation of the existing or new regulations and continue their operations uninterrupted.
With unlimited contracts being phased out and flexible work models getting legal recognition, the laws are now even more clear on the rights and benefits, notice periods, gratuity payments, and labour disputes. Keeping up with all this latest information can help you stay informed.
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