UAE Labour Law: 14 Common Compliance Traps and How to Avoid Them

Are you confident that your business is fully compliant with UAE labour law?
Many organisations feel confident about their compliance until a fine, inspection, or employee dispute reveals areas for improvement.
In the UAE, compliance goes beyond preparing contracts or processing payroll on time. It requires ongoing attention to evolving regulations, employee rights, and government reporting requirements.
Even well-managed companies can encounter compliance challenges that result in financial penalties and reputational risk. At HLB HAMT, our HR and compliance specialists highlight the most common areas where businesses fall short and share practical ways to maintain full compliance in this blog.

Here are the 14 Common Compliance Traps and Practical Ways to Avoid Them

1. Employment Contracts

Many businesses still rely on indefinite-term contracts, which are no longer compliant under UAE labour law. All employees must now be employed under fixed-term contracts. Each contract should clearly outline salary, job responsibilities, working hours, benefits, and termination clauses.

2. Wage Protection and Payroll

Late or inaccurate salary payments through the Wages Protection System (WPS) are among the most frequent compliance issues. Automating payroll helps ensure timely payments, accuracy, and full adherence to WPS regulations, while reducing human error.

3. Emiratization

Meeting Emiratization targets has become a mandatory requirement in the UAE. Companies that fail to meet the set quotas may face financial penalties, which vary depending on the extent of the shortfall.
The targets differ based on company size:

• 50 or more employees: 2% Emiratization rate per year
• 20 to 49 employees: 1% Emiratization rate per year

Employers should plan their recruitment strategies carefully, maintain accurate records, and ensure timely reporting to remain compliant with MOHRE regulations.

4. Workforce Diversity

The UAE government encourages companies to build a diverse and inclusive workforce that represents multiple nationalities and cultures. Promoting workforce diversity supports innovation, enhances collaboration, and strengthens compliance with inclusion goals. Employers should foster equal opportunities, transparent hiring practices, and a respectful work environment for all employees.

5. Work Permits and Visas

Every employee must have a valid residence visa and work permit sponsored by the employer. Employers must also maintain up-to-date labour cards and employment records with MOHRE or with the respective freezone authorities. Failure to cancel or renew permits on time can result in penalties

6. Working Hours, Overtime, and Leave Entitlements

The standard working hours in the UAE are eight per day or 48 per week, with some industry exceptions. Overtime must be compensated as per the law, either through additional pay or time off in lieu. Accurate records of annual, sick, maternity, and public leave must be maintained.

7. End-of-Service Gratuity (EOSB)

Gratuity payments must be calculated and paid in accordance with Article 51 of the UAE Labour Law. The amount depends on the employee’s contract type and length of service and must be settled within 14 days of their last working day.

8. Occupational Health and Safety (OHS)

Employers must ensure a safe and compliant work environment by conducting regular risk assessments, offering safety training, and maintaining valid workplace insurance such as Workmen’s Compensation Insurance for employees in specific sectors.

9.Unemployment Insurance Scheme

Employers must register all eligible employees under the Unemployment Insurance Scheme (Involuntary Loss of Employment – ILOE). The scheme offers financial support to employees who lose their jobs for reasons beyond their control. Employers are responsible for ensuring timely registration and contribution payments to maintain compliance and protect employee benefits under the scheme.

10. Medical Insurance

All private sector employees in the UAE must be covered by health insurance. As per the updated UAE Labour Law, effective January 2025, it is mandatory for employers to provide at least basic health insurance coverage to every employee, including domestic workers.
This requirement ensures that both UAE nationals and expatriates have access to essential healthcare services. The coverage must include:

• Basic medical consultations and treatments
• Emergency care
• Maternity benefits (where applicable)

Providing health insurance is not only a legal requirement but also an important part of employee welfare. Employers who fail to comply may face financial penalties and legal action from the authorities.

11. General Pension and Social Security Authority (GPSSA)

Emirati and GCC nationals must be registered with the General Pension and Social Security Authority (GPSSA) or the Abu Dhabi Pension Fund, with monthly contributions shared between the employer and employee.
Under Federal Decree No. 57 of 2023, effective from October 2023, the contribution rates for UAE nationals joining the private sector for the first time are as follows:

• Maximum Base Salary: AED 70,000
• Total Contribution Percentage: 26%

Contribution Breakdown:

These contributions are designed to provide a robust pension and social security structure for UAE nationals employed in the private sector.
Employers must also ensure timely payment of contributions. Any delay will result in an additional charge of 0.1% of the payable contribution amount for each day of delay, without the need for prior warning or notice from the authorities

12. Equal Opportunity and Anti-Discrimination

Federal Decree-Law No. 33 of 2021 prohibits discrimination based on gender, race, religion, nationality, or disability. Employers must ensure equal pay for equal work and promote an inclusive, respectful workplace.

13. Data Protection and Confidentiality

Under Federal Decree-Law No. 45 of 2021, employers must manage employee data responsibly, maintaining confidentiality and obtaining consent where required.

14. Termination and Notice Compliance

Employers and employees must adhere to contractual notice periods, which typically range between 30 and 90 days as mentioned in the employment contracts.

Key Requirements:

• Enforcement Limit: The employer cannot enforce the employee to work beyond this stipulated notice period.
• Handover: The employee should ensure that their work is completely handed over during the stipulated notice period.
• Due Process: All terminations must follow due process, with documentation and final settlements completed within the legal timeframe.

HLB HAMT’s Expertise in UAE Labour Law Compliance

With over 25 years of expertise in HR and labour compliance, HLB HAMT supports businesses across the UAE in meeting all regulatory requirements through:

• Comprehensive Compliance Reviews: Assessing HR policies, employment contracts, and payroll systems to ensure full alignment with UAE labour laws.
• Regulatory Updates: Keeping your organisation informed of the latest amendments and compliance obligations.
• HR Audits: Conducting detailed audits to identify risks and implement corrective actions before issues arise.
• Documentation Support: Preparing and reviewing employment contracts, policies, and records to maintain legal accuracy.
• Implementation Guidance: Assisting in applying compliant practices related to working hours, leave policies, and termination procedures.
• Practical Advisory: Offering strategic recommendations to strengthen compliance and enhance operational efficiency.

Speak to our HR Advisory team today to ensure your business remains compliant, protected, and ready for the future.

 

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