Employer of record in the United Arab Emirates: costs, rules and how to hire

The first row is the one worth reading twice, because it can invalidate the whole arrangement rather than adjust its price.

Resolve these points before signing

Ask the provider to answer each of these against the actual role and candidate.

Federal employment contracts are for a specified, renewable term agreed by the parties. The three-year maximum printed in the original 2021 English law was removed by the 2022 amendment. Renewals count towards continuous service, and continuing to perform the contract after expiry can extend it on the same terms.

A change in an establishment's legal form does not end its existing employment contracts under Article 48. Moving a worker to a different EOR is not a reason to assume service, accrued leave or end-of-service rights disappear. Establish whether employment legally continues or ends, document any permitted transfer and settle or preserve the accrued obligations.

Check the facts behind this guide

We check selected sources monthly and review relevant changes before updating the guide, and each fact note records its source, review date and applicable period. A successful page fetch does not verify a legal claim. The 2021 law, later amendments, 2025 health-insurance expansion and 2026 wage and Emiratisation changes describe different effective periods even when reviewed on the same day.

We have not verified a current official nationwide average salary for this guide. The salary comparison note therefore explains how to compare packages without presenting the old net-pay survey as a current official benchmark.

Federal contracts are fixed-term by design, which surprises people who expect an indefinite contract to be the norm.

Write the terms before the employee starts

Use the required employment form and give both employer and employee a copy. Record the role, workplace, work pattern, salary and allowances, hours, leave, probation, contract term and exit arrangements. Arabic is the approved language under the federal law, with the worker's language added where needed, and Arabic prevails if versions differ. The terms must preserve statutory minimum rights and any better agreed benefits.

Federal employment contracts are for a specified, renewable term agreed by the parties. The three-year maximum printed in the original 2021 English law was removed by the 2022 amendment. Renewals count towards continuous service, and continuing to perform the contract after expiry can extend it on the same terms, so do not use the old cap as a current limit.

Set probation and any restrictions carefully

An employer can set probation of up to six months and must give at least 14 days of written notice to end employment during probation. A worker moving to another UAE employer generally gives at least one month of notice, while a foreign worker leaving the UAE generally gives at least 14 days. Recruitment-cost reimbursement between employers and other consequences can apply, and these rules differ from ordinary post-probation notice.

A federal non-compete needs a legitimate interest, such as access to clients or business secrets, and limits on geography, work and duration, with a maximum of two years. The employer bears the burden of proving harm, and the executive rules exclude specified employer-caused endings or breaches and employment ending during probation. A broad clause is not automatically enforceable.

Protect work product and agree additional benefits

The UAE has specific rules for work created or inventions made in employment. Employer rights depend on the work, duties, resources and agreement, and employee-invention compensation can also apply. A transfer of copyright economic rights must be written and identify the rights and scope, while moral rights are not freely assignable. For an EOR hire, check the employee-to-employer and employer-to-client arrangements instead of assuming your business owns every output.

Separate statutory entitlements from additional benefits such as enhanced medical cover, housing, transport, annual flights, schooling, bonus or extra leave. Record eligibility, limits, payment dates and what happens on termination. The federal law preserves better contractual rights, so a promised benefit cannot be removed because the statutory minimum is lower.

Check contractor status and recruitment charges

The federal rules describe freelance work as independent work through which a person earns directly by providing services, without becoming the recipient's employee. Someone working under an employer's direction for pay can instead fall within employment rules. Check the real control, work pattern and applicable permit, because calling an employee a freelancer does not settle their legal status.

The federal law prohibits charging workers recruitment and employment costs, directly or indirectly, and prohibits employers from withholding workers' official documents. Return-travel costs at the end of employment have statutory conditions and exceptions. Ask the provider to identify who pays permit, recruitment and relocation items, without treating the employee's passport as security for those costs.

Misclassification risk, and the freelance permit question

The Emirates has a genuine freelance category, which is precisely why the label gets misused. The federal rules describe freelance work as independent work through which a person earns directly by providing services, without becoming the recipient's employee, while someone working under an employer's direction for pay can instead fall within the employment rules. Source: the approved Emirati contractor-status guidance, u.ae, checked 18 September 2026.

So there are two questions rather than one, and both have to be answered. The classification question is whether the person works under your direction. The permit question is whether they hold permission for the work they are actually doing. Our own guidance puts them together: check the real control, the work pattern and the applicable permit, because calling an employee a freelancer does not settle their legal status. Source: the approved Emirati contractor-status guidance, checked 18 September 2026.

What a hirer does about it: engage a freelancer only where they are genuinely selling a service, and verify the permit rather than accepting an assurance. In a market where immigration status is tied to the employer, a classification problem and an immigration problem arrive together.

Set the payroll date and bonus terms

Record the salary frequency and due date in the contract, and for a monthly salary budget 12 regular payments each year. MOHRE-registered employers must pay on time through the Wage Protection System or another approved system, while other jurisdictions need their own payment checks. A monthly payroll convention does not excuse payment after the contractual due date.

The federal Labour Law does not establish a general thirteenth-month salary for every employee, though a bonus or additional payment can become part of the agreed package. State the amount or calculation, eligibility, payment date and treatment on joining or leaving, and include any guaranteed payment when comparing annual offers.

Deductions are restricted to the grounds and limits in Article 25, such as certain loans, overpayments, approved schemes and court orders. The combined deduction or withholding generally cannot exceed 50% of wage, and individual categories have their own lower limits. An employee's signature does not turn every proposed charge into a lawful payroll deduction.

There is no personal income tax on salary, so the employer cost question becomes a pension question, and the answer depends entirely on who the employee is.

Separate salary tax from pension and insurance

The UAE does not levy personal income tax on individuals, and the Federal Tax Authority also excludes wages from the business income used for natural-person corporate tax. That does not settle a worker's tax obligations in another country or the client company's own tax position, and pension deductions, insurance and other lawful deductions still need checking.

Confirm the pension law and contribution base

For Emiratis covered by Federal Law 57/2023, the employee contributes 11% and the employer share is 15% of the contribution salary, and for private-sector members with a contribution salary below AED 20,000 the government bears 2.5 percentage points of the employer share. The private-sector contribution base is the contractual salary, with an AED 3,000 floor and AED 70,000 ceiling. Check membership history, because a new job does not automatically move an existing member out of the older law.

GPSSA's explanation of Law 7/1999 gives an employee share of 5% and an employer share of 15%, with the government bearing 2.5 percentage points of the private-sector employer share, leaving 12.5% borne by the covered private employer. GPSSA identifies a private-sector contribution-salary ceiling of AED 50,000 under that law. Confirm the employee's registered law and base instead of applying one pension rate to every Emirati.

Abu Dhabi has its own Pension Fund rules for covered Emirati public- and private-sector employees. The announced reform sets contributions for new members at 11% employee and 15% employer, with an AED 100,000 contribution-salary ceiling, while preserving existing members' contribution treatment. Confirm the fund, joining history and registered base, because the GPSSA AED 70,000 ceiling is not a UAE-wide rule.

The GCC insurance extension system covers eligible GCC nationals working outside their home country in another GCC state. Registration and contributions follow the applicable home-country system, with limits and allocation rules for the employer's share and any difference. Ask the provider to calculate the candidate's actual scheme, because treating every non-Emirati as having no pension contributions misses GCC coverage.

Under Law 57/2023, an employer must register a covered employee with GPSSA within 30 days of joining and notify the end of service within 15 days. Contributions are paid monthly, with payment due in the first 15 days of the following month. Other pension funds and membership regimes need their own checks, and registration and contribution duties continue even when an EOR administers the payroll.

Include health cover and check ILOE

Mandatory health insurance now extends across all seven emirates. The new requirement for the five emirates outside Abu Dhabi and Dubai began on 1 January 2025, with employers arranging cover when issuing or renewing covered residence permits, while Abu Dhabi and Dubai already had their own systems. Ask for the actual policy, network, exclusions and dependent cover, because the price of one basic scheme is not a universal UAE insurance budget.

Eligible employees must subscribe to the Involuntary Loss of Employment scheme, subject to its exclusions. The published premium is AED 5 plus VAT a month for basic salary up to AED 16,000, or AED 10 plus VAT above that. Qualifying claims generally require at least 12 continuous subscription months and cover involuntary job loss rather than resignation or disciplinary dismissal. This employee subscription is separate from employer pension contributions and end-of-service benefits.

The split between basic wage and total package is the number that matters most here, because gratuity and leave payouts are calculated on the basic figure alone.

Agree basic salary and the full package

The federal law distinguishes basic wage from wage including contractual allowances and benefits. State each component clearly in the offer and payroll record. Several entitlements, including federal foreign-worker gratuity and unused leave paid on exit, use basic wage, while ordinary paid leave and notice use different wage rules. There is no single percentage split that fits every UAE employment regime.

MOHRE raised the minimum monthly wage for Emiratis in the private sector to AED 6,000 from 1 January 2026. It applied to new, renewed and amended permits and contracts, with existing covered employers given until 30 June 2026 to adjust. This is an Emirati-specific minimum, so do not apply it as a universal salary floor for every foreign hire or confuse it with pension contribution bases.

Compare role-specific gross-pay quotes that identify basic salary, housing or transport allowances, variable pay and other benefits, using the same currency, pay period and package definition. A net-pay survey or an old statistical average is not a current gross salary quote for your hire.

Build an annual hiring budget

This example assumes a full-time foreign employee outside GCC pension coverage, on a package where two thirds of the salary is basic pay.

Salary is AED 180,000 a year, and standard federal gratuity for a full qualifying year within the first five years is AED 7,000, giving AED 187,000 before health insurance, permits, EOR fees, equipment, expenses, overtime, bonuses, taxes on invoices and other exit costs. Gratuity is an accrued obligation rather than an extra monthly cash salary.

For an Emirati or GCC national, calculate the applicable pension contributions and any other end-of-service obligations separately. A DIFC or alternative savings scheme also changes this example.

Federal annual leave is counted in calendar days rather than working days, which makes 30 days sound more generous than it is in practice.

Plan working hours and rest

The general federal limit is eight normal working hours a day or 48 a week. Specific sectors, roles and work patterns have exceptions, and overtime has separate limits and pay rules. A five-day office week can be agreed, but it is not the only lawful schedule, so record the employee's actual hours, rest days and any remote-work arrangements.

A worker generally must not work more than five consecutive hours without breaks totalling at least one hour, excluded from working time. The federal law requires at least one paid weekly rest day, set by contract or work rules, and it does not require Friday for every private-sector employee. Rest-day work requires the statutory substitute rest or additional pay, and restrictions apply to consecutive rest days worked.

The executive regulation reduces normal working hours by two hours during Ramadan for workers within the federal regime. Plan the roster, client coverage and payroll around the reduced hours. Do not treat this as a rule only for employees who are fasting, or automatically apply it to a separate financial-free-zone regime.

Overtime generally cannot exceed two hours a day except for specified emergencies, and Article 19 also states a 144-hour total-work limit over three weeks. Ordinary overtime is paid using basic wage plus at least 25%, while overtime between 10 p.m. and 4 a.m. attracts at least 50%, with a shift-worker exception. These rules need to be read with the applicable working-time exemptions, and paying an overtime premium does not itself make an excessive schedule lawful.

Check leave by type

Six entitlements make up the federal floor.

A covered full-time worker receives 30 calendar days of paid annual leave for each year of service, and with more than six months but less than one year of service the entitlement is two days for each month. The federal calendar-day approach differs from DIFC's working-day rule. Leave during probation can be agreed, and part-time entitlement requires a separate calculation.

Under the executive regulation, a worker can carry forward up to half of annual leave into the following year or agree a cash allowance based on the wage at the time of entitlement. On termination, unused statutory leave is paid using basic wage. Plan leave with the required notice and preserve any better contractual entitlement, rather than erasing accrued leave because employment ends.

Covered employees are entitled to the official public holidays with full pay. If required to work, they receive a substitute day off or the normal day's wage plus at least 50% of basic wage for that day. Confirm the announced dates each year, including lunar-calendar holidays, instead of using a fixed guessed date or a universal annual-day count.

Support sickness, childbirth and family leave

After probation, covered workers can take up to 90 days of sick leave a year: the first 15 at full pay, the next 30 at half pay and the remaining 45 unpaid. They must report sickness within three working days and provide medical evidence. Paid sick leave does not ordinarily apply during probation, though unpaid leave may be granted, and work injuries and sickness arising from specified misconduct have separate rules.

Federal maternity leave is 60 days: 45 at full pay followed by 15 at half pay, and it is not conditional on completing a full year of service. The law also covers specified stillbirth and child-death situations after at least six months of pregnancy. An employer cannot dismiss or give notice because of pregnancy, maternity leave or the protected related absence.

A worker unable to return because of pregnancy or childbirth-related illness affecting her or her child can take up to 45 additional unpaid days with the required medical evidence. A child needing constant care because of illness or disability can trigger an additional 30 days at full pay and a further 30 unpaid. After returning, nursing breaks can total up to one hour a day for six months from birth. Check the medical and timing conditions for each entitlement.

A covered parent can take five paid working days of parental leave, continuously or intermittently, within six months of the child's birth. This applies to the mother or father and is separate from maternity leave. Keep the required birth evidence and record the leave as working days.

The federal entitlement is five paid days for the death of a spouse, or three for a parent, child, sibling, grandchild or grandparent, starting from the date of death, with supporting evidence required. The same provision does not create a general five-day paid marriage entitlement, so extra compassionate or marriage leave needs a separate policy or agreement.

A worker with at least two years of service who is enrolled at an approved educational institution in the UAE can take ten paid working days a year to sit exams, with the required evidence. UAE nationals also have paid national-service leave under the applicable rules. Other unpaid leave can be agreed, but it is excluded from the service calculation for end-of-service gratuity and pension contributions under the federal provision.

Keep gratuity or savings in the benefits budget

Under the standard federal rules, a full-time foreign worker with at least one year of continuous service receives 21 days of last basic wage for each of the first five years and 30 days for each later year. Part-years are proportionate after the first year, unpaid absence is excluded and the total is capped at two years of wage. Resignation does not by itself remove the entitlement. Check pension membership, other work patterns and any approved alternative savings scheme before applying this formula.

The UAE has a voluntary funded alternative to standard end-of-service gratuity for participating employers and employees. Ask whether the employer has joined, which workers are covered, how monthly contributions are handled and how earlier service is preserved. Do not charge both the standard future gratuity reserve and a replacement scheme contribution for the same obligation without checking the arrangement, and note that DIFC qualifying schemes are a separate regime.