The United Arab Emirates, also known as the UAE, is a major economic force in the Middle East and is well-known for its highly developed infrastructure and recognized diversity. It is also well-known as a business-friendly nation that welcomes foreign investments and labour.
Representing the fifth largest economy in the Middle East, the UAE’s GDP is projected to reach US$501 billion (AED 1.84 trillion) in 2022.
The petroleum and natural gas sectors provide the UAE’s economy with its primary sources of income. Tourism is one of the UAE’s main non-oil revenue streams, and the country’s booming services industry helps to diversify its economy. There are about $350 billion value of ongoing construction projects around the country.
Government taxes and payroll in the United Arab Emirates
Employers’ expenses
No federal income tax laws for general business are enforced in the United Arab Emirates. Every Emirate has passed an income tax decree; however, only foreign banks and oil firms can implement the regulations.
Contributions from employees
The UAE does not have any enacted personal income tax laws. This indicates that there aren’t any obligations for individual tax reporting or registration. Employers must contribute to employee pension plans; however, this is a topic we shall address later in the guide.
Contributions to Social Security
Only citizens of the United Arab Emirates are eligible to contribute to social security. These contributions will need to be made by the company and the employee. The following are the rates:
- Employer: 12.5 percent of the worker’s weekly pay
- Workers – 5%
- 2.5% for government.
In Abu Dhabi, these rates are different, with the following contribution rates:
- Employer: 15% of
- Workers – 5%
- Political – 6%
Monthly deductions for employee contributions are made from the employee’s pay. Payment must be made using the UAE Funds Transfer System by the 15th of the subsequent month. A 10% late payment fee is applicable.
United Arab Emirates minimum retirement age
Pensions are guaranteed to employees starting at age 50.
United Arab Emirates minimum wage
Because the UAE Labour Law does not specify a fundamental compensation percentage, there is currently no wage minimum in the country. Nonetheless, standard procedure stipulates that the base pay is around 60% of the gross compensation, with 40% going toward allowances.
Working Hours of UAE
The normal workweek in the United Arab Emirates is Sunday through Thursday, while some companies are open six days a week and close on Fridays.
But starting on February 2, 2022, the United Arab Emirates’ new labour law will no longer require companies to provide Fridays as rest days. Rest days can now be imposed on any given day of the week with mutual consent from all parties.
A Monday-to-Friday week of work (with an additional half-day on Fridays) is one of the other modifications that apply to all government employees. Although the private sector does not already operate like this, several businesses are reportedly planning to switch to a Monday through Friday work schedule.
Regular business hours are 8 a.m. to 1 p.m., with a resumption at 4 p.m. (or later if the temperature drops) and a continuation until 7 p.m.
Benefits for employees in the United Arab Emirates
Required perks
Employees in the United Arab Emirates must register with the national government pension plan and regularly contribute to it. The pension plans of the nations that comprise the Gulf Cooperation Council—Saudi Arabia, Kuwait, Qatar, Bahrain, and Oman—apply to all foreign workers employed in the United Arab Emirates.
Employers are expected to contribute 20% of an employee’s pay toward a pension. The pension contribution is computed against the required minimum and maximum salary amounts of AED 1,000 and AED 50,000, respectively, for these contributions.
Additional advantages
A thorough grasp of the UAE’s economics and cultural norms is helpful when it involves offering benefits to employees so that you may provide them with something truly worthwhile. In addition to meeting the demands of your employees, your benefits package should offer you a competitive edge in the job market.
You can differentiate your business by providing a range of extra perks, such as:
- Performance-based prizes
- Availability of mental health counseling and support
- Courses for training and development
- Services for financial advisory
- Health and well-being incidents
- Leave options offered in the United Arab Emirates
Yearly vacation: The following benefits are accorded to employees:
- If they have worked for a period exceeding six months but less than a year continuously, they will receive two days off each month.
- If they work for more than a year without stopping, they will receive at least 30 vacation days annually.
Typically, annual leave is computed using a calendar month instead of working days.
Employers are urged to revise any policies that restrict leave carryover, per the New 2022 Labour Law, which may force employees to use all their vacation time in the relevant annual leave year.
Unwell depart: Within two days, employees must notify their employer if they are ill or injured and unable to work.
During their probationary term, employees in the United Arab Emirates are not eligible for sick pay. However, during three months, sick leave becomes available as follows:
- The first fifteen days’ full pay
- Half-pay for the ensuing thirty days
For more than thirty days, sick leave must be taken without pay. A worker isn’t entitled to sick pay if their misconduct—such as binge drinking—directly causes their illness. Employees must present a formal medical certificate as proof of their sickness.
Employees may leave their jobs while on sick leave as long as their resignation has a doctor’s approval. In this scenario, companies must pay the employee’s full salary until the completion of the 45-day sick leave period.
Employers are not allowed to fire employees while on sick or annual vacation unless they cannot return to work after using up all their available sick leave. In this case, the employee is entitled to a whole gratuity and end-of-service benefits. They won’t get paid for the days after their leave ends when they fail to return to work.
Employers can end an employee’s employment agreement if the worker fails to return to work within a week of the scheduled return date.
Parental and maternal leaves: In the United Arab Emirates, maternity leave is valid for 50 calendar days. These are the maternity pay rates:
- (At least forty-five days of full salary)
- Pay only half for the next fifteen days.
Workers are also entitled to maternity leave if they miscarry after six months of pregnancy, if the child dies after birth, or if they experience a stillbirth. The vacation will be taken as previously mentioned.
An employee has the right to a further thirty days of leave after giving birth to a child who has a handicap or sickness. If needed, this extra 30 days of unpaid vacation may be taken.
After their maternity leave ends, workers can take an additional 45 days of unpaid leave.
Nursing employees are allowed two half-hour breaks each day for nursing for six months after the baby is born. These time slots are considered working hours and shouldn’t be deducted from pay. The New 2022 Labour Law prohibits businesses from firing workers for being pregnant or on maternity leave.
Benevolent Leave: Compassionate leave is defined as follows in the United Arab Emirates:
- Five days in the occurrence that a spouse passes away
- Three days if a parent, sibling, kid, grandchild, or grandparent passes away.
Study Away: Workers with over two years of experience are eligible for 10 days of paid study leave annually. They can take exams thanks to this leave. To be eligible for this leave, they must be connected to an authorized UAE educational institution.
Holidays observed by the United Arab Emirates
These national holidays are observed in the Yemen:
- January 1st
- Eid al-Fitr, which is observed over five days.
- The Day of Arafat
- Eid al-Adha, which is observed over three days.
- The Islamic Calendar
- The Birthday of Prophet Muhammad
- Day of Commemoration
- National Day, which is observed over two days.
Luring Skilled Individuals to the United Arab Emirates
The UAE is a great place for business expansion because of its sophisticated corporate culture, low crime rate, and cheap tax environment.
But the same variables also make the UAE an attractive market for businesses trying to attract talent. To set your company apart from competitors in the UAE, consider offering employee benefit plans that offer a distinctive experience that reflects the lucrative nature of the country’s market.
Businesses can attract the best talent in the UAE in the following ways:
- Offer chances for professional growth
According to a recent Michael Page poll, 70% of UAE citizens listed training and development as one of their top job benefits preferences.
Proficient workers are incessantly seeking avenues for expanding their knowledge, and they are inclined to associate with an organization offering professional advancement prospects. These could be in the form of one-on-one mentoring or professional development plans. All the same, employers ought to concentrate on providing prospective workers with accurate information regarding the various career paths available within the organization.
- Create regulations that support a healthy work-life balance.
The COVID-19 pandemic brought about several significant shifts in how businesses operate globally. Employee viewpoints have shifted, and as a result, employees now highly value organizations that support employee well-being and flexibility.
The Michael Page survey discovered that most UAE workers would rather work part-time from home and part-time in the office. Those who desired to work in a non-home work setting, at least in part, did so to feel more invested in their work, participate in in-person meetings, and preserve their social networks.
Organizations should provide a flexible work schedule with remote and in-person options whenever feasible.
Workplace termination in the United Arab Emirates
The New Labour Law mandates that employment relationships with employees be based on fixed-term contracts. These have a maximum three-year lifespan. Employers in the United Arab Emirates will have up to 30 days starting in February 2022 to convert employees from unlimited to limited-term contracts.
Apart from providing notice, employers are obligated to provide compensation equivalent to three months’ earnings in the event of a termination that gives rise to a legitimate claim in court.
Note Duration
The New Labour Law established the following minimum notice periods for fixed-term employment contracts:
- Thirty days if the tenure is fewer than five years
- 60 days if the service duration exceeds five years.
- Ninety days if the tenure exceeds ten years.
On the other hand, limited-term contracts do not apply these notice periods because employees can agree on an expiration date with their employer. There must be a minimum of 30 days and a maximum of 90 days throughout this time.
Probationary Time Frames
As to Article 9 of Federal Decree-Law No. (33) of 2021, the maximum legal probationary period in the United Arab Emirates is six months.
Paid Severance
Workers have the right to a bonus for the portion of the year that was cut short. This is contingent upon them serving continuously for a full year.
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In Conclusion
While the UAE offers lucrative avenues for global talent acquisition, compliance with local labour laws is paramount. Meticulous adherence is pivotal to harnessing the benefits this region offers.
At Soundlines, we stand firm to guide you through this intricate process, ensuring your talent acquisition strategy aligns seamlessly with UAE regulations. Should you require further information or assistance, please do not hesitate to contact our proficient Human Resource Expert team.
