Labour & Employment Contract Drafting Advisory

Since Federal Decree-Law No. 33 of 2021 came into force on 2 February 2022, the old distinction between 'limited' and 'unlimited' contracts was replaced with a single standard: all private-sector employment contracts are now unlimited-term contracts, with a fixed-term option capped at a maximum of three years and renewable by mutual agreement. Employers still operating on the pre-2022 contract format need those contracts reviewed and converted.

Yes. Federal Decree-Law No. 33 of 2021 requires every employment relationship to be documented in a written contract, and mainland employers must register that contract with MOHRE (free zone employers register through their free zone authority, with DIFC and ADGM operating their own distinct employment regulation frameworks). A verbal-only arrangement, or an unregistered contract, leaves both employer and employee without the clear documentary record that a MOHRE dispute resolution process relies on.

Under Article 51 of Federal Decree-Law No. 33 of 2021, an employee who completes one year or more of continuous service is entitled to end-of-service gratuity calculated on the basic salary (excluding allowances) at 21 days' basic salary for each of the first five years of service, and 30 days' basic salary for each year of service beyond five years, pro-rated for partial years, up to a cap of two years' total salary. The calculation applies to both resignation and termination scenarios, subject to specific provisions that may affect entitlement in cases of termination for cause.

The probation period is capped at six months under Federal Decree-Law No. 33 of 2021. During probation, either party may terminate the contract, though specific notice requirements apply depending on whether the employee is moving to another UAE employer or leaving the UAE. We draft probation clauses to reflect the current statutory maximum and the applicable notice mechanics.

The Labour Law requires a notice period of not less than 30 days and not more than 90 days, as agreed between the parties and stated in the employment contract. Either party — employer or employee — must generally give the agreed notice period, though payment in lieu of notice is a recognised alternative in many circumstances. The specific notice period, and whether payment in lieu is available, should be explicitly stated in the contract rather than left ambiguous.

Yes, but only within statutory limits. Federal Decree-Law No. 33 of 2021 permits non-compete clauses restricting an employee from competing with the employer after leaving, but caps the duration at a maximum of two years and requires the restriction to be reasonable in terms of geographic scope and the type of work or activity restricted, protecting only a legitimate business interest such as client relationships or trade secrets. A clause that is unreasonably broad in any of these dimensions risks being unenforceable.

The Wage Protection System (WPS) is a UAE Central Bank-mandated electronic salary transfer system through which registered employers must pay employee wages via an approved exchange house or bank, verifying that salaries are paid on time and in full. The salary figures and payment date in the WPS file must match what is documented in the employment contract — a mismatch between the two is a compliance flag that can surface during a MOHRE inspection or wage complaint.

Most UAE free zones apply the federal Labour Law (Federal Decree-Law No. 33 of 2021) as the underlying employment framework, with the free zone authority handling contract registration and labour card administration instead of MOHRE. DIFC and ADGM are the notable exceptions — both operate their own distinct employment regulations (the DIFC Employment Law and the ADGM Employment Regulations respectively), which differ from the federal Labour Law in areas including gratuity calculation mechanics and termination procedures.

MOHRE-registered employment contracts are typically issued in a standard bilingual Arabic/English format through the MOHRE system, with Arabic generally prevailing in the event of any interpretation dispute before a UAE court or the Labour Department. Free zone contracts are commonly drafted in English, with the free zone authority's own registration format applied. We recommend bilingual documentation wherever there is any prospect of a dispute reaching a UAE Arabic-language forum.

An employee who resigns before completing one year of continuous service is generally not entitled to end-of-service gratuity under Article 51 of the Labour Law, since the one-year threshold is a condition precedent to gratuity entitlement. Other amounts — unused leave encashment for the period actually worked, and any outstanding salary — remain due regardless of length of service.

Federal Decree-Law No. 33 of 2021 sets out specific, narrowly defined grounds under which an employer may terminate without notice — generally involving serious misconduct such as proven fraud, breach of confidentiality causing serious harm, or repeated documented violations of workplace instructions following a formal warning process. These grounds are applied narrowly and require the employer to be able to demonstrate the misconduct and the process followed; an unsubstantiated or undocumented 'for cause' termination is vulnerable to a successful employee challenge before MOHRE.

Secondment structures require careful drafting to determine whether the employee remains employed by the India entity (with a secondment or deputation letter for the UAE assignment), moves to a dual-employment arrangement, or transfers entirely to UAE employment. Each option has different consequences for UAE Labour Law coverage, gratuity accrual, India-side social security (Provident Fund) contribution obligations, and tax withholding in both jurisdictions. PNPC's India and Dubai offices coordinate on this structuring so both sides are consistent.

A settlement agreement is a mutually signed document formalising the terms of an employee's departure — typically the final settlement amount (including gratuity, unused leave encashment, and any negotiated additional payment), confirmation that all obligations between the parties are discharged, and, where relevant, confidentiality or non-disparagement terms. It is used most often in negotiated exits, redundancy situations, or where an employer wants to resolve a potential dispute without a formal MOHRE complaint being filed.

Each employee's contract must be registered under the specific free zone (or mainland DED, or DIFC/ADGM) entity that actually holds their employment visa and labour card — you cannot register one employee under a single umbrella contract if they are legally employed by separate licensed entities in different jurisdictions. Where a group operates multiple UAE entities across different free zones, each entity's employees need contracts registered against that specific entity's licence.

Beyond the mandatory minimums (parties, job title, salary, working hours, probation, notice), a well-drafted contract should address: the precise basic/allowance salary split and its gratuity implications, confidentiality and IP assignment, a properly scoped non-compete if relevant to the role, remote/hybrid work terms if applicable, bonus or commission mechanics if variable pay is part of the package, and a clear description of benefits (medical insurance, annual flight allowance, housing) that may otherwise be assumed rather than documented.

We recommend an annual review at minimum, and an immediate review whenever there is a material change to the Labour Law, its executive regulations, or free zone/DIFC/ADGM employment rules — these frameworks are periodically updated by ministerial or authority decision. A contract or policy suite drafted correctly in one year can drift out of alignment with subsequent regulatory changes if it is never revisited.

MOHRE's Emiratisation policy requires mainland private-sector companies meeting a specified headcount threshold to employ a minimum percentage of UAE nationals, with the applicable percentage and thresholds set by Cabinet decision and subject to periodic revision. While this is primarily a workforce-planning and compliance obligation rather than a contract-drafting one, it is relevant when structuring hiring plans and can affect the sequencing of contract issuance for mainland entities approaching the threshold.

Yes, but any material amendment — salary change, role change, working hours, location — should be documented as a signed addendum or a replacement contract, and where the change affects registered contract terms, the update should be reflected with MOHRE or the relevant free zone authority. An informal or undocumented change, even if both parties verbally agree, creates ambiguity that is difficult to resolve if a dispute later arises over what was actually agreed.

At minimum: the signed and (where applicable) MOHRE/free zone-registered employment contract, offer letter, any amendments or addenda, performance and disciplinary records, leave records, and — on exit — the final settlement calculation and signed settlement acknowledgement. This documentation set is what an employer relies on if a MOHRE complaint or dispute arises, and it is far easier to maintain contemporaneously than to reconstruct after the fact.

PNPC agrees a fixed, written fee before any drafting work begins — typically structured as a fixed fee for the initial template suite (employment contract, offer letter, core policies) with a lower per-contract or retainer fee for subsequent individual hires, amendments, and terminations. The exact structure depends on your headcount, the complexity of your workforce (single jurisdiction versus multi-free-zone or cross-border secondment), and whether this sits alongside an existing PNPC payroll engagement.

A template provider sells a document with no review of your specific business, sector, or jurisdiction. A standalone law firm can draft a compliant contract but typically has no visibility into how your actual payroll is processed, meaning the salary structure in the contract and the figures in your WPS file can drift apart without anyone noticing until a dispute arises. PNPC drafts contracts as part of an integrated payroll and compliance practice — the people drafting your contract are the same people (or work alongside the same people) running your WPS payroll and computing your gratuity liability.

Business and workforce profile assessment. Core unlimited-term employment contract drafting aligned to Federal Decree-Law No. 33 of 2021 (or the appropriate DIFC/ADGM framework). Non-compete, confidentiality, and IP clause drafting. Offer letter and onboarding documentation. MOHRE/free zone contract registration alignment review. WPS salary structure cross-check. Core HR policy suite (leave, disciplinary, remote work). Probation and performance management templates. Termination and settlement documentation. Annual contract and policy review. Direct CA/HR contact for ongoing questions.

Probation is optional, not mandatory — an employer can choose to hire directly into a standard contract without a probation period. Where probation is used, it is capped at a maximum of six months under Federal Decree-Law No. 33 of 2021 and must be explicitly stated in the contract; the Labour Law's default position in the absence of an explicit probation clause is that the employee is engaged on standard terms without a probationary period.

The employment contract's job description is the operational, business-facing description of the role. The MOHRE or free zone labour card records a formal occupation category, drawn from a prescribed list, that determines aspects such as work permit eligibility and, in some cases, minimum salary thresholds for certain occupation categories. These two descriptions should be consistent with each other — a significant mismatch (for example, a labour card occupation category that does not reasonably match the actual role) can create complications at visa renewal or during a MOHRE inspection.

Yes. The Labour Law and its executive regulations recognise part-time, temporary, and flexible work arrangements alongside standard full-time employment, each with its own permit category and contractual requirements. These arrangements require a contract specifically structured for the applicable work pattern — a standard full-time contract template is not appropriate for a part-time or flexible arrangement without modification.

A change in the employer entity's ownership or corporate structure does not automatically terminate existing employment contracts, but a transfer of the employee's actual employer (for example, from one group entity to another) requires proper documentation — either a novation of the existing contract or a fresh contract with the new entity, along with the corresponding MOHRE/free zone labour card transfer. Gratuity continuity across the transfer should be explicitly addressed in the documentation.

Employment costs — salary, allowances, gratuity provisioning, and benefits — are generally deductible business expenses for UAE Corporate Tax purposes under Federal Decree-Law No. 47 of 2022, subject to the arm's-length principle for compensation paid to related parties or connected persons such as owner-directors. For closely-held companies, compensation paid to an owner who is also an employee or director should be structured and documented on an arm's-length, commercially reasonable basis to withstand Corporate Tax scrutiny.

Under Federal Decree-Law No. 33 of 2021, a fixed-term contract is capped at a maximum duration of three years, and may be renewed by mutual agreement of the parties for one or more further terms. Most UAE employers use the standard unlimited-term contract structure by default, reserving fixed-term contracts for specific project-based, seasonal, or defined-scope engagements.

We support the employer in preparing a response using the documentation already on file from the engagement — the signed contract, salary and payroll records, gratuity and final settlement calculation with supporting workings, and any relevant disciplinary or performance documentation. Where the matter proceeds to MOHRE's conciliation process or beyond, we coordinate with the employer's legal counsel, providing the computation and documentation evidence needed.

The core Labour Law framework applies to both UAE nationals and expatriate employees, but there are specific distinctions in areas including pension and social security contributions (UAE nationals are enrolled in the General Pension and Social Security Authority scheme rather than accruing end-of-service gratuity in the same way as expatriate employees) and Emiratisation quota counting for mainland entities. Contracts for UAE national employees should reflect the correct pension contribution mechanics rather than an expatriate-style gratuity clause.

Online templates are frequently outdated (reflecting the pre-2022 limited/unlimited contract regime), jurisdictionally generic (not distinguishing mainland, standard free zone, and DIFC/ADGM requirements), and silent on the specific clauses — gratuity base, non-compete scope, notice mechanics — that determine whether the contract actually protects the employer's position in a dispute. The risk surfaces not at signing, but months or years later when a termination, dispute, or MOHRE inspection tests whether the contract actually holds up.

This depends on the specific facts — where the employee is tax-resident, whether they hold a UAE work permit, and whether the arrangement is structured as UAE employment, a secondment, or an independent contractor relationship in their home jurisdiction. Each structure carries different Labour Law, tax, and social security consequences in both the UAE and the employee's home country. We assess the facts and recommend the appropriate structure rather than defaulting to a standard UAE employment contract for a genuinely remote, non-UAE-based arrangement.

For a business with a straightforward single-jurisdiction (mainland or single free zone) structure, a complete initial template suite — employment contract, offer letter, and core HR policies — typically takes 2 to 4 weeks from the first consultation to a signed-ready document set. Businesses with multi-jurisdiction structures, cross-border secondment arrangements, or DIFC/ADGM entities in the mix should expect a longer initial timeline given the additional regulatory frameworks involved.

PNPC drafts the contract and reviews it for alignment with what will be registered, and can coordinate the registration process with MOHRE or the relevant free zone authority as part of a broader engagement — but the underlying visa and labour card application process itself is typically handled through the client's PRO (Public Relations Officer) function or the free zone's own registration channel, which PNPC can coordinate with directly.