UAE Employment Law Compliance: Hiring and Termination

Employment Law Compliance in the UAE: Avoiding Common Pitfalls in Hiring and Termination

The United Arab Emirates (UAE) has long attracted multinational corporations and skilled professionals. That environment rests on a robust and evolving legal framework, particularly in employment. For any business operating in the UAE, from new startups to established enterprises, employment law compliance in the UAE means strict adherence to Federal Decree-Law No. 33 of 2021 Regarding the Regulation of Employment Relationship (the "New Labour Law"). This is not merely a best practice; it is a mandatory requirement.

Related: See our non-compete agreement drafting services in the UAE.

The New Labour Law replaced Federal Law No. 8 of 1980 and modernised the UAE's labour landscape, introducing greater flexibility, clarity and protection for both employers and employees. With change, however, comes complexity.

Many businesses, particularly those new to the region or relying on outdated practices, fall into common legal pitfalls at two critical stages of the employment lifecycle: hiring and termination. These missteps can lead to costly disputes, financial penalties and lasting damage to a company's reputation.

Related: See our employment termination letter drafting services in the UAE.

This guide, informed by the latest legal provisions, gives employers and HR professionals a practical roadmap to UAE employment law. It sets out the most frequent compliance errors in hiring and termination and the steps needed to keep your operations fully compliant and protect your business interests.

Related: See our DIFC lawyers and arbitration services and our real estate law advisory services in the UAE.

The Foundation of Employment Law Compliance in the UAE: Federal Decree-Law No. 33 of 2021

The New Labour Law, effective from February 2, 2022, and its Executive Regulations (Cabinet Resolution No. 1 of 2022), established a unified legal framework across the UAE. This includes the free zones, but excludes the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), which have their own distinct common law systems.

The law emphasises equality, non-discrimination and the protection of workers' rights, while also introducing flexibility to support the modern economy.

Key Shifts in the New Law

Feature	Old Law (Federal Law No. 8 of 1980)	New Law (Federal Decree-Law No. 33 of 2021)
Contract type	Unlimited and limited term contracts	Primarily fixed-term contracts (up to 3 years, renewable)
Working hours	Standard 8 hours/day, 48 hours/week	Standard 8 hours/day, 48 hours/week, with greater flexibility for part-time, temporary and remote work
Probationary period	Up to 6 months	Up to 6 months, with mandatory written notice for termination by either party
Discrimination	Limited provisions	Explicitly prohibits discrimination based on race, colour, sex, religion, national origin, social origin or disability
Maternity leave	45 days full pay, 15 days half pay	60 days (45 days full pay, 15 days half pay), plus additional leave for complications

Understanding these changes is the first step toward a compliant HR strategy. The law's reach is extensive, and ignorance of its provisions is not a valid defence against a labour claim.

Part I: Avoiding Pitfalls in the Hiring Process

Hiring is the first point of legal exposure for any employer. Errors at this stage can invalidate contracts, lead to fines or result in costly litigation before an employee even begins the role.

Pitfall 1: Failing to Issue a Valid, Written Employment Contract

One of the most common and easily avoided mistakes is failing to formalise the employment relationship with a legally compliant contract.

Compliance requirement: Every employee must have a written employment contract registered with the Ministry of Human Resources and Emiratisation (MoHRE). The contract must be in Arabic and English, or any other language, provided it is approved by the employee. The MoHRE-approved contract is the legally binding document and overrides any private agreement if a conflict arises.

The mistake: Relying solely on a private, company-drafted offer letter or contract that is not registered with MoHRE.

What to do: Ensure that all essential terms (job title, salary, benefits, start date and contract duration) are accurately reflected in the MoHRE contract. The New Labour Law mandates that all contracts must be fixed-term, renewable for periods not exceeding three years. This shift from the old unlimited contract system requires careful attention to renewal procedures.

Practical point: For complex roles or executive positions, a supplementary agreement can set out confidentiality clauses, intellectual property rights and restrictive covenants (non-compete and non-solicitation), provided they do not contradict the MoHRE contract. Nour Attorneys advises on drafting and reviewing employment contracts to ensure protection and compliance.

Pitfall 2: Mismanaging Work Permits and Visa Compliance

Hiring a foreign national without the correct work permit and residency visa is a serious offence and carries significant penalties for the employer.

Compliance requirement: An employer cannot recruit or employ any worker unless the worker holds the necessary work permit and residency visa, sponsored by the employing entity or a licensed third party.

The mistake: Allowing an employee to start work while the visa application is pending, or employing individuals on visit visas or under another entity's sponsorship (unless specific legal arrangements, such as part-time work permits, are in place).

What to do: Establish a rigorous pre-employment checklist. The process must begin with securing the entry permit, followed by the work permit and residency visa application. The employer is responsible for all associated costs, including recruitment fees, visa application fees and medical insurance.

Practical point: The UAE visa system is constantly evolving. Staying current on the requirements for different visa categories (for example, the Golden Visa, the Green Visa and the standard employment visa) is essential. Our trustee and escrow services can support this process as part of onboarding international staff.

Pitfall 3: Breaching the Probationary Period Rules

The probationary period lets both parties assess suitability. The New Labour Law introduced specific rules for termination during this period that employers often overlook.

Compliance requirement: The probationary period cannot exceed six months. Termination during this period requires written notice.

The mistakes:

1. Terminating an employee during probation without giving the mandatory notice.
2. Extending the probationary period beyond the six-month limit.

What to do:

• Termination by the employer: The employer must give at least 14 days' written notice to terminate the employee during the probationary period.
• Termination by the employee (moving to another employer in the UAE): The employee must give at least one month's written notice. The new employer must compensate the original employer for the employee's recruitment costs.
• Termination by the employee (leaving the UAE): The employee must give at least 14 days' written notice. If the employee returns to the UAE and obtains a new work permit within three months, the original employer can claim compensation for recruitment costs.

Failing to observe these notice periods can render the termination invalid and expose the employer to a labour claim.

Pitfall 4: Ignoring Non-Discrimination and Equal Pay Provisions

The New Labour Law significantly strengthened protection against discrimination.

Compliance requirement: Article 4 of the New Labour Law explicitly prohibits discrimination based on race, colour, sex, religion, national origin, social origin or disability. It also mandates equal pay for men and women for the same work or work of equal value.

The mistake: Basing hiring decisions on discriminatory factors, or having pay structures that cannot be justified by objective, non-discriminatory criteria (for example, experience, qualifications or performance).

What to do: Implement clear, objective and documented hiring and compensation policies. Audit your pay scales regularly to ensure compliance with the equal pay mandate. Training hiring managers on unconscious bias and non-discriminatory interviewing is highly recommended.

For professional legal guidance, see our corporate governance and business compliance advisory and crypto regulation compliance advisory services.

Part II: Handling Termination Correctly

Termination is the most legally sensitive stage of the employment lifecycle. The New Labour Law sets clear but strict rules for ending an employment relationship. Non-compliance here almost always results in a labour case filed with MoHRE.

Pitfall 5: Misunderstanding the Grounds for Termination

The New Labour Law provides three primary ways to end a fixed-term contract: mutual consent, expiry of the term, or termination by one party with notice based on a valid reason.

Compliance requirement: Termination must be for a legitimate reason related to the employee's performance, the employer's operational requirements, or one of the specific grounds for summary dismissal.

The mistake: Terminating an employee without a valid, documented reason, or using the wrong termination mechanism. For example, terminating an employee for poor performance without following a documented performance improvement plan (PIP).

What to do:

1. Document everything: Keep detailed records of performance reviews, warnings, disciplinary actions and communications.
2. Use the correct notice period: For termination based on a valid reason (for example, restructuring or poor performance), the contract must be terminated with written notice of not less than 30 days and not more than 90 days, as agreed in the contract.
3. Payment in lieu of notice (PILON): If the employer wishes to terminate immediately, it must pay the employee full salary for the notice period.

Pitfall 6: Misusing Summary Dismissal (Gross Misconduct)

Summary dismissal, or termination without notice, is reserved for the most serious breaches of conduct. Employers frequently misuse it, which leads to successful unjust dismissal claims.

Compliance requirement: Summary dismissal is only permissible on the specific, exhaustive grounds listed in Article 44 of the New Labour Law. These include:

• Assuming a false identity or submitting forged documents.
• Committing a mistake that results in gross material loss to the employer.
• Failing to perform basic duties despite a written investigation and warning.
• Disclosing company secrets.
• Being intoxicated or under the influence of narcotics during working hours.
• Assaulting the employer, a manager or a colleague.

The mistake: Dismissing an employee for a minor offence (for example, occasional lateness) as summary dismissal in order to avoid paying the notice period.

What to do: Before invoking Article 44, the employer must conduct a written investigation, give the employee an opportunity to defend themselves, and ensure the offence falls strictly under one of the listed grounds. The termination must be communicated within a maximum of 30 days from the discovery of the violation. Any deviation from this strict procedure can make the dismissal unjust.

Legal safeguard: Summary dismissal calls for prompt and precise legal action. A specialised legal team can make sure the investigation and termination process is legally sound and defensible. Our dispute resolution team handles complex labour claims and protects employer interests.

Pitfall 7: Miscalculating End-of-Service Gratuity (EOSG)

EOSG calculation is a frequent source of disputes, particularly since the shift to fixed-term contracts and the inclusion of new work models.

Compliance requirement: An employee who has completed one year or more of continuous service is entitled to EOSG, calculated on the last basic salary.

The mistakes:

1. Failing to use the correct basic salary (excluding allowances) in the calculation.
2. Incorrectly applying the deduction rules for resignation.
3. Failing to pay the EOSG and all final entitlements (including accrued leave pay) within 14 days of the termination date.

What to do: Apply the calculation as follows:

• Full gratuity: 21 days' basic salary for each of the first five years of service, and 30 days' basic salary for each subsequent year.
• Resignation: The New Labour Law removed the previous reduction for resignation. Under the new law, an employee who resigns is entitled to the full gratuity calculation, provided they complete the notice period.

End-of-service gratuity calculation

Years of service	Entitlement per year (basic salary)
1 to 5 years	21 days
5+ years	30 days

Pitfall 8: Overlooking Unjust Dismissal and Compensation

If the competent judicial committee or court deems a termination "unjust", the employer will be liable to pay compensation.

Compliance requirement: The court may rule a dismissal unjust if the termination is not related to the work or if the employer fails to follow the correct legal procedures.

The mistake: Assuming that paying the notice period and EOSG is enough to avoid a claim, even when the underlying reason for termination is weak or discriminatory.

What to do: The maximum compensation for unjust dismissal is three months' salary (basic salary plus allowances). This is in addition to notice period pay and EOSG. Employers must conduct a thorough risk assessment before any termination, especially if the employee has a strong performance record or the termination is close to a protected period (for example, maternity leave).

Part III: Proactive Employment Law Compliance in the UAE

Compliance is an ongoing process, not a one-time event. Proactive measures are the most effective way to reduce legal risk.

1. Implement Robust Internal Policies

Your internal HR policies should be fully aligned with the New Labour Law and its Executive Regulations. Key areas include:

• Disciplinary procedures: Clear, documented steps for warnings, investigations and disciplinary actions.
• Performance management: A formal system for performance reviews and documented performance improvement plans (PIPs).
• Leave policies: Detailed policies on annual leave, sick leave, maternity leave and parental leave, all compliant with the statutory minimums.

2. Keep Thorough Documentation

In a labour dispute, the burden of proof often falls on the employer. Complete, well-organised records are your strongest defence. These include:

• Signed MoHRE contracts and supplementary agreements.
• Records of all salary payments, including basic salary and allowances.
• All correspondence on warnings, investigations and termination notices.
• Proof of payment of EOSG and final entitlements.

3. Seek Specialist Legal Advice

The UAE's legal landscape changes often, with new decrees and regulations issued regularly. What was compliant last year may not be compliant today. Relying on in-house HR generalists without specialised legal support can be a significant risk.

How Nour Attorneys can help: Whether you are establishing a new entity, restructuring your workforce or facing a complex labour dispute, specialised legal advice is indispensable. Our team provides employment law advisory services, from drafting tailored contracts to representing clients in MoHRE and court proceedings, so your business operates with legal certainty.

Conclusion

Employment law compliance in the UAE is a critical pillar of sustainable business operations. The New Labour Law (Federal Decree-Law No. 33 of 2021) has raised the bar for employers, demanding greater diligence, transparency and adherence to formal procedures, particularly in hiring and termination.

By avoiding the common pitfalls, such as relying on unregistered contracts, mismanaging visa requirements, misusing summary dismissal or miscalculating end-of-service benefits, businesses can significantly reduce their legal exposure. Proactive compliance, supported by robust internal policies and expert legal guidance, is the only path to long-term success in the competitive UAE market.

Do not wait for a dispute to arise. Work with legal advisers who understand the New Labour Law to build a resilient and compliant workforce strategy.

Related services: See our employment termination letter drafting and labour and employment law advisory services for practical legal support in this area.

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.

Nour Attorneys Team

Additional Resources

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