03Jun

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 TypeUpdated Provision
Annual Leave30 days/year (after 1 year of service)
Sick LeaveUp to 90 days (first 15 days fully paid)
Study Leave10 days for employees in accredited institutions
Maternity LeaveExtended to 60 days (45 fully paid + 15 half paid)
Parental Leave5 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:

  • Remote work

  • 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:

ViolationFine
Hiring without valid contractAED 20,000
Failure to register worker with MOHREAED 10,000
Delay in salary via WPSAED 50,000
Violation of Emiratization quotasAED 96,000
Arbitrary terminationCompensation up to 3 months’ salary
  • 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

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