What is UAE New Labor Law – Employment Guide 2025
The labor law UAE 2021 has brought about many changes in the labor landscape of the United Arab Emirates (UAE). The new law represents a significant departure from the antiquated Federal Law No. 8 of 1980, and is designed to create a fair, flexible and competitive workforce.
As at September 2025, such a law still structures the employment relationship, and the work-life, of millions of employees and employers in the private sector.
Whether you are an expatriate employee managing end-of-service entitlements or an employer observing compliance, all must understand the law to protect themselves and their rights and obligations.
This complete guide explains everything you need to know about the UAE New Labor Law – from contract conversions to how to calculate gratuity, workplace protections and practical advice.
We’ll decode complicated provisions into terms that make sense, so you can stay ahead in a fast-moving regulatory environment.
In addition to demonstrating the global standards it upholds through its laws and regulations, the UAE aims to lure the best talent and ensure fair employment and working conditions supervised by the Ministry of Human Resources and Emiratization (MOHRE).
What is the UAE New Labor Law?
The UAE New Labor Law, also known as Federal Decree-Law No. 33 of 2021, was in effect from February 2, 2022, having replaced the former labour law in place since 1980. The new draft law is a major legislative rewrite of UAE employment laws and arguably the most radical overhaul since the original UAE Labour Law of 1980.
According to the government, the new law had three primary aims: to bring the UAE’s employment regulations up to date with global best practice; to introduce international labor standards that appeal to high-skilled labor; and to drive full alignment with the strategic view of the future of work in the Emirates of the Ministry of Human Resources and Emiratisation (MOHRE).
This watershed piece of legislation brings about fundamental amendments to all aspects of the employment, from the nature of contracts and computation of gratuity to working environment and grievance settlement mechanisms. The new legislation demonstrates the UAE’s objective to balance a more flexible, harmonized and globally competitive labour market with the protection of workers.
Timeline & Contract Transition
The roll-out of the new labor law took place in a phased manner to enable smooth transition for the businesses and workers. The most important cut-off date was the 2023 February deadline, after which all open-ended contracts needed conversion to a fixed-term contract or renewal for that entire framework.
Key Timeline Milestones:
- February 2, 2022: New Labor Law officially takes effect
- February 2, 2023: Final deadline for converting unlimited contracts
- Ongoing: All new contracts must comply with new law provisions
| Aspect | Old Law (Federal Law No. 8 of 1980) | New Law (Federal Decree-Law No. 33 of 2021) |
|---|---|---|
| Contract Types | Allowed both limited (fixed-term, max 5 years) and unlimited (indefinite) contracts. Unlimited were common for stability. | Only limited-term contracts permitted. Unlimited contracts phased out by Feb 2023; all must convert to fixed-term (up to 3 years, renewable). |
| Contract Duration | Limited: 1-5 years; Unlimited: No end date, terminable with notice. | Fixed-term only: 1-3 years standard, with clear renewal clauses. Automatic renewal if not specified. |
| Gratuity Eligibility | Eligible after 1 year for unlimited; prorated for limited. No cap on total. | Eligible after 1 year continuous service. Capped at 2 years’ basic salary. Reduced for early resignation. |
| Termination Notice | 1-3 months for unlimited; as per contract for limited. | 30-90 days for limited contracts; employer can terminate without notice only for gross misconduct. |
| Probation Period | Up to 6 months, non-renewable. | Up to 6 months; can be extended by agreement, but counts toward service for gratuity. |
This table emphasizes that the new statute emphasizes transparency and fairness, cutting down the arguments over what is a reasonable indefinite duration. For those employers who failed to meet the D-day of 2023, there were audits and fines to apply, but amnesty programmes were also available to help them move. Full compliance is expected by latest 2025 and digital platforms (such as the MOHRE app) will support with contracts registrations.
The switch also has ramifications for gratuity accrual, as service under old unlimited contracts is being counted toward the new cap. Employees must check their contract status through the MOHRE portal so the benefits can be applied without any delay.
Gratuity Rules Explained
Gratuity, known as “mukafaat” in Arabic, represents one of the most significant benefits under UAE labor law. The new legislation maintains the fundamental principle while introducing important refinements to calculation methods and payment timelines.
Eligibility and Service Duration
Employees become eligible for gratuity after completing one full year of continuous service. The gratuity calculation depends on the employee’s length of service and salary structure at the time of contract termination.
Service Duration Categories:
- 1-5 years of service: 21 days of basic salary for each year
- Beyond 5 years: 30 days of basic salary for each year exceeding five years
- Maximum cap: Total gratuity cannot exceed two years of the employee’s basic salary
Calculation Formulas
For employees with 1-5 years of service: Gratuity = (Basic Salary ÷ 30) × 21 × Number of Years
For employees with more than 5 years:
- First 5 years: (Basic Salary ÷ 30) × 21 × 5
- Additional years: (Basic Salary ÷ 30) × 30 × (Total Years – 5)
- Combined total (subject to 2-year salary cap)
Example Calculation: An employee with AED 10,000 basic salary working for 7 years:
- First 5 years: (10,000 ÷ 30) × 21 × 5 = AED 35,000
- Additional 2 years: (10,000 ÷ 30) × 30 × 2 = AED 20,000
- Total gratuity: AED 55,000
Payment Timeline Obligations
The new law establishes strict payment deadlines that employers must observe:
- Standard termination: Gratuity must be paid within 14 days of contract termination
- Death of employee: Payment to beneficiaries within 10 days
- Resignation: Payment within 14 days, provided proper notice was given
- Immediate termination: Payment timeline may vary based on circumstances
Employers who fail to meet these deadlines may face penalties and additional compensation requirements.
Related: What is Limited vs Unlimited Contracts in UAE 2025
Contract Differences & Leaving Scenarios
The elimination of unlimited contracts represents one of the most fundamental changes in the new labor law. Understanding how this affects gratuity entitlements is crucial for both employers and employees.
Limited vs Unlimited Contracts Breakdown
Limited Contracts (New Standard):
- Maximum duration: 3 years
- Automatic expiry unless renewed
- Gratuity paid regardless of who initiates termination
- Greater flexibility for both parties
Unlimited Contracts (Phased Out):
- Contracts existing before February 2022
- Must be converted by February 2023
- Different gratuity rules for resignation vs termination
Gratuity on Resignation vs Termination
Employee Resignation:
- Full gratuity after 5+ years of service
- 50% gratuity for 1-5 years of service (under old unlimited contracts)
- 100% gratuity under new limited contracts regardless of duration
Employer Termination:
- Full gratuity in most circumstances
- Reduced or no gratuity for disciplinary termination
- Enhanced protections against unfair dismissal
Contract Completion:
- Full gratuity upon natural expiry of limited contract
- No penalty for either party
Step-by-Step Example Formulas
Scenario 1: Employee with 3 years service, AED 8,000 basic salary
- Service period: 3 years (within 1-5 year bracket)
- Calculation: (8,000 ÷ 30) × 21 × 3
- Daily salary: AED 266.67
- Gratuity per year: AED 5,600
- Total gratuity: AED 16,800
Scenario 2: Employee with 8 years service, AED 15,000 basic salary
- First 5 years: (15,000 ÷ 30) × 21 × 5 = AED 52,500
- Additional 3 years: (15,000 ÷ 30) × 30 × 3 = AED 45,000
- Total calculated: AED 97,500
- Cap check: 2 × AED 15,000 × 12 = AED 360,000
- Final gratuity: AED 97,500 (under cap)
Workplace Protections & Non-Discrimination
The new labor law significantly strengthens workplace protections, establishing comprehensive anti-discrimination measures that align with international human rights standards.
Equal Pay Mandates
The legislation explicitly prohibits wage discrimination based on gender, nationality, or other protected characteristics. Employers must ensure equal compensation for equal work, with transparent salary structures that can withstand regulatory scrutiny.
Key Equal Pay Provisions:
- Gender pay equality for similar roles
- Transparent promotion criteria
- Regular salary review processes
- Protection against retaliation for pay equity complaints
Comprehensive Protection Categories
Pregnancy and Maternity:
- Enhanced maternity leave provisions
- Protection against dismissal during pregnancy
- Flexible working arrangements for new mothers
- Breastfeeding break entitlements
Religious and Cultural Protection:
- Respect for religious practices and observances
- Accommodation of prayer times and religious holidays
- Protection against religious discrimination
- Cultural sensitivity training requirements
Disability Accommodation:
- Reasonable workplace adjustments
- Accessible facilities and equipment
- Equal opportunity employment practices
- Support for employees with disabilities
Article 14: Anti-Harassment and Disciplinary Framework
Article 14 establishes a robust framework for preventing and addressing workplace harassment, with clear procedures for investigation and resolution.
Harassment Prevention Measures:
- Zero-tolerance policies required
- Regular training programs
- Confidential reporting mechanisms
- Swift investigation procedures
- Appropriate disciplinary actions
Disciplinary Law Compliance:
- Progressive discipline systems
- Due process requirements
- Employee rights during investigations
- Appeal mechanisms
- Documentation standards
Special Rules for Domestic/Household Workers
The new labor law extends significant protections to domestic and household workers, a category previously governed by separate regulations.
Gratuity Calculation for Domestic Workers
Domestic workers are entitled to gratuity calculated at 21 days of salary for each year of service, with no distinction between different service periods.
Calculation Formula: Gratuity = (Monthly Salary ÷ 30) × 21 × Number of Years
Example for Domestic Worker:
- Monthly salary: AED 2,000
- Service period: 4 years
- Daily salary: AED 66.67
- Annual gratuity: AED 1,400
- Total gratuity: AED 5,600
Conditions for Gratuity Denial
Employers may withhold gratuity from domestic workers only under specific circumstances:
Valid Reasons for Withholding:
- Resignation without proper notice (30 days required)
- Termination for serious misconduct
- Breach of confidentiality agreements
- Damage to employer property through negligence
- Abandonment of duties without justification
Invalid Reasons:
- Personal conflicts with employer family
- Minor performance issues
- Cultural or language barriers
- Employer convenience or cost-cutting
When Gratuity Can Be Withheld & Employee Rights
The new law provides specific guidelines on when employers may legitimately withhold gratuity payments, while strengthening employee rights to challenge unfair withholding.
Employer-Justified Reasons for Withholding
Serious Misconduct Categories:
- Theft or fraud
- Disclosure of confidential information
- Physical assault or threatening behavior
- Persistent unauthorized absence
- Serious safety violations
Documentation Requirements:
- Written incident reports
- Investigation records
- Employee response documentation
- Witness statements where applicable
- HR review and approval
Filing Complaints & Labor Court Procedures
Employees who believe their gratuity has been unfairly withheld have several recourse options:
Initial Steps:
- Internal company grievance procedures
- MOHRE complaint filing
- Mediation services
- Labor court proceedings if necessary
Required Documentation:
- Employment contract
- Salary certificates
- Termination letter
- Evidence of service duration
- Communication records with employer
Timeline for Complaints:
- MOHRE complaints: Within 1 year of termination
- Labor court cases: Within 2 years of termination
- Mediation requests: No specific time limit
Using Gratuity Calculators (with Caveats)
Digital gratuity calculators have become popular tools for estimating end-of-service benefits, but users must understand their limitations and proper application.
How to Use Calculators Effectively
Best Practices:
- Use updated calculators reflecting 2022 law changes
- Input accurate basic salary (excluding allowances)
- Calculate exact service duration in years and months
- Verify results against official formulas
- Consider individual contract terms
Data Input Requirements:
- Basic monthly salary
- Start date of employment
- End date (actual or projected)
- Contract type (limited/unlimited if transitional)
Important Disclaimers and Limitations
Calculator Limitations:
- Estimates only, not legally binding
- May not reflect individual contract variations
- Cannot account for disciplinary actions
- Don’t consider company-specific policies
- May not include recent law updates
Legal Binding Considerations:
- Official calculations supersede calculator results
- Contract terms may provide additional benefits
- MOHRE guidelines take precedence
- Professional legal advice recommended for disputes
Recommended Calculator Resources
Primary Resources:
- DDA (Dubai Development Authority) official calculator
- MOHRE website calculation tools
- Licensed HR consultancy calculators
Third-Party Tools:
- Major bank employment calculators
- Legal firm estimation tools
- Professional services firm calculators
