UAE Labor Law 2025: Key Updates and Insights for Businesses & Professionals

The UAE is a global business hub, known for its forward-thinking policies and robust legal framework. As of 2026, the UAE Labor Law has undergone significant refinements to ensure fairness, transparency, and international alignment. Staying informed about these updates is crucial for both businesses and professionals to ensure compliance. This article dives into the latest developments, including the new minimum wage for UAE nationals and stricter penalties for non-compliance.

1. Key Updates to UAE Labor Law in 2026

Emirati Minimum Wage Increase

Effective from January 1, 2026, the Ministry of Human Resources and Emiratisation MOHRE has raised the minimum wage for Emiratis in the private sector to 6,000 AED per month. Establishments have until June 30, 2026, to adjust salaries for existing Emirati staff to avoid penalties starting July 1, 2026.

Voluntary End-of-Service Savings Scheme

The UAE has introduced a voluntary alternative to the traditional gratuity system called the Savings Scheme. Employers can now choose to invest employee end-of-service benefits in approved investment funds, allowing employees to grow their wealth while ensuring liquidity for businesses.

Stricter Penalties for Non-Compliance

Fines for violating labor laws have significantly increased in 2026:

• General Violations: AED 5,000 to AED 1,000,000 depending on the severity.
• Fake Emiratisation: AED 20,000 to AED 100,000 per fake employee, with serious cases reaching AED 1 million.
• Illegal Recruitment: Providing false information to recruit expatriates can lead to fines up to AED 100,000.

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2. Flexible Work Models and Contracts

The 2026 framework officially recognizes six distinct work models to enhance labor market productivity:

• Full-Time: Working for one employer for full daily hours.
• Remote Work: Tasks performed outside the physical office, whether full-time or part-time.
• Flexible Work: Hours or days change based on workload and business needs.
• Job Sharing: Dividing tasks and salary among multiple workers for a single role.

Note: All unlimited-term contracts must have been converted to fixed-term contracts (maximum 3 years, renewable) to remain valid under current law.

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3. Employee Leave Entitlements in 2026

The law protects various leave types to support work-life balance:

• Annual Leave: 30 calendar days for employees with more than one year of service.
• Maternity Leave: 60 days total (45 days full pay, 15 days half pay). This also applies in cases of miscarriage after 6 months.
• Paternity Leave: 5 paid days for fathers, to be taken within six months of the birth.
• Bereavement Leave: 5 days for the death of a spouse and 3 days for parents, children, or siblings.

4. Practical Tips for Businesses

Salary Payment via WPS

All private sector salaries must be paid through the Wage Protection System WPS. Failing to pay 70 percent of staff through the system or delaying payments can result in work permit suspensions and fines up to AED 100,000 per violation.

Non-Compete Clauses

Employers can include non-compete restrictions in contracts. However, these are only enforceable if they specify a clear duration (max 2 years), geographical scope, and type of work. In 2026, courts can set these aside if the new employer pays 3 months of compensation to the old employer (with consent).

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FAQs

1. What is the probation period notice in 2026?

Employers must give 14 days notice to terminate during probation. If an employee resigns during probation to leave the UAE, they must give 14 days notice; if staying to join another UAE firm, 30 days notice is required.

2. What is the 2026 Emiratisation target for small firms?

Companies with 20-49 employees in targeted sectors must hire at least two Emiratis by the end of 2025/early 2026 to avoid monthly contributions of AED 9,000 per missing role.

3. Can an employer keep my passport?

No. Keeping an employee passport is illegal and carries a fine of AED 10,000 to AED 20,000. Passports must be returned immediately after visa stamping.

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