HR for a business with 1–10 employees in the United Arab Emirates
Reviewed by Mellow Editorial Team, HR & payroll content team
Running HR for a micro-business in the UAE is manageable if you set up the right foundations early. The core obligations — employment contracts, end-of-service gratuity, Wage Protection System registration and basic leave entitlements — apply from your very first hire, regardless of company size.
Get your contracts right before anyone starts
Every employee must have a written employment contract. Under Federal Decree-Law No. 33/2021, all contracts must be on a limited-term basis (fixed term, renewable). The contract should state the role, basic wage, allowances, working hours and start date.
Keep basic wage and allowances as separate line items. Gratuity is calculated on basic wage only, so conflating everything into one "total package" figure creates legal and accounting problems later.
If you are hiring through a free zone, check whether that free zone has its own employment regulations. Some — notably the DIFC and ADGM — operate under their own labour frameworks, separate from the federal Labour Law.
Register for the Wage Protection System
The Wage Protection System (WPS) is a Central Bank of UAE scheme that requires employers to pay salaries electronically through an approved exchange house or bank. The Ministry of Human Resources and Emiratisation (MOHRE) monitors compliance.
For a business with one to ten employees, WPS registration is non-negotiable. Late or missing salary payments are flagged automatically, and penalties can include a block on new work permit applications.
Practical steps:
- Open a corporate bank account or register with an approved WPS exchange house.
- Ensure salary transfer dates match the pay cycle you declared when registering employees.
- Keep payroll records that show basic wage and each allowance separately — MOHRE inspections do happen.
Understand your end-of-service gratuity liability
Gratuity is often the largest single HR liability a small employer carries, yet many micro-businesses track it only when someone resigns. That is too late.
The statutory calculation under Federal Decree-Law No. 33/2021 is:
- First five years of service: 21 days' basic wage per completed year.
- Beyond five years: 30 days' basic wage per completed year.
- Cap: Total gratuity cannot exceed two years' basic wage.
Employees who resign before completing one year receive nothing. Between one and three years, a proportion of the entitlement applies; full entitlement kicks in after five years. Employees dismissed without cause receive full gratuity regardless of tenure.
For a team of even five people, the accrued liability can reach six figures quickly. Set aside a monthly provision in your accounts — do not treat it as money you will find when the time comes.
Note: UAE and GCC nationals employed in the private sector are enrolled in the GPSSA pension scheme rather than receiving gratuity. Employer and employee contributions go to GPSSA; the gratuity rules above apply to expatriate employees.
Annual leave and other basic entitlements
After one year of continuous service, employees are entitled to 30 calendar days of annual leave per year. During the first year they accrue leave pro-rata and may take it with employer agreement.
Other entitlements to have documented in your HR policy, however small your team:
- Sick leave: up to 90 days per year (15 fully paid, 30 at half pay, 45 unpaid) after completing probation.
- Probation: a maximum of six months; you can terminate during probation with shorter notice periods, but the contract must specify this clearly.
- Public holidays: employees are entitled to paid public holidays as declared by the UAE government.
- Parernity/maternity: paternity leave is five working days; maternity leave is 60 calendar days (45 fully paid, 15 at half pay).
Track leave from day one. A basic spreadsheet works at this scale, but make sure it is updated consistently and employees can see their own balances.
Practical HR admin for a micro-business
With fewer than ten employees, you probably do not need a dedicated HR system on day one — but you do need documented processes.
A short employee handbook covering leave, expenses, disciplinary process and working hours protects both you and your staff. It does not need to be long. Two to four pages of plain-language policy is better than a 40-page document nobody reads.
Keep a personnel file for each employee containing: the signed contract, copies of Emirates ID and passport, visa and work permit details, and records of any salary changes or formal warnings. MOHRE can request these during an inspection.
If you are unsure whether a specific role requires a work permit (some free zones and activities have restrictions), verify with MOHRE or your free zone authority before the person starts work — not after. Employing someone without the correct permit carries significant penalties.
For payroll specifically, how Mellow runs payroll across six countries on one platform gives a practical picture of what a lean payroll setup can look like across borders, which is relevant if your small team includes employees based outside the UAE.
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