UAE Labour Law 2026: Key Updates for Employees & Employers

The UAE Labour Law was significantly overhauled in 2022 (Federal Decree-Law No. 33 of 2021, effective February 2022), and 2026 brings further refinements. If you're an employee or employer in the UAE, understanding these rules is essential.

This guide covers the current state of UAE Labour Law as of 2026, with a focus on recent updates and practical implications.

Types of Employment Contracts

Unlimited Contract (Removed in 2022 — All Are Now Limited)

Since February 2022, all new UAE employment contracts must be limited (fixed-term) contracts with a maximum duration of 3 years (renewable). Unlimited contracts (open-ended) are no longer issued for new employees.

For employees on pre-2022 unlimited contracts: These remain valid but can be converted to limited contracts by mutual agreement.

Limited Contract (Fixed-Term)

Key 2026 updates:
- Probation can now be extended once (total max 9 months) for certain technical roles
- Notice period can be up to 90 days for senior management (previously 30 days max)

Working Hours & Overtime

Standard Working Hours

Overtime Rules

Maximum overtime: 2 hours per day (unless emergency) / 144 hours per 3 weeks

Annual Leave

Key Rules (2026 Update)

• Leave can be split into up to 3 parts (previously 2)
• Unused leave: Can be carried forward (max 1 year) or paid in cash
• Employer cannot force employee to take leave during notice period
• Annual leave does not include public holidays (separate)

Sick Leave

2026 update: The "cooling-off period" for chronic conditions has been reduced. Previously, you needed a 30-day recovery period before returning to work. Now: 15 days.

Medical certificate requirement:
- 1–2 days: Not required (self-certification)
- 3+ days: Medical certificate from approved provider

End of Service Gratuity (2026 Update)

Calculation

Important: The calculation is based on your basic salary only (not including allowances, housing, transport, etc.). This is a common point of confusion — many employees expect gratuity on their total package, but it's only on basic salary.

Gratuity Cap

2026 Update: Gratuity for Part-Year

If you resign mid-year, gratuity is now calculated proportionally. Previously, some employers refused to pay for partial years. Now it's mandatory:

Example: Employee works 2 years and 4 months.
- Year 1–2: 21 days/year on basic salary
- 4 months: 21 × (4/12) = 7 days on basic salary
- Total: 21 + 21 + 7 = 49 days' basic salary

Termination Rules

Notice Period

Termination Without Notice (Employee)

Employer can terminate without notice for:
- Fraud or breach of trust
- Assault or verbal abuse
- Violation of safety rules
- Absent without leave for 20+ non-consecutive days or 7+ consecutive days
- Disclosure of company secrets

2026 update: The list of "gross misconduct" grounds has been expanded to include:
- Harassment (sexual, racial, bullying)
- Violation of data protection rules
- Refusal to follow reasonable COVID-19/health protocols

Termination Without Notice (Employer)

Employee can resign without notice if employer:
- Fails to pay wages for 60+ days
- Assaults or harasses the employee
- Violates the employment contract terms
- Forces employee to work in dangerous conditions

Non-Compete Clauses (2026 Update)

Non-compete clauses in UAE contracts have been significantly restricted:

The 2026 update makes many existing non-compete clauses unenforceable. If your contract has a non-compete, check if it meets the new criteria. If it doesn't, it's likely void.

Resignation & Job Change

Changing Jobs During Contract

2026 update: The "work permit transfer fee" previously charged by some free zones has been abolished. Employees can now change employers without paying AED 5,000–10,000 in transfer fees.

Discrimination & Harassment

The 2022 labour law explicitly prohibits:

• Discrimination based on race, gender, religion, nationality, or disability
• Sexual harassment in the workplace
• Bullying and verbal abuse

2026 update: Employers must now have a written anti-harassment policy. Companies with 50+ employees must appoint a "Dignity at Work" officer to handle complaints.

Penalties: AED 50,000–200,000 fine for employers found guilty of discrimination or harassment.

Health Insurance & Other Benefits

Mandatory Benefits (2026)

Practical Tips for Employees

1. Keep a copy of your contract — Signed by both parties. This is your primary protection.
2. Know your basic salary — Gratuity is calculated on basic salary, not total package
3. Check your non-compete — If it's more than 1 year or covers the entire UAE, it's likely unenforceable after the 2026 update
4. Track your leave balance — Unused leave must be paid or carried forward
5. Report violations — File complaints with MOHRE (Ministry of Human Resources and Emiratisation): 600-590-000 (toll-free)

Practical Tips for Employers

1. Update employment contracts — Ensure they comply with 2026 amendments (especially non-compete and probation provisions)
2. Implement anti-harassment policies — Required by law for companies with 50+ employees
3. Maintain proper records — Employment contracts, salary records, leave records (must be kept for 2 years after termination)
4. Calculate gratuity correctly — Only on basic salary, with proportional calculations for partial years
5. Provide timely end-of-service benefits — Must be paid within 14 days of termination

Where to Get Help

Final Note

The UAE Labour Law is designed to balance the interests of employees and employers. In general, the law is favorable to employees on issues like gratuity, notice periods, and sick leave, while giving employers flexibility in hiring, probation, and termination.

The key for both parties: document everything in writing, understand the contract terms, and don't hesitate to seek professional advice when disputes arise. The UAE's labour courts and MOHRE are efficient and fair — but they work best when you have proper documentation.