UAE Labour Law 2025 Exciting Key Updates: The UAE Labour Law 2025 introduces critical updates to align employment practices with international standards, digital transformation, and Emiratization initiatives. Whether you run a private company, manage HR in a free zone, or operate a multinational business, staying compliant is no longer optional.
In this guide, we’ll break down the key changes under UAE Labour Law 2025, their impact on HR, and what employers need to do right now to avoid penalties.
UAE Labour Law 2025 Exciting Key Updates for Employers
1. Unified Employment Contract System
All employers in the UAE mainland and free zones must now use the standardized digital employment contract issued through MOHRE or the respective Free Zone Authority.
Highlights:
Mandatory for all new hires
Must specify contract type: full-time, part-time, temp, or freelance
Must include job description, salary, work hours, and termination terms
Employers must update existing contracts by Q3 2025.
2. Limited Contract Only – Unlimited Contracts Phased Out
UAE Labour Law 2025 Exciting Key Updates confirms that all employment contracts must now be limited-term, renewable every 2–3 years.
Implication for HR:
All unlimited contracts must be converted
Termination rules now apply under Article 42–43 (not old laws)
3. New Gratuity Calculation Format
Gratuity is now calculated based on working days per year, not just calendar years. The law also clarifies:
Gratuity = 21 days of basic salary for the first 5 years
30 days for every additional year
No gratuity for termination under Article 44 (serious misconduct)
Pro-rata payment for incomplete final year
A new MOHRE gratuity calculator tool is available for employers.
4. Mandatory End-of-Service Insurance or Savings Plan
Companies must now enroll workers in a government-approved savings or insurance fund as an alternative to traditional gratuity.
Who is affected:
Employers with over 20 staff
Employees earning AED 4,000+
Workers with over 1 year of service
This system ensures pension-like benefits for long-term workers.
5. Emiratization Compliance Expansion
Private sector companies with 20 or more employees must now employ at least one Emirati per specific job category.
Penalties:
AED 96,000/year fine for non-compliance
Disqualification from government contracts
Visa quota freezes
Mahad HRC provides Emiratization hiring assistance.
6. New Leave Entitlements (Effective January 2025)
| Leave Type | Updated Provision |
|---|---|
| Annual Leave | 30 days/year (after 1 year of service) |
| Sick Leave | Up to 90 days (first 15 days fully paid) |
| Study Leave | 10 days for employees in accredited institutions |
| Maternity Leave | Extended to 60 days (45 fully paid + 15 half paid) |
| Parental Leave | 5 days (for both parents, paid) |
All leave balances must be recorded on digital payroll or HRMS systems.
7. Flexible Work Models Legally Recognized
The UAE Labour Law 2025 Exciting Key Updates officially supports:
Hybrid contracts
Flexible hours and 4-day workweeks (pilot programs)
MOHRE permits are required for part-time and freelance workers.
8. Enhanced Termination Protections for Employees
Termination rules now include:
Mandatory written justification for dismissal
Notice period (30 days minimum)
Ban on dismissal during maternity or sick leave
Employees can file complaints online via MOHRE smart app within 30 days of termination.
Penalties for Non-Compliance (2025)
UAE Labour Law 2025 Exciting Key Updates:
| Violation | Fine |
|---|---|
| Hiring without valid contract | AED 20,000 |
| Failure to register worker with MOHRE | AED 10,000 |
| Delay in salary via WPS | AED 50,000 |
| Violation of Emiratization quotas | AED 96,000 |
| Arbitrary termination | Compensation up to 3 months’ salary |
How Employers Must Respond in 2025
UAE Labour Law 2025 Exciting Key Updates:
- Audit existing contracts and update to limited format
- Shift to MOHRE unified contract portal
- Update gratuity and leave calculations
- Register staff in savings/insurance plans
- Train HR team on Emiratization and sick leave changes
- Use digital HRMS or payroll software for compliance
Mahad HRC – HR Compliance Experts for UAE Labour Law 2025
UAE Labour Law 2025 Exciting Key Updates:
At Mahad HRC, we help companies across the UAE:
Review and update employment contracts
Stay compliant with new labour law requirements
Provide Emiratization hiring solutions
Build compliant HR policies and onboarding frameworks
Handle employee disputes, termination, and settlements legally