The UAE’s Labour Law has undergone major reform in 2025.
These changes affect how employment contracts are structured, how workers can be hired, and how benefits are calculated.
For both employers and employees, understanding these updates is critical.
In this guide, Workforce Group breaks down the most important changes, what they mean for you, and how to adapt.
What Triggered the 2025 Updates
In August 2024, the UAE government issued a federal decree-law that amends the previous employment relationship rules.
The goal: to modernize the labour market, align with global work practices, and strengthen protections for both workers and employers.
Penalties for violations were made more severe, signaling stronger enforcement.
These reforms also respond to evolving workforce models, remote work, part-time roles, and contractor arrangements are now legally formalized.
Key Contract Changes
Fixed-Term Contracts
One of the biggest changes in 2025 is the mandatory use of fixed-term contracts. Employers can no longer issue unlimited-term contracts by default.
These contracts can run for up to three years, and they are renewable by mutual agreement.
Importantly, when renewing, the new contract can be the same length, shorter, or based on whatever both parties agree, giving flexibility.
Employers need to audit existing contracts and start planning for conversions where necessary. According to guidance, unlimited contracts should be converted by a set deadline
Transition from Unlimited Contracts
Existing unlimited contracts must be phased out and replaced with fixed-term ones.
Under the new articles (e.g., Articles 42–43), termination, renewal, and notice rules now apply differently.
Employers should proactively engage with their legal or HR advisors to manage this transition, and Workforce Group can assist companies in updating their employment policies.
Work Models & Flexible Employment
The law now legally recognizes modern work arrangements, reflecting the evolving UAE labor landscape.
These include:
- Remote work (work-from-home or other locations)
- Part-time contracts for employees who work fewer hours or fewer days
- Freelance, temporary, or gig work, formalized under labour law protections now
Even under these flexible models, workers retain many of the same protections as full-timers, including pay, leave, gratuity, and insurance (unless otherwise agreed)
These updates allow employers to tailor staffing to business need, while safeguarding employee rights.
Working Hours, Overtime & Rest Days
Standard working hours in the private sector are now 8 hours per day and 48 hours per week.
During Ramadan, working hours are reduced by 2 hours per day for fasting workers.
Overtime is capped: up to 2 extra hours a day.
Payment for overtime depends on timing:
- Regular overtime: +25% (or more) above base pay.
- Night shifts: special premium applies (for example, 150% for certain hours) as clarified by MoHRE guidance.
Workers must also have at least one rest day per week, and must be given a break (e.g., 1 hour after 5 continuous hours) to comply with the law.
Probation Period & Termination Rules
The maximum probation period under the new law is 6 months.
If an employer wants to terminate during probation, they must give 14 days’ notice but if the employee is moving to another UAE company, a 30-day notice may apply.
Recruitment costs (from when the employee was hired) may be recoverable or payable by the new employer under certain conditions.
Termination rules are more clearly defined under updated articles. Employers need to review and align past procedures with the new legal standards.
Leave & Family Benefits
Maternity Leave
Maternity leave has increased to 60 days: 45 days fully paid, and 15 days at half pay.
This provides stronger protection for mothers while balancing employer costs.
Paternity Leave
The law introduces 5 days of paid paternity leave for fathers.
This supports gender balance and allows families to adjust after the birth of a child.
Study Leave
Workers who have completed two years of service are now eligible for 10 days of paid study leave per year.
This encourages continuous learning and career development in the workforce.
End-of-Service Benefits & Gratuity
The gratuity (end-of-service benefit) formula has been revised.
Key changes:
- Gratuity accrues earlier: after just 6 months of service.
- Pro-rata calculation for employees who leave before completing a full year.
- For the first five years: 21 days of basic salary per year; beyond that: 30 days per year.
- No gratuity in cases of serious misconduct under Article 44.
- Pro-rating applies if the final year is not completed in full.
End-of-Service Insurance / Savings Plan
Employers (especially with larger headcounts) are now required to offer government-approved savings or insurance plans instead of the traditional lump-sum gratuity for certain workers.
This gives workers more security and helps companies better manage long-term financial obligations.
Salary, Payslips & Wage Protection System
The Wage Protection System (WPS) is strengthened under the 2025 law.
Employers must issue digital payslips with itemised breakdowns:
- Basic salary
- Allowances
- Overtime pay
- Deductions
- Leave balances
This transparency ensures that workers clearly understand their pay, and helps both parties avoid disputes.
Dispute Resolution & Labor Claims
Employees now have up to 2 years from termination to file labour claims.
If the Ministry of Human Resources and Emiratisation issues a decision on a dispute, the case can be escalated to the Court of First Instance (rather than Court of Appeal) for unresolved claims.
This shift simplifies and accelerates the legal process for many workers.
Penalties & Compliance for Employers
The cost of non-compliance has gone up significantly. Employers violating the law may face fines between AED 100,000 and AED 1,000,000.
Criminal penalties apply for serious offences, such as fictitious recruitment or fake Emiratisation.
Business centres and recruitment agencies are under stricter scrutiny.
These rules emphasize accountability, and employers should prioritize compliance and correct any contract issues before deadlines.
Reliable Manpower with Workforce Group
Workforce Group provides legally sponsored, trained, and properly classified manpower for all your staffing needs. From recruitment and deployment, we make staffing simple and hassle-free. Contact Workforce Group today to streamline your manpower supply and stay ahead in a changing labor landscape.
Conclusion
The UAE Labour Law 2025 marks a significant shift toward a more modern, flexible, and protective employment framework.
These changes affect every part of employment contract types, leave, pay, dispute resolution, and benefits.
For businesses, staying compliant is not optional: the penalties are real, and the cost of delay can be high.
For workers, the new law strengthens rights and provides more clarity.
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