HR for founders in the United Arab Emirates
Reviewed by Mellow Editorial Team, HR & payroll content team
Hiring your first employee in the UAE means taking on real legal obligations from day one — employment contracts, payroll registration, end-of-service calculations and more. Here is what every founder needs to know before they start.
Get the employment contract right
UAE employment law (Federal Decree-Law No. 33/2021) requires a written contract for every employee. Fixed-term contracts are now the standard form; open-ended contracts were phased out under the 2021 reforms. Contracts must state the role, basic wage, allowances, working hours and duration.
The contract must be in Arabic, or in Arabic alongside a translation. If there is a dispute and the two versions differ, the Arabic version takes precedence. Many founders draft contracts in English and assume that is sufficient — it is not.
Probation can be up to six months. During probation, either party can end the contract with notice, but the rules differ from post-probation termination, so read Article 9 of the decree carefully before you act.
Register for payroll and WPS before you pay anyone
Salaries in the UAE must be paid through the Wage Protection System (WPS), administered by the Ministry of Human Resources and Emiratisation (MOHRE). WPS records every salary transfer and flags late or missed payments. Penalties for non-compliance include fines and restrictions on new work permits.
The practical steps: open a corporate bank account, register with MOHRE and your free zone authority (if applicable), and arrange to pay salaries through an approved WPS agent. You cannot simply transfer money from a personal account and call it done.
There is no personal income tax on salaries in the UAE, which simplifies payroll considerably. Employees receive their gross salary without income tax deductions. If you are hiring UAE or GCC nationals, however, you must enrol them in the General Pension and Social Security Authority (GPSSA) scheme and make both the employee and employer contributions on time. Expatriate employees are not enrolled in GPSSA.
Understand end-of-service gratuity — it is a real liability
End-of-service gratuity is the most significant statutory cost most UAE employers underestimate. Every expatriate employee who completes at least one year of service is entitled to it on leaving. The calculation:
- First five years: 21 days of basic wage for each year of service
- Beyond five years: 30 days of basic wage for each additional year
- Cap: the total gratuity cannot exceed two years' total basic wage
"Basic wage" excludes allowances (housing, transport, etc.), so the split between basic and allowances in the employment contract has a direct financial effect. Founders who set a very low basic wage reduce the gratuity liability, but regulators can look at whether the structure is artificial, and some employees will negotiate on this basis.
Gratuity is paid at the end of employment, but it accrues continuously. Build it into your financial model from hire one — it is not optional and it is not negotiable.
The UAE is also piloting an alternative end-of-service savings scheme for private-sector employees through managed investment funds, which allows employers to make monthly contributions instead of holding the liability on their books. Check current MOHRE guidance to see whether it applies to your business.
Annual leave and other statutory entitlements
Annual leave is 30 calendar days per year after one year of continuous service. Employees with less than one year but more than six months are entitled to two days per month. You can set leave schedules by agreement, but you cannot contract below the statutory floor.
Other entitlements to build into your HR policies:
- Sick leave: up to 90 days per year, paid on a sliding scale (fully paid, half paid, then unpaid across the 90-day period)
- Public holidays: set by the government each year; employees required to work on a public holiday are entitled to a substitute day or additional pay
- Maternity leave: 60 calendar days (45 fully paid, 15 half paid)
- Paternity leave: 5 working days
Keep a leave register and track balances. Under WPS, MOHRE can audit employment records, and gaps will create problems during an inspection.
Build your HR documentation early
Founders often delay HR documentation until headcount grows. In the UAE that is a risk. MOHRE and free zone authorities can inspect records, and employment disputes go to the MOHRE conciliation stage before reaching the courts — where your documentation (or lack of it) becomes the central evidence.
At minimum, have these in place before your second hire: a signed contract for every employee, an internal HR policy that covers leave, working hours and conduct, a payroll record aligned with WPS transfers, and a calculation sheet showing accrued gratuity for each employee.
If you are expanding beyond the UAE and need to understand how payroll obligations differ by country, how Mellow runs payroll across six countries on one platform is a useful reference.
Getting the foundations right early is far less expensive than untangling them after a dispute.
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