For employers looking to operate in the United Arab Emirates (UAE), establishing a business and hiring local talent can be complex. As an employer, you'll need to navigate the intricacies of acquiring necessary licenses and work permits, crafting legally sound employment contracts, considering real estate options for your operations, and ensuring compliance with payroll and tax regulations. 

An EOR in the United Arab Emirates, like Gloroots, can help you easily navigate these challenges and quickly expand your business.

If you're wondering about the role of an EOR or a Professional Employer Organization (PEO) in the UAE and whether your business needs one, here are the answers to your questions.

Businesses partner with a UAE Employer of Record for  two reasons: 1) To avoid setting up an entity and 2) To hire local talent in adherence with compliance.

And rightly so, because incorporating your business in the UAE can cost you anywhere between AED 17,000 and AED 50,000. These costs can be averted with an EOR. When partnering with an EOR, employers can use the EOR’s local entity to onboard local talent, negating the need for new entities. 

Secondly, UAE’s labor laws are vastly different from their US and UK counterparts. For example, the UAE standard workweek is Sunday to Thursday, with a maximum of 48 hours per week, different from the UK's Monday to Friday standard. Unlike many countries where gratuity payments are longer, UAE labor laws mandate that employers must offer gratuity pay for employees who complete one year or more of continuous service.

Navigating these complex laws can stump even experienced global employers, leading them to penalties and fines. Particularly, employers who hire contractors, without the knowledge of UAE’s labor laws, can fall into the employee misclassification trap. 

A UAE-based EOR can eliminate these hurdles and help you handle payroll, administer employee benefits, report expenses, maintain employee leave records, and manage timesheets.

The pricing structure for UAE EOR/PEO services usually involves a monthly fee per employee or a percentage of the employee's salary. Extra charges may apply for additional services or customization.

Gloroots offers you EOR services for fixed fee. Such a predictable structure can help you plan your hiring budgets better. With gloroots, there are no hidden fees, whatsoever.  

Key Metrics For Foreign Employers 

The UAE ranks 22nd globally for talent competence in INSEAD’s Global Talent Competitiveness Report. The country is touted to be a leading provider of technology skills in the AMEA region. 

The table below depicts key indicators from the Global Talent Competitiveness Report for employers wishing to hire from the UAE.

Source: The Global Talent Competitiveness Index 2023

Through the Gloroots’ Recrew platform, you can discover amazing talent in the UAE.

Employee misclassification pertains to the incorrect labelling of workers as independent contractors and exempting them from specific benefits, when they should legally be considered employees with rights. 

Engaging a PEO/EOR like Gloroots effectively mitigates these risks. We  guarantee adherence to labor laws, precise worker classification, streamlined payroll management, and employee benefit provisions, enabling employers to focus on their core business activities. When you delegate these tasks to seasoned experts, you ensure a smooth and compliant hiring journey through the UAE labor landscape.

The Federal Decree Law No. 33 of 2021 Regarding the Regulation of Employment Relationship and its amendments, known as the ‘UAE Labour law’, governs the labour rights of employees in the private sector. 

The United Arab Emirates (UAE) strongly emphasizes businesses to maintain fair employment standards to protect the rights and well-being of both employers and employees. The country has established comprehensive employment laws to ensure compliance and worker protection.

Employment contract

It is mandatory for all employers to provide their employees with a written employment agreement that includes essential details such as:

1. The names of both the employee and the employer(s)
2. The effective start date of the contract
3. Wage or salary, including the duration for which it applies
4. Job description outlining the employee's role
5. Information on working hours
6. Provisions for sick leave
7. Terms related to vacation leave
8. Clauses stipulating notice periods for both parties
9. Information about any probationary period, if applicable
10. Policies related to discipline and conduct
11. Mechanisms for addressing employee grievances, and more

This contract serves as a vital document outlining the terms and conditions of employment in the UAE, ensuring clarity and fairness for both employers and employees.

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Working time

In the UAE, the standard workweek is 8 hours a day, up to 48 hours a week, from Monday to Friday. During Ramadan, there's a 2-hour reduction in daily work hours. Public sector employees work a shorter week of four and a half days

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Overtime

Overtime is extra pay for working beyond regular hours, as outlined in your contract. There are two rates: 150% for night work (9 pm - 4 am) and 125% for other overtime. If you work on Fridays, you get extra pay plus a day off, earning 150% of your regular wage.

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Public Holidays

There are 15 public holidays in total. If a public holiday falls on a weekend, the local government will decide whether to shift it to a weekday or keep it as a regular working day. Religious holidays depend on the lunar calendar and will be marked as "Tentative" until they are officially confirmed closer to the holiday date.

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Minimum Wage

In the UAE, there's no set minimum salary, but wages must cover employees' basic needs. Employers registered with the Ministry of Human Resources and Emiratisation (MoHRE) must use the 'Wages Protection System (WPS)' to pay employees on specified dates. This system transfers salaries electronically to bank accounts approved by the Central Bank of the UAE.

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Annual Leave

Workers get 30 days of paid leave every year once they've worked for a full year. If they've worked for more than 6 months but less than a year, they earn 2 days of leave for each month worked. Before employees go on their annual leave, their employer must pay their salary.

This leave is meant to be taken during the same year, unless the company has a policy that allows employees to carry over some of their leave to the next year.

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Paid Sick Leaves

Employees who have worked for three months can take paid sick leave for up to 90 days each year. They need to give a medical certificate within 48 hours of getting sick.

For the first 15 days of sickness, they receive their full salary. After that, for the next 30 days, they get half of their regular salary. Any additional sick days in the same year are unpaid (up to 90 days in total per year).

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Maternity leaves

Female employees have the right to a 60-day maternity leave. The first 45 days are paid at their full regular salary, and the remaining 15 days are paid at half their regular salary. They can choose when to start this leave, whether before or after the due date.

If an employee has a medical issue related to pregnancy or childbirth, they can take up to 45 extra days of unpaid leave as long as they provide a medical certificate.

Employers are not allowed to fire employees because of their pregnancy or because they took maternity leave.

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Paternity leaves

The UAE does not provide any extra paternity leave.

Tax and Social Security contribution

Employer Payroll Contribution

Employee Payroll Contribution

Employee Income tax

There is no tax on personal income.

Either the employer or the employee can end employment for valid reasons. This requires written notification with the appropriate notice period. Valid reasons can include issues with performance, behavior, job redundancy, financial difficulties like bankruptcy, and if the worker doesn't renew their work permit.

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Severance Pay

An employee becomes eligible for severance pay after completing a full year of service. The severance pay is calculated as follows: 

• 21 days' wage for each year worked during the first 5 years of service 
• 30 days' wage for each year beyond 5 years 
  

If the employment is less than a full year, the severance pay is prorated accordingly. For foreign employees, the severance pay is capped at two years' wage. The calculation is based on the employee's last basic wage.

In cases where the reason for termination is not recognized by UAE law, the employee may be entitled to an additional compensation of 3 months' pay. Even with recent changes in labor laws, employees who resign (provided they have worked for at least one year with the employer) are entitled to their full End of Service Gratuity (EOSG), and this also applies to employees terminated for serious misconduct.

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Notice Period

• If an employee resigns during the probation period to join another UAE-based company, they must provide a 30-day notice.
• Foreign workers leaving the UAE need to give a 14-day notice.
  

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Probation period

The probation period cannot extend beyond 6 months. While on probation, either the employer or the employee must provide a minimum notice of 14 days if they wish to terminate the employment. If an employee intends to join another company within the UAE, they are required to provide at least 30 days' notice. Furthermore, employers have the option to seek compensation from the new employer to cover the costs incurred in hiring the employee.

When hiring globally, ensuring compliance comes with its own set of battles. Employers must ensure all hiring and onboarding activities adhere to employment laws, payroll procedures, DE&I compliance, GDPR and similar data protection, etc. If you think it is hard to set up local entities and start hiring, keeping up with a dynamic compliance landscape is far harder. 

Gloroots helps you minimize all these efforts by providing a single window to manage all these tasks. Our in-house experts fully shield you from cross-border employment and payroll compliance risks. We do this by helping you generate employment contracts, on-time payments, compliant benefits, while you focus only on screening talent. 

Our promise is a stress-free global employment experience for both you and your employees.

Contact our experts today to kickstart your global hiring campaign.

Growing your team in the UAE requires making strategic hires at the right time and placing them in appropriate positions. Expanding in the UAE comes with its own set of challenges, including compliance, payroll, tax, and benefits management. At Gloroots, our global Employer of Record (EoR) service can alleviate these complexities, ensuring compliance and enabling you to concentrate on what truly matters: your employees and business expansion. Partner with us to simplify the process and succeed in the dynamic UAE market.