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UAE’s New Federal Labor Law

Recently, the United Arab Emirates published its new Federal Labour Law No.33 of 2021, which is an amended version of the Federal Labour Law No.8 of 1980. While the law is set to come into effect from 2 February 2022, it is likely to introduce significant changes on existing employee arrangements. Below we have discussed some of the key changes in the new bill, their potential impacts and mostly how it will affect the working class?

1.The New Law will apply to all existing and future employment relations in the private sector onshore in the UAE. The same will also apply to free region zones which do not have their own labour laws.

2.The New Federal Labour Law of 2021 do not apply to employment relations in the Dubai International Financial Centre of the Abu Dhabi Global Market, considering they have their own labour law regime.

3.The New Law has categorized the work models into three different categories.

  • Full time- when a person works for one employer on a full-time basis.

  • Part time- when a person works for one or more employers for a specific number of hours or days.

  • Temporary work- work which is carried out during a specified period of time and involves a specific task which ends in its completion.

  • Flexible working- Work that involves changing working hours or days depending on the workflow and operational and business needs of the employer. Under flexible working arrangement, an employee may work for an employer depending on the circumstances and requirements of the work.

Certain aspects of this model, for instance, overtime and severance pay would be seen later, when the law comes into effect.

4.The new law has certainly provided a great clarity in the aspects of employee contracts. As per the previous amendment, many companies in the UAE, adopted the structure of unlimited term employment contracts. This has been changed under the new law. Now, companies will have to issue employment contracts only under fixed terms. Under the new model, the term of fixed employment contract must not exceed three years. However, the term can be extended or renewed for any number of times. Any extension or renewal of the term will be added when calculating an employee’s period of continuous service. In cases, where parties do not expressly renew or extend the term but continue performing the contract, the term shall be extended automatically on the same terms and conditions.

The new model has given a deadline of 1 February 2023 to the employers to make the necessary changes to their employment contracts and employment policies, including conversion of any unlimited term employment contracts to a fixed term contract with relevant authority.

5.The pervious law allowed the employers with a power to terminate an employee during the probation period without providing any notice. The New Law eliminates this. The New Law introduces a notice period of 14 days prior written notice for terminating an employment contract by the employer during the probation period.

On the other hand, an employee must provide at least one month’s prior written notice to the employer if they intend to terminate the employment contract during the probation period to work for another employer in the UAE. In such case, the new employer must compensate the first employer for any incurred recruitment costs, unless agreed otherwise.

In cases, where an employee wants to terminate the employment contract during probation with the intention of leaving the UAE, the employee will be asked to provide the employer with at least 14 days’ prior written notice. In cases where such an employee returns to the UAE and obtains a work permit from another employer within three months from the date of leaving the UAE, the new employer must compensate the original employer for the recruitment costs incurred when they hired the employee.

In cases where an employee or the employer terminates the employment contract, while undermining the New Law, the terminating party will have to pay the other party compensation equal to the employee’s basic salary plus allowances due under the relevant notice period or the remainder thereof.

6.The New Law has specified the list of events under which that would eliminate the employee contract. These include,

  • The mutual written agreement from both the employee as well as the employer.

  • If the employee contract is expired. (Where it isn’t renewed or extended)

  • If the employee is convicted by a final order to a custodial penalty for a term of not less than three months.

  • In cases where the employer becomes bankrupt, insolvent or unable to continue the business due to any economical or exceptional reason.

7.Either party may now terminate the employment contract for a legitimate reason by giving the other a prior written notice, provided that such notice is not less than 30 days and not more than 90 days. In cases of unlimited term employment contract which are signed before the New Law comes into effect, such contracts may be terminated by giving the employee a

  • 30 day written notice if the period of services is less than five years

  • 60 day written notice if the period of service exceeds five years

  • 90 day written notice if the period of service exceeds 10 years

8.In cases where an employer becomes aware that the employee is causing material loss to the firm, and notifies the same to the Ministry of Human Resources and Emiratization within seven working days from when the employer becomes aware, he/she can terminate the employee without any prior notice. Under the previous law, the employee was given a notice period of 48 hours.If an employee fails to perform their duties in accordance with their employment contracts, and fail to provide a remedy, despite being informed about the same by the employer, in addition to two written warnings provided by the employer, he/she can be terminated without notice. If an employee abuses their position with the aim to obtain personal gain, or gets employed by another employer without complying to relevant process or regulations, they can be terminated without a prior notice.

9.The New Law also changes some of the disciplinary sanctions and procedures that an employer may take against an employee if they are found in breach of the New Law or the Executive Regulations. These include a written notice drawing their attention to any breach, a written warning, deducting up to a five day salary in one month, suspension from work for up to 14 days without pay, denying any salary increase for one year if the employer has a periodic salary increase policy in place and the employee is entitled to such increase under their contract or the company’s bylaws, denying an employee a promotion for a maximum of two years, and finally dismissing the employee with payment of severance pay.

10.The New Law clarifies that a foreign employee who completes at least one year of continuous service will be entitled to severance pay, which is calculated on the basis of their basic salary. The New Law expressly provides that the basic salary excludes any other allowances or benefits. Calculation of the severance pay is also slightly changed as the New Law refers to “working” days. That is, where an employer terminates the employment contract, for every year of service, the employee is entitled to 21 working days’ basic salary for the first five years of service and 30 working days’ pay for each additional year of service. The total severance pay must not exceed two years’ salary.

11.The New Law also introduces five days of paid bereavement leave for the death of a spouse and three days for the death of a parent, child, sibling, grandchild or grandparent, commencing from the date of death.

Parental leave is also offered for both parents for five days for child care. This is in addition to the mother’s maternity leave, which has been slightly adjusted to include 45 days with full pay and 15 days with half pay. The New Law also states that a female employee will be entitled to her maternity leave as stipulated if delivery takes place six months or more after pregnancy, even if the child is stillborn or is born alive but dies. The New Law does not make provisions for Hajj leave. This may, however, be provided for in the Executive Regulations, along with any set public holidays.

12.Furthermore, the New Law prohibits sexual harassment, bullying or any verbal, physical or mental abuse against employees by their employer, manager or colleagues.

The enactment of these new provisions will be in the coming year. Until then the parties have been given sufficient time to comply and makes necessary changes. The government has even planned to publish Executive Regulations to provide a more vivid picture of these laws. It will be fascinating to re-visit the New Law once again when it comes into force. Then, we will have a more vivid picture on how these provisions will affect the working class.


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