By Globalization Partners
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The United Arab Emirates (UAE) is well known for its wealth, towering skyscrapers, shopping centers, and beautiful beaches.Its position as a powerful global business center and its freedom from most employer taxes make it an attractive location for many companies looking to expand internationally.
The UAE has relatively strict employment laws, and your company will need to understand the ins and outs of all pertinent legal requirements. This guide to hiring employees will cover crucial topics like wages, benefits, leave, and hiring costs, as well as offer some general tips for hiring in the UAE.
What to know before hiring in the UAE
Before you begin building your UAE teams, you’ll need in-depth familiarity with essential topics like visas and work permits, contracts, termination, and standard working hours.
1. Mainland and free zones
The UAE is a federation that includes seven emirates, or city-states. Two of the best-known emirates are Abu Dhabi and Dubai — most U.S. tech companies in the UAE, for instance, have their offices in one of these locations.
The UAE also has 45 designated free trade zones created to encourage foreign investors. Most, though not all, are in Dubai, and each one has a governing trade zone authority.
These zones are designed for specific industry categories and offer licenses only to companies that fall within those categories. They allow for 100 percent international ownership, 100 import and export tax reductions, corporate tax exemptions in most industries, zero personal income taxes, and assistance with employee sponsorship and housing. A few examples of free zones include the following:
- Abu Dhabi Airport Free Zone
- Dubai Auto Zone
- Dubai Techno Park
- Fujairah Creative City
- International Media Production Zone
- Ras Al Khaimah Investment Authority
What do these distinctions mean for international businesses? Foreign nationals make up more than 88 percent of the UAE’s population. Companies operating in mainland UAE — neither offshore nor in a free zone — will need to obtain specific documents for their employees, such as visas and work permits, from the appropriate mainland authorities before they can legally employ those workers, and they will need to comply with the Ministry of Labor’s employment regulations.
Companies operating in a free zone will need to obtain similar documents from the relevant free zone authorities. Additionally, the free zones sometimes have different labor laws from the mainland, so consider checking with legal experts in your area to ensure that your company’s hiring and employment policies are compliant.
2. Contracts and termination requirements
Employers must have a written contract for each new employee before they can submit visa applications. The contract must be written in both Arabic and English and should specify terms like these:
- Position and duties
- Probationary period
- Termination requirements
Terminated employees who have been with a company for a year or more are usually entitled to severance pay, also known as gratuity pay. The breakdown of gratuity pay accrual generally runs like this:
- 21 total days of gratuity pay for the first five years of service
- 30 days of gratuity pay per year of service beyond the fifth
3. Payroll and taxes
The UAE does not have payroll or employer taxes. However, many companies set aside about 8.3 percent of each employee’s compensation for end-of-service benefits and gratuities.
In most cases, companies in the UAE are free from corporate income taxes as well. The UAE levies corporate taxes on oil companies and international banks only. Businesses registered in the free zones are exempt from corporate taxes for a certain time, and that tax-free period can be extended.
A value-added tax (VAT) of 5 percent was also introduced in the UAE in 2018, providing the country with a new source of income to provide high-quality public services.
4. Wages and working hours
In the UAE, the weekend consists of Friday and Saturday, so employees often work Sunday through Thursday. However, Friday is the only legally mandated weekly day off, so many companies operate on a 5.5- or six-day workweek.
The maximum working hours in the UAE are eight hours a day and up to 48 hours per week. During the holy month of Ramadan, companies must reduce their daily work schedules by two hours, and most work takes place either very early in the morning or after the sun has set and the fast has broken.
Employees may work up to two hours of overtime on a workday and should receive 125 percent of their usual wages for that time. The overtime pay increases to 150 percent if the employee must work between 9 p.m. and 4 a.m., or on a Friday.
The minimum wage in the UAE varies. For expatriates working in the UAE, no minimum wage applies. Though the government has not defined a blanket minimum wage for UAE nationals, it often issues localized minimum wages that depend on the employees’ regions and education levels.
5. Time off
In the UAE, standard business norms stipulate that each employee receives 30 vacation days per year. However, the precise number of vacation days often depends on the length of time the employee has been with the company:
- Less than six months of service: No vacation time accrues.
- Six months to 12 months: The employee accrues at least two vacation days per month.
- More than one year: The employee receives a full 30 days of vacation.
An employee who has worked for a company for at least three months also receives a separate 90 days of sick leave annually. Employees may receive their full salaries for the first 15 days of sick leave, half-pay for the next 15 days, and unpaid leave for the remainder.
Employees in the UAE may take maternity and paternity leave. Pregnant employees are entitled to 45 days of paid maternity leave unless they have worked at the company for less than a year, in which case they may take the time at half their regular pay. Pregnant employees may also take an additional 10 days of unpaid maternity leave if they choose. Fathers who work in the private sector may take up to five days of paternity leave within six months of the child’s birth.
UAE employees may also take paid time off for the Hajj, the pilgrimage to Mecca that Muslims must undertake once in their lifetimes. UAE labor law provides for each employee to take a one-time unpaid Hajj leave of 30 days.
In addition to the above time off, employees in the UAE should receive several paid holidays. Official paid holidays differ from year to year and often include days such as the Gregorian New Year, Eid al-Fitr, Eid al-Adha, Hijri New Year, Commemoration Day, and the two-day celebration of National Day.
6. Anti-discrimination law and restrictions
In the UAE, employers cannot discriminate against job candidates or employees for any of the following reasons:
- Marital status
- Mental or physical disability
Under the same laws, however, employers must give preference to UAE nationals during hiring. Once they have done so, they must also give priority to applicants from other Arab nations.
Cost of hiring an employee in the UAE
The costs to hire employees in the UAE often depend on your company, your industry, and the emirate where you have established your business. Here are a few of the direct and hidden costs you may be responsible for:
- Recruitment expenses
- Time spent reviewing and interviewing candidates
Some of the costs associated with hiring employees come from health insurance benefits. Of the seven emirates, Abu Dhabi and Dubai both have laws that mandate employer-provided healthcare coverage for employees, their spouses, and their dependents. Many companies in the five other emirates also choose to offer health insurance as a benefit.
Hiring practices in the UAE
Hiring someone in the UAE may have many similarities to bringing a new employee on board in your home country. However, you’ll want to account for a few local nuances and tailor your hiring practices accordingly:
- Use the local language and currency: Even if your new UAE employees speak your native language, try to use Arabic or the predominant local language in your communications, especially in official documents like offer letters and contracts. You should also provide all monetary amounts in Emirati dirham. These practices help you ensure that your employees understand your essential communications.
- Obtain proper documentation: Hiring a new employee in the UAE generally requires an employer to obtain both an establishment labor card, or work permit, and an establishment immigration card. Both documents are relatively easy to get from the Ministry of Labor.
What does a company need to hire employees in the UAE?
Hiring new employees in the UAE can be a complicated, lengthy process, especially if your company decides to set up a subsidiary.
The requirements often vary by where in the UAE you choose to establish business operations, so you may want to work with local experts to determine the requirements in your area. You will generally encounter fewer restrictions if you incorporate in one of the free zones. In that case, you’ll want to spend time figuring out which of the many free trade zones will best meet your needs.
Your business will also need to decide how it will incorporate. The UAE offers a few different incorporation options, including public joint-stock companies, private joint-stock companies, civil companies, limited liability companies, and professional sole establishments. Many international businesses choose to incorporate as limited liability companies unless they have specific, more complex requirements.
Establishing a limited liability company requires businesses to appoint at least two directors, though no more than 50. On the mainland, incorporating as a limited liability company also usually means finding a local sponsor to own 51 percent of your company or a local service agent to invest in and own 100 percent of your business. In the free zones, your parent company can generally maintain complete ownership.
If your company elects to set up a subsidiary, it will need to meet requirements like these:
- Obtaining the necessary local sponsorship if operating in the mainland
- Reserving your company’s official trade name
- Appointing directors and shareholders
- Submitting the required legal forms
- Obtaining the correct business license for your company’s activities
- Opening an in-country bank account
- Depositing the necessary minimum share capital
- Obtaining the proper visas and permits for employees
This process can take weeks, even months, and cost your company hundreds in fees. Alternatively, your company can work with a professional employer organization (PEO), also known as an Employer of Record (EOR) instead. An experienced partner like an EOR has an existing business entity, so you can get your operations started right away. A trusted EOR will also take on the labor of recruiting, hiring, and onboarding your new employees so your company can focus more of its attention on its main business objectives.
Hiring remote employees in the UAE
As you begin building your remote teams in the UAE, use these tips to streamline the process:
- Communicate ahead of time: Remote hiring can sometimes be tricky in terms of learning the necessary technology and coordinating personnel across different time zones. Communicating with your applicants ahead of time often enables you to smooth out any wrinkles. You can schedule mutually convenient timeslots and allow everyone to become familiar with the right technology platforms in advance.
- Select partners and leaders: As you expand your business into the UAE, you might feel tempted to choose employees to fill narrowly defined roles, focusing on only one or two specific skills. However, your company is more likely to set itself up for long-term success if it invests in employees who demonstrate the potential to help your company grow. These employees can provide valuable local connections and help your team navigate cross-cultural differences and expectations.
- Clarify your culture and expectations: As you put your international team together, you need trusted ways to get everyone on the same page. For instance, meet with your new hires to go over their employment contracts thoroughly and be sure they understand the details. Essential training can also make your company’s norms and expectations clear and align your new hires with your core mission.
Additional tips for how to hire in the UAE
Here are a few more helpful steps to hiring in the UAE:
- Adapt to linguistic diversity: The UAE is home to a vast assortment of languages. The official language is Arabic, and native Emiratis often speak a dialect known as Gulf Arabic. Many international workers also speak languages like Urdu, Hindi, Tamil, Bengali, Farsi, Pashto, Nepali, Tagalog, Malayalam, and Mandarin. The UAE was once a British colony, so many people in the country speak English, especially in Dubai, and business transactions tend to take place in English.
- Diversify your recruitment strategies: Many companies rely on traditional recruiting networks and company website advertisements, and these methods are often effective. More and more UAE job candidates are searching for new positions on social media sites, however. Your company may want to post job advertisements on LinkedIn, Facebook, and other popular platforms to increase your chances of finding the right people.
- Make in-person connections: Domestic obligations may mean you usually remain in your home country and communicate remotely with your UAE employees. However, especially as you start assembling your team, consider having some of your higher-level executives visit the country in person. You’ll communicate your investment in your new hires and help them feel like valued partners in your mission.
Trusted expansion assistance from Globalization Partners
When your company is ready to expand into the UAE, let Globalization Partners expedite the process. Our comprehensive solution and local services allow us to take on the administrative, human resources, and legal work of getting your new employees on board, so you’ll attain peak productivity more quickly. We save your company time and labor to help you focus your business efforts, and we’re proud to maintain a 97 percent customer satisfaction rate.