The UAE’s employment framework continues to evolve at pace. All
private-sector employment is governed by Federal Decree Law
No. 33 of 2021, as amended by Federal Decree Law No. 20 of
2023 and Federal Decree Law No. 9 of 2024.
The key change
Open-ended employment contracts are no longer legally recognised.
Every private-sector employment relationship regulated by the
Ministry of Human Resources and Emiratisation (MoHRE) must use a
fixed-term contract.
Only fixed-term contracts are permitted
What the change entails:
- Open-ended employment contracts no longer hold legal force.
- All private-sector relationships regulated by MoHRE must use fixed-term contracts.
- No statutory three-year maximum cap applies to fixed-term contracts.
What employers must do:
- Ensure every employment contract is on fixed terms.
- Review existing open-ended contracts and convert them fully to the fixed-term format.
- Confirm all contracts meet the current statutory requirements.
Wage Protection System upgrade
What employers must do:
- Complete all salary payments by the first day of each Gregorian month.
- Meet the 85% WPS compliance threshold.
- Update salary calculation systems and related processes.
Extended limitation period for claims
What the change entails:
- The limitation period for labour claims extends from one year to two years.
- The clock now starts on the date the employment relationship ends, rather than the date the right became due.
What employers must do:
- Retain employment records for at least two years after the relationship ends.
- Strictly fulfil every statutory obligation related to employment.
The New Civil Code, effective 1 June 2026
Federal Decree Law No. 25 of 2025 replaces the 1985 Civil Code. Key
employment-related provisions include the pre-contractual duty of good
faith under Article 121, the statutory disclosure obligation under
Article 122, and a strict review mechanism for settlement agreements.
Employers must uphold good faith in negotiations, disclose core
information to employees, and ensure settlement agreements follow
standardised procedures and contain fair terms.
Core provisions of the Labour Law
| Provision | Requirement |
|---|---|
| Probation period (Article 9) | May not exceed six months. Employers give 14 days’ written notice to dismiss; employees moving to another employer give 30 days’ notice; employees leaving the UAE give 14 days’ notice. |
| Notice period | The standard period is 30 days; a separate contractual agreement takes precedence. Immediate dismissal is available only for serious misconduct. |
| End-of-service gratuity (Article 51) | Calculated on basic salary alone: 21 days’ salary for each of the first five years, 30 days’ salary per year from the sixth. Capped at two years’ basic salary. Final payments settle within 14 days of the contract ending. |
| Annual leave (Article 29) | 30 days’ paid annual leave after one year of service; pro-rated paid leave for employees who have worked six to twelve months. |
Practical guidance for employers
Immediate actions
- Review all employment contracts to confirm they are in fixed-term format.
- Complete the conversion of existing open-ended contracts.
- Update employee handbooks to reflect the current requirements.
- Upgrade payroll systems to accommodate the WPS changes.
Long-term compliance
- Pay salaries on time, every month.
- Retain employment records for the full two years after employment ends.
- Keep written records of all employment-related decisions.
- Take professional advice where compliance support is needed.
Conclusion
UAE labour law continues to evolve quickly, and employers must track
the rules to stay compliant. The immediate checklist is short:
complete the conversion from open-ended to fixed-term contracts,
upgrade payroll systems for WPS, review employee handbooks and
internal policies, and confirm compliance with every statutory
requirement.
If you need support reviewing your contracts or policies,
contact our team.
