Employee Benefits under UAE Labour Law (Guide for Mandatory & Optional Benefits in the UAE)

The UAE Labour Law, enforced by MOHRE, outlines optional and mandatory employee benefits for workers. Read about each benefit and how to design a cost effective benefit package to maximize your employees’ wellbeing.

Understanding employee benefits in the UAE

The United Arab Emirates has made progress in making it to a global economic hub. Part of their recent progress includes signing into law guidelines for how employment works in practice.

Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relationships governs employment in the UAE private sector, including the core mandatory benefits and leave entitlements discussed in this guide.

Companies that align with labour laws while providing additional perks gain a competitive edge in the UAE market.

Understanding employee needs is the foundation of an effective UAE employee benefits strategy.

If you need to learn more about termination of employment, we outline the notice period requirements and how to ensure compliance in this article.

Eligibility Criteria: Who is entitled to UAE employee benefits?

Private-sector workers are generally covered by the UAE Labour Law, including part-time workers. However, some entitlements for part-time workers, such as annual leave, are calculated on a pro-rata basis according to actual working hours and the employment contract

Workers must have a valid work permit issued by Ministry of Human Resources and Emiratisation (MOHRE) to qualify.

The following employees are excluded from employee benefits under Labour Law:

• Government employees
• Armed forces, police and security
• Domestic workers have a separate amendment that applies

Domestic workers (i.e. housemaids, nannies, drivers, cooks, gardeners, or other employees directly employed by households) are governed separately under Federal Decree-Law No. 9 of 2022 Concerning Domestic Workers and are entitled to:

1. Timely and fair payment of wages
2. Weekly rest and working conditions (including 1 paid rest day per week)
3. 30 days paid annual leave per year
4. Up to 30 days sick leave per year (First 15 days – full pay; next 15 days – half pay)
5. Medical insurance and access to necessary treatment
6. Employer must provide suitable accommodation and meals
7. End of service gratuity – at least 14 days of wage per year of service
8. Airfare payment for return ticket to home country at end of contract, except if worker transfers to another employer

Likewise, domestic workers are protected from employer withholding passport, forcing work without consent, and being charged recruitment fees by the employer.

Mandatory employee benefits in UAE under UAE Labour Law

The UAE government mandates essential employee benefits to protect workers’ rights and ensure fair treatment.

Employees are entitled to payment of wages agreed on in the employment contract. A wage computation includes basic salary, allowances, and benefits in kind as contractually defined. According to the Wage Protection System, wages must always be paid on time and in AED (unless otherwise agreed upon).

Employers should regularly review employment policies to ensure they comply with updated regulations.

End of service gratuity (also known as End of service benefits or EOSB)

EOSB or End of service benefits is a mandatory statutory benefit under the federal law. It is generally a lump sum payment paid at the end of employment. This calculation mostly applies to expatriate workers or non-UAE nationals completing more than a year of service.

UAE nationals do not receive gratuity but are enrolled in mandatory state pension schemes wherein both employer and employee contribute monthly to the General Pension and Social Security Authority (GPSSA).

To calculate gratuity accurately, make sure to calculate based on basic wage only (excluding allowances). The formula is as follows:

1. Employees with one to five years of service are entitled to 21 days of salary for each year worked as gratuity.
2. Employees who have served more than five years are entitled to 30 days of salary for each year of service beyond the fifth year.

The total gratuity payment may not exceed the equivalent of two years’ salary. The end of service benefits must be pro-rated for partial years after first year. Unpaid leave periods are excluded from calculation.

Employers must ensure that end-of-service gratuity payments are made within 14 days of the end of the employee’s contract.

Paid leave entitlements: annual leave, sick leave, maternity leave, parental, compassionate, study leave

Under UAE Labour Law, certain scenarios can trigger employees receiving paid leave benefits. Paid leaves are legally required and all companies must remain compliant.

Carry forward rules

Under the Labour Law, leaves must be taken in the year it is earned. It is not designed to accumulate indefinitely.

Employers may control the scheduling with at least 1 month notice to the employees. Meaning, if employees don’t use their leaves, employers can require them to take it.

Alternatively, unused annual leaves may be carried forward to next year with employer approval based on company policy.

Monetization of leave

In certain cases, employees may also agree with the employer to receive a cash allowance instead of taking the carried-forward annual leave, if company policy allows. However, it is mandatory that an employee must be paid for their unused annual leave balance upon termination of employment.

Maternity and sick leave are an exception. If unused, it expires and there is no payout as it is considered a conditional benefit. Parental, compassionate, and study leaves if unused are forfeited and cannot be carried forward as they are event-based entitlements and not accrued benefits.

Unlawful Termination

Most employers are reasonable and compliant, but in the event that any employer removes, reduces or denies statutory leave rights, it becomes a violation of the UAE Labour Law.

Article 47 allows compensation of up to three months’ wage where termination is due to the worker filing a serious complaint with MOHRE or a lawsuit whose validity is proven.

Working hours, overtime and rest days (What human resources must document)

Standard shift schedule in the UAE include 8 hours a day with a total of 48 working hours per week. Maximum allowable overtime is at 2 hours per day (exceptions apply).

Overtime pay is calculated at +25% of normal hourly wage for standard overtime and at least +50% of normal hourly pay if working between 10:00 PM and 4:00 AM. Graveyard shifts may be excluded from night overtime premium.

Rest days are also mandated weekly with employees entitled to minimum 1 paid rest day.

These are typically outlined in the contract signed upon hiring.

Health insurance Coverage requirements

Health insurance requirements in the UAE are regulated at the emirate level. Employers are required to provide health insurance in Abu Dhabi and Dubai, while requirements may differ in other emirates.

In Dubai, employees’ health insurance is governed by Dubai Health Insurance Law and includes minimum basic coverage plan.

In Abu Dhabi, employers must provide for employees and cover employee’s spouse and up to 3 children under specific conditions.

Additionally, employee safety must be prioritized with workplace safety measures and occupational health protections.

In the event of work injuries and occupational related disease, employer must cover treatment costs until recovery and compensate wages of full salary (up to 6 months) and half of salary for the next 6 months if needed.

If an employee dies due to work related causes (i.e. death caused by work injury or occupational disease), employers must pay to the employee’s family an equivalent of 24 months of the employee’s basic wage before death.

Legal limits require minimum AED 18,000 and maximum of AED 200,000. The family is also entitled separately the end of service gratuity, any unpaid wages or other financial dues, to be paid within 10 days of death (or knowledge of death).

The family may also request for the employer to cover costs of preparing and transporting the body to their home country.

Visa, Emirates ID, and repatriation obligations (often missed in benefits checklists)

Employers in the UAE must cover the costs of visa sponsorship, Emirates ID, and repatriation to the employee’s home country.

In the UAE, both part time and full time employees must hold valid visa work permits. Only full time roles typically require employer sponsored residency visas.

Part time employees may work for multiple employers under separate permits, and may already be sponsored under a different visa (i.e. family or student visa).

Before employment, the employer must obtain work permits. Any recruitment cost cannot be charged to the employees. Delays may happen due to incomplete or incorrect documentation especially during approvals from MOHRE and immigration authorities.

The process is as follows:

1. Work permit gets approved. Full time employees must be able to get full work permit and residency visa.
2. Entry permit / visa is issued to the employee
3. Medical test is a must
4. Emirates ID application
5. Residency stamping

Any failure in one step can block the entire chain of events.

If an employer fails to settle employee dues, this may result in working visas being indefinitely postponed or cancelled and delay in renewals.

Repatriation (return travel) must be covered by the employer unless the employee joins a different company or termination happens due to employee’s fault.

Other Mandatory Benefits

While these are implied as part of proper business conduct, it bodes well to be mindful of the following as well:

1. Written Employment contract and documentation
   • Must clearly define wage and benefits
   • Must maintain employee records for at least 2 years after termination
2. Equality and non-discrimination
   • Employers must ensure no discrimination based on:
     • Race
     • Gender
     • Religion
     • Nationality
     • Disability

UAE Employee Benefits by jurisdiction: Quick Comparison on Mainland vs Free Zones (including DIFC/ ADGM)

The Federal Labour Law applies broadly to mainland and generally Free Zone private companies. Some categories (such as government employees and domestic workers) may be excluded or governed separately by Cabinet decisions or specific regulations..

Benefits for mainland and most Free Zones are broadly aligned under UAE Labour Law, but specific zones may introduce additional rules or differences in implementation. Certain jurisdictions – Dubai International Finance Centre (DIFC) and Abu Dhabi Global Market (ADGM) – operate under their own employment laws.

Health-insurance requirements are regulated at the emirate level. Employer-sponsored health insurance is mandatory in Dubai and Abu Dhabi, while requirements may differ in other emirates. In Abu Dhabi, employer coverage also extends to eligible dependents under the applicable rules.

Below are the key differences in employee benefits:

Type of Benefit	Mainland & most free zones	DIFC	ADGM
End of service gratuity	Mandatory gratuity treated as lump sum payment upon termination	Mandatory funded savings scheme where employer contributes monthly into investment fund. Employee accumulates invested end of service benefits, meaning there is no large lump sum payment upon exit.	Allows traditional gratuity or workplace savings scheme as an optional alternative
Leave entitlements	Annual: 30 days / year Sick: 90 days with tiering, as explained Maternity: 60 days	Annual: 20 working days Sick: Typically 60 working days Maternity: ~65 working days (varies by structure and more aligned with international HR standards	Annual: 20 working days Sick: 60 working days, structured as: -> First 10 – full pay -> Next 20 – 50% pay -> Remaining 30 – unpaid Requires medical certificate Maternity: 65 days (first 33 days – fully paid; remaining 32 – 50% payment)
Contracts	Fixed term required	Flexible	Flexible
Dispute resolution	MOHRE + UAE competent courts	DIFC Courts	ADGM Courts

Common optional employee benefits in UAE (competitive perks)

The UAE’s competitive labour market has led companies to enhance their employee benefits programs.

Employers may provide benefits beyond minimum legal requirements. These other benefits aim to enhance employee satisfaction and better financial wellbeing for part time and full time employees. Employers may implement bonuses, allowances, incentive schemes, wellness programs and more flexible work life balance.

Housing allowances, transport, education, mobile, and cost-of-living (AED examples)

1. Housing allowances can be paid monthly or directly in the employer provided accommodation. This is usually the largest component of total compensation.Ranges could be anywhere from (in monthly AED):
   • Junior roles: AED 2,000 to 5,000
   • Mid level: AED 5,000 to 12,000
   • Senior roles: AED 15,000-40,000+
   Housing allowances are typically structured as 30 to 50% of base salary.
2. Transportation allowance This could be fixed monthly allowance or access to company provided transport. Employees can also reimburse fuel or rideshare costs.
3. Education allowances
   Children’s education allowances are common among competitive employers in sectors such as finance, law, and technology in the UAE.Employers cover tuition fees for employees’ children, and usually done for expat senior hires. Multinational companies may send the beneficiaries to international schools, with certain cap on the amount and number of children covered.
4. Mobile or communication allowancesCommon in sales roles, leadership roles or client facing positions. This can range anywhere from AED 200 to 1,000 / month
5. Cost of living allowances (COLA)Additional allowance to offset inflation or high living costs. This can be built into housing or transport allowances instead.

The UAE Labour Law recognizes family as both spouse and children. In the event the employee has no spouse or children, family dependent benefits (i.e. health insurance, education benefits, family relocation support) don’t apply.

Bonuses and incentives: performance, sign-on, retention, and sales commissions

Wage is defined as basic salary + allowances + benefits in kind. Bonuses are not automatically part of the computation, and only become part of the wage if contractually defined.

Bonuses may become enforceable if clearly defined in employment contracts or formal company policies, subject to stated conditions.

Bonuses may also depend on continuous service and paid on designated payout date after minimum service period is fulfilled.

Bonuses and commissions are excluded from gratuity calculations.

Employers may introduce savings or incentive-linked schemes as part of their broader retention structure. However, any deductions from an employee’s wage to fund such programs must be made with the employee’s prior written consent.

This ensures that participation in benefit or investment programs remains voluntary and compliant with UAE Labour Law.

Family coverage and wellness programs: for employees’ children and other dependents (insurance), EAP, gym memberships, preventive care

Employers offer family health insurance coverage, especially for multinationals, finance, law and tech sectors, and senior roles or expat packages.

Wellness programs are customized to cultural preferences and integrate holistic health solutions in the UAE.

Fitness memberships for example could be gym memberships or fitness reimbursements given yearly.

Mental health support (Employee Assistance Programs or EAPs, therapy or counseling access, mental health days as per company policy) may be offered. Mental health days can also fall under sick day if medically certified.

Preventive care programs such as annual health screenings, wellness stipends and vaccination programs are considered as lifestyle and community-focused. These offerings are usually tailored to workforce demographics and reflect a broader shift toward holistic employee wellbeing in UAE.

Time-off enhancements: additional leave, flexible work, remote/hybrid policies as recommended by Human Resources

Companies are increasingly recognizing that work-life balance enhances employee well-being and drives productivity.

The UAE outlines work models as full time, part time, temporary, and flexible work arrangements.

Flexible work policies have shifted from optional perks to essential workplace strategies in the UAE and vary based on business needs.

Remote work (wherein work is performed outside the company premises) is also allowed if agreed with the employer.

Company policy should define core office hours, expected availability and overtime rules, especially if employee is working internationally. Additionally, it helps to be clear on output expectations, KPIs and reporting structure. The law may not explicitly define guidelines, but it is best practice operationally to be on the same page on performance tracking.

HR must also define who shoulders the equipment and expenses to operate (i.e. laptop, internet allowance, office setup allowance may also be defined separately).

How to design a compliant employee benefits package in UAE (B2B checklist)

Employees who feel valued are less likely to seek opportunities elsewhere in the UAE labour market.

A strong benefits package improves retention, enhances employer branding, and ensures compliance with UAE labour laws. HR teams should conduct regular surveys, feedback sessions, and engagement studies to identify preferred benefits.

Step 1. Start with a non negotiable baseline

First step to designing an employee benefits package is to ensure all packages meet minimum statutory entitlements, including:

• Wages and Timely payment (basic salary, allowances)
• End of service benefits (EOSB)
• Annual, sick and statutory leave
• Shift schedule or workday hours + overtime rules
• Health insurance for employees, and in Abu Dhabi potentially for eligible dependents under the applicable local health-insurance rules

These are minimum legal rights and cannot be reduced or waived.

Step 2. Clearly structure compensation and avoid ambiguity

1. Employment contracts must explicitly define other benefits (housing, transport, insurance, bonuses). Document if optional benefits are conditional or discretionary.
2. Specify in writing the bonus type (performance, commission, retention); its eligibility criteria; payment timing and other conditions for bonuses to become enforceable

Step 3. Benefits policy and documentation to ensure compliance

1. Ensure lawful payroll practices
   • Employers must pay wages on time through compliant systems
   • Any deductions require written employee consent (for schemes or programs)
2. Maintain proper documentation and records
   • Employers must maintain employee files for at least 2 years after termination
   • Documents should include:
     1. Contracts
     2. Payroll records
     3. Leave records
     4. Benefit policies
3. Implement clear HR policies and enforce it consistently.
4. Avoid common compliance mistakes.
   • Not documenting bonus structures
   • Treating discretionary bonuses as guaranteed
   • Withholding earned commissions
   • Making salary deductions without consent
   • Misclassifying allowances vs basic monthly salary
5. Lastly, continuously assess employee needs through surveys, feedback sessions and engagement studies.

Impact of the Wage Protection System on Private Sector Payroll

Employers in the UAE are required to pay salaries through the Wage Protection System (WPS), ensuring timely electronic payments. Under UAE Labour Law, wages must be paid in accordance with Ministry of Human Resources & Emiratisation (MOHRE) approved systems. Wages reported through WPS must reflect the full pay structure and be verified on behalf of private sector employees.

The Wage Protection System significantly impacts how employee wellbeing is structured. The system forces full transparency and employees can easily prove underpayment, missing allowances and delayed wages. Benefits become more enforceable in the event of disputes.

We outline in further detail Wage Protection System here.

First time registering? For a step-by-step guide on setting up WPS, see our detailed resource here.

Costs and budgeting for Employee Benefits in the UAE

Understanding the core cost structure

Employee benefits can be divided into:

1. Mandatory costs
   • Basic salary
   • End of service gratuity
   • Leave pay
   • Medical care / insurance obligations
2. Discretionary costs
   • Allowances, benefits and bonuses
   • Wellness programs

Employers must budget for both fixed statutory liabilities and variable, market driven benefits. Budgets must also include future “liabilities” based on salary over a length of time, and EOSB that accrues over continuous service.

Outsource vs in-house

In house management allows for greater control and customization, but it requires dedicated HR with strong compliance knowledge.

Outsourcing can streamline administration, reduce compliance risks and access local expertise. This is particularly useful for private sector employers, global companies entering UAE and free zone companies expanding.

A hybrid approach is to manage the core strategy in house and outsource execution to local providers. This maximizes global consistency with local compliance.

What is the risk of not streamlining administration of HR packages?

Poor administration can lead to overpayments, missed accruals and penalties. Best practice is to centralize payroll and benefits tracking, and automating calculations and reporting.

Final checklist for Mainland, Free Zones, DIFC and ADGM

Make sure that:

• Valid employment contract in place
• Wage clearly defined (basic vs allowances)
• Leave entitlements tracked and granted
• End of service benefits accrual calculated correctly
• Wages paid on time via approved systems
• Employee records maintained (for at least 2 years)
• Medical care and safety obligations fulfilled
• Repatriation obligations documented

Jurisdiction-specific considerations

1. Confirm applicable legal framework:
   • Mainland / most Free Zones → UAE Labour Law
   • DIFC / ADGM → independent employment laws
2. Adjust:
   • Benefits structure
   • EOSB or savings schemes
   • Dispute resolution processes accordingly

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Frequently Asked Questions (FAQs) on Employee Benefits