Companies which aim to do business in the UAE and individuals who intend to work in the country will encounter the need to deal with certain important key points regarding the duties and obligations on labor and social security. In fact, awareness of such matters is essential to be in compliance with the current relevant regulations in the UAE.
Labor Law Considerations in the UAE
On a general note, regarding working hours, Article 65 of the UAE Labor law identifies a working day comprising of 8 hours per day or 48 hours per week as standard working hours. However, working hours may be increased to 9 hours if approval is obtained from the MoHRE (Ministry of Human Resources & Emiratisation).
Speaking of overtime, these represent the hours of work that exceed standard working hours and remuneration for employees shall be increased from between 25% to 50% of the hourly wage in cases in which such overtime work occurs after 9pm.
In the event that an employee has to work overtime on Fridays, he/she will be paid an increased level of remuneration of more than 50 percent of the hourly wage.
As of January 1st, 2022, with the Circular No. (18) 2021 on the new official working system of the Federal Authority for Government Human Resources (FAHR), the UAE federal government decided to innovate working hours in order to adapt to the schedules of other countries. In fact, previously the working week was from Sunday to Thursday, with the government now adopting to a four and a half-day working week. Hence, employees work eight hours, from 7.30 am to 3.30 pm from Monday to Thursday, and from 7.30 am to 12.00 pm on Fridays, with Saturdays and Sundays the official weekends for the federal government sector.
Moreover, employees are entitled for paid leave during the following 8 public holidays:
- Hijri New Year – 1 day;
- New Year (Gregorian calendar) – 1 day;
- Eid Al Fitr – 2 days;
- Waqfa day and Eid Al Adha – 3 days;
- Prophet Mohammed’s birthday – 1 day;
- Isra and Miraj or the Ascension Day – 1 day;
- Martyr's Day – 1 day;
- National Day – 1 day.
In addition, each employee will have 2 days per month of leave if they have accrued 6 months of employment and 30 days of annual leave if they have accrued 1 year of employment. Special leave may also be approved without pay for a maximum of 30 days.
On the other hand, an employee may not enjoy more than 90 days per year of sick leave and will only be paid in full for the first 15 days, then half of their wages for the following 30 days and no payment shall be provided for the remaining 45 days.
Furthermore, in the UAE, the minimum wage is not regulated uniformly; therefore, it will depend on the area in which the employee is working.
The Wages Protection System (“WPS”) is a key step to guarantee and safeguard the rights of workers, and to form trust between a company and its employees. WPS is an electronic salary transfer system that allows institutions to pay workers’ wages via banks, bureau de change, and financial institutions approved and authorized to provide such service.
The system, developed by the Central Bank of the UAE, allows the Ministry of Labour to create a database that records wage payments in the private sector to guarantee the timely and full payment of agreed upon wages. The WPS covers all institutions registered with the Ministry across all sectors and industries and will benefit different categories of labour. Employees can contact MoHRE service “eNetwasal” for any concerns or complaints regarding their salary.
Social Security in the UAE
Both employers and employees in the UAE shall be aware of the main features of the regulatory system concerning social security contributions.
Firstly, it shall be noted that mandatory social security contributions only apply to nationals of the Gulf Cooperation Councils (“GCC”), among which are the United Arab Emirates, Saudi Arabia, Qatar, Oman, Kuwait, and Bahrain. Both employers and employees must make contributions to the General Pension and Social Security Authority. Another important point for reference is that employees in the UAE which are not GCC nationals are not subject to the mandatory social security contributions and the employer shall be responsible for withholding and remitting employee social security contributions.
For UAE employees, the contributions are calculated at a rate of 20% of the gross salary and are applicable to employees in both mainland UAE companies as well as companies registered in Free Zones.
The contributions are split as follows:
- 5% by the employer;
- 5% by the employee;
- 5% by the Government.
In the Emirate of Abu Dhabi, the contributions are split as follows:
- 15% by the employer;
- 5% by the employee;
- 6% by the Government.
Finally, other GCC nationals (excluding UAE nationals), who work in the UAE, shall contribute to social security in accordance with the social security regulations of their respective countries.
D'Andrea & Partners Legal Counsel and PHC Advisory Tax & Accounting (companies of DP Group) offer full-scale legal compliance, tax advisory support and consultancy to businesses willing to or already conducting business both in mainland UAE and the Free Zones. For more information or for any questions, please feel free to contact us at email@example.com.