Hiring Employees in the UAE

The UAE presents attractive employment opportunities for companies seeking to expand into its dynamic market environment. The nation's regulatory framework has evolved to support diverse business operations while protecting both worker and employer rights. Through its labor policies, the UAE government seeks to promote both local workforce participation through Emiratisation programs and international recruitment.

Contributing Advisor

Maria Kotova

Regional Director, Middle East

This article explores the crucial hiring guidelines, legal obligations, and recommended practices for companies recruiting staff in the UAE's mainland and free zone areas. Given the complexity of employment regulations, organizations are encouraged to seek guidance from HR specialists or legal advisors to maintain compliance and ensure fair employment practices.

What is Emiratisation?

Emiratisation is a strategic initiative implemented by the United Arab Emirates (UAE) to integrate Emirati nationals into the private sector workforce. It serves as a cornerstone of the country’s broader economic and workforce development strategy, aiming to reduce dependency on expatriate labor while equipping Emiratis with the skills and opportunities needed to contribute effectively to the nation’s economy.

Current Emiratisation requirements

At its core, Emiratisation law mandates that companies operating in the UAE meet specific hiring quotas for Emirati nationals. These quotas vary depending on the size, nature, and sector of the business. In addition to the quantitative requirements, the law emphasizes qualitative outcomes, urging employers to invest in upskilling Emirati hires and creating pathways for career advancement.

Mandatory employment quotas based on company size and sector. Under current requirements:

Finance sector

• Banks must achieve 30 percent Emiratisation in skilled positions with 4 percent annual increase
• Insurance companies require 30 percent Emiratisation with 5 percent annual increase

Healthcare Sector

• Private healthcare facilities: 10 percent overall Emiratisation requirement
• Specialized medical positions often receive exemptions
• Administrative/management roles: 20-25 percent Emiratisation requirement

Technology & Innovation Sector

• Free zone companies historically exempt from quotas
• 2 percent quota for companies with 50+ employees

Retail & Trade Sector

• Applies to companies with 50+ workers
• 2 percent annual Emiratisation rate required for skilled positions
• Target: 10 percent Emiratisation by 2026

To ensure adherence, the MOHRE requires businesses to regularly report their Emiratisation progress. Non-compliance can result in penalties, including fines and restrictions on future government contracts. Conversely, companies that exceed their targets may qualify for rewards such as subsidies or preferential treatment in public tenders. Regular audits and a centralized reporting system ensure transparency and accountability, aligning corporate practices with national workforce objectives.

Employment contracts

The UAE's employment framework has undergone significant modernization, establishing fixed-term contracts as the mandatory standard across all jurisdictions. This shift represents a fundamental change in how employment relationships are structured in the country.

The UAE Labour Law now exclusively recognizes fixed-term contracts for mainland operations, marking a decisive shift from the previous system. Essential contract elements must include:

• Position and workplace details
• Contract commencement and duration
• Compensation package breakdown
• Work schedule specifications
• Leave allowances
• Notice period requirements
• Probation terms (if applicable)
• Contract termination protocols

Free Zone Specifications

The DIFC and ADGM maintain distinct employment regulations while adhering to fixed-term contract principles:

• No restrictions on minimum or maximum duration
• Enhanced flexibility in contract structuring
• Written documentation requirement
• Comprehensive detail inclusion covering:
  • Participant identification
  • Employment start date
  • Role description
  • Compensation structure
  • Workplace location
  • Leave entitlements
  • Termination notices requirements

Probationary period

Mainland UAE

• Maximum duration: 6 months
• Mandatory contractual inclusion
• Extension prohibition beyond initial period
• Termination protocols:
  • Employer: 14-day written notice requirement
  • Employee joining UAE employer: 30-day notice
  • Employee leaving UAE: 14-day notice
  • Compensation option in lieu of notice

Free Zone

DIFC Specifics:

• Six-month maximum probation
• Duration cap at 50 percent of fixed-term contract length
• Focus on proportional probation periods

ADGM Framework:

• Maintains six-month maximum alignment
• Consistency with broader UAE standards
• Clear probation parameters

Employment patterns

The framework accommodates diverse employment arrangements:

• Full-time positions
• Part-time roles
• Temporary assignments
• Flexible work arrangements

Hiring process for Emiratis

Hiring Emirati nationals involves a structured approach aligned with UAE labor laws and Emiratisation policies. Employers must ensure compliance with legal requirements and adopt strategies to attract and retain local talent.

The UAE job market for Emiratis is shaped by government incentives, a growing emphasis on knowledge-based industries, and evolving career aspirations among the local population. While sectors such as banking, insurance, and technology remain focal points for Emiratisation, many Emiratis are seeking opportunities in emerging fields like renewable energy and digital innovation. Employers should align recruitment efforts with these trends to attract qualified candidates.

Inclusive job descriptions play a pivotal role in engaging Emirati candidates. Employers should:

• Avoid jargon and emphasize clear, culturally relevant language.
• Highlight career development opportunities and benefits tailored to Emiratis, such as work-life balance and training programs.
• Design workplace environments that respect Emirati traditions and values, such as accommodating prayer breaks and traditional dress codes where applicable.

Nafis and similar platforms serve as essential resources for employers looking to hire Emirati talent. These initiatives offer job boards, matchmaking services, and access to training programs. Leveraging such platforms not only simplifies the recruitment process but also demonstrates a company’s commitment to national workforce objectives.

Key steps in the hiring process

Employers should use platforms such as Nafis and other local job portals to reach Emirati talent effectively. These platforms are designed to connect businesses with qualified Emiratis and often feature tools for meeting Emiratisation quotas.

Recruitment strategies

To attract Emirati employees, consider the following strategies:

• Collaborate with universities and vocational institutions to identify and nurture emerging talent.
• Showcase your company’s commitment to Emiratisation in job postings, emphasizing opportunities for leadership and skill development.
• Attend career fairs and Emirati-focused recruitment events to engage directly with potential candidates.

When interviewing Emirati candidates, it is essential to approach the process with cultural sensitivity. Best practices include:

• Demonstrating respect for local customs and values during the interview process.
• Ensuring that interview questions reflect an understanding of Emirati culture and aspirations.
• Highlighting the company’s initiatives for integrating and developing Emirati employees.

Hiring foreign employees in the UAE

The UAE is a global hub that attracts a significant number of expatriate workers. However, hiring foreign employees requires careful navigation of labor laws and immigration requirements. Employers must adhere to strict guidelines set forth by the Ministry of Human Resources and Emiratization (MOHRE) to ensure compliance and streamline the hiring process.

• Employers are responsible for sponsoring foreign employees' visas and securing work permits. The process begins with obtaining approval from MOHRE, demonstrating the necessity of hiring a foreign worker for a specific role. Companies operating within UAE free zones may also need to adhere to office space-related visa quotas, typically requiring a minimum space allocation per employee.
• Before the foreign employee arrives in the UAE, the employer applies for an entry visa. Upon approval, the employee can legally enter the country. For employees already in the UAE on a different visa type, a "change of status" application is required to align their visa status with employment regulations.
• Prospective employees must undergo a mandatory medical examination to confirm they are free from communicable diseases. Once cleared, they proceed with Emirates ID registration, which involves biometric data collection and serves as their official identification within the UAE.
• Employers and employees sign a labor contract outlining terms of employment, including job roles, salary, and benefits. This contract must be filed with MOHRE within 14 days of the employee’s arrival or visa status change. Contracts are typically written in both Arabic and English, ensuring compliance and clarity.
• Following the completion of the initial steps, the employer finalizes the residence visa process, allowing the employee to legally reside in the UAE. This is a critical step, as the residence visa is required for accessing essential services like banking and housing.

Employers bear the full cost of processing work permits and visas, including medical examinations and Emirates ID applications.

Employers are also responsible for ensuring timely renewals to maintain compliance. Hiring foreign employees also involves adhering to broader labor standards, such as ensuring fair treatment, offering competitive benefits, and fostering an inclusive workplace. Employers must remain vigilant about classification laws to avoid misclassifying workers, which can lead to penalties.

Compliance with Emiratisation quotas

A monthly fine of AED 6,000 per unfilled position applies to private sector companies that miss their quota requirements. This penalty, introduced in January 2023, represents a substantial increase from previous years and demonstrates the government's strengthened resolve in enforcing nationalization policies.

Beyond direct financial penalties, non-compliant companies encounter operational hurdles that can severely restrict their business activities. These include:

• Limited access to government services
• Restricted ability to obtain new work permits
• Reduced chances of winning government tenders
• Higher fees for various business transactions
• Potential limitations on business expansion plans

Strategic benefits of compliance

Conversely, companies that successfully meet or exceed their Emiratisation targets gain access to a suite of advantages that can provide a significant competitive edge. The UAE government has implemented a tiered reward system that recognizes and incentivizes exemplary compliance:

First-tier benefits include:

• Priority in government contracting opportunities
• Reduced fees for government services
• Expedited processing of various business transactions
• Enhanced status in government supplier classifications

Companies achieving exceptional Emiratisation rates may qualify for additional incentives, such as:

• Access to preferential financing rates from government-backed institutions
• Recognition through excellence awards and certifications
• Simplified access to premium government services
• Enhanced business licensing benefits

Leveraging government support and resources

Tax obligations for employers

The United Arab Emirates maintains a relatively straightforward tax framework for employment-related obligations. While there is no personal income tax, employers must comply with several key requirements when hiring and maintaining their workforce.

Employment-related taxes and contributions

For UAE National Employees

• Pension Fund Contributions:
• Employers must contribute 12.5 percent of the employee's pensionable salary
• Employees contribute 5 percent of their pensionable salary
• The government contributes 2.5 percent
• Mandatory registration with the General Pension and Social Security Authority (GPSSA)
• Monthly contributions must be paid within 15 days of the following month

For Expatriate Employees

• No mandatory pension contributions required
• End of Service Benefits (EOSB) serve as a retirement benefit:
• 21 days basic salary per year for the first 5 years of service
• 30 days basic salary per year for each additional year
• Maximum EOSB capped at 2 years' salary
• Must be calculated and provisioned for in company accounts

Insurance and healthcare obligations

Mandatory health insurance for all employees where the premium costs must be borne by the employer with minimum coverage requirements vary by emirate. Work injury insurance is mandatory. It covers workplace accidents and occupational diseases where the premium costs are the employer's responsibility, and the coverage must meet UAE Labor Law requirements.

Payroll processing and corporate tax implications

The UAE mandates all employers to process payroll through the Wage Protection System (WPS), an electronic salary transfer system designed to ensure timely and accurate wage payments. Employers must maintain a minimum compliance rate of 80 percent and transfer salaries within 10 days of their due date through this system.

From a corporate tax perspective, the UAE offers favorable treatment of employment-related expenses, with all reasonable salary and wage expenses being tax-deductible.

This includes not only basic salaries but also end of service benefits upon payment, insurance premiums, employee training and development costs, and standard employment benefits such as housing allowances. The WPS system's detailed salary breakdowns serve the dual purpose of ensuring employee protection while providing clear documentation for corporate tax deductions, making it easier for employers to substantiate their employment-related tax claims.

Employers should work closely with HR consultants and tax advisors to ensure full compliance with all employment-related tax obligations, particularly during the hiring process and ongoing employment relationship. Regular audits of employment-related tax compliance are recommended to avoid penalties and maintain good standing with UAE authorities.