Hiring Your First Employee in the UAE: What the Law Asks

Sep 25

4 min read

Hiring your first employee in the UAE is usually the moment a company stops being a licence on paper and becomes an employer. The work permit and the visa get most of the attention. The obligations that outlast them are the ones you owe the person every month and on the day they leave.

This post sets out the federal position for mainland employers and uses DMCC as its one free zone example, because DMCC has published its own position. It does not cover the DIFC or ADGM, and employers there should take advice specific to those centres.

Which rules apply to your company

The main instrument is Federal Decree-Law No. (33) of 2021, which regulates employment in the UAE private sector. Its definition of the private sector carries an exception for any entity whose own establishing law places it under a different law. For a mainland company, the federal law is the starting point. For a free zone company, the answer turns on the zone's own establishing law.

DMCC is one zone that has answered the question publicly. Its employment FAQs state that employment in the DMCC free zone is governed by the federal Decree-Law and Cabinet Resolution No. (1) of 2022. That is DMCC's position for DMCC.

The contract for your first employee in the UAE

The Decree-Law requires the employer to conclude an employment contract with the worker, in two copies, one kept by each side. The contract runs for a specified period and can be renewed by agreement. If the term ends and both sides simply carry on without agreeing anything, the contract is treated as extended on the same conditions, so diarise the end date rather than letting it pass unnoticed.

Language matters too. The contract has to be in Arabic, alongside another language the employee understands if they do not speak Arabic. Where the two versions differ, the Arabic text prevails.

What the contract should include

Cabinet Resolution No. (1) of 2022 lists what a contract should include. Among other things, that means:

the job and the workplace
the start date and the term of the contract
working hours and rest days
any probationary period
the agreed wage, including benefits and allowances
annual leave entitlement
the notice period and the termination procedure

The parties can add their own clauses to the approved forms, as long as those clauses are consistent with the law. On the mainland, the contract is made using the contract forms in the system of the Ministry of Human Resources and Emiratisation.

DMCC says it provides contract templates through its portal for the different models of work, and that they cover everything the federal law requires.

Paying your first employee in the UAE: the Wage Protection System

The Wage Protection System, or WPS, is not one rule. The federal version and DMCC's version are separate obligations from separate authorities that happen to share a name.

The federal rule for mainland employers

Ministerial Resolution No. 340 of 2026 has applied since 1 June 2026. It makes the first day of each month the due date for the previous month's wages, and any payment after that date counts as late. Establishments registered with the Ministry must pay through the WPS. The resolution it repealed treated wages as late only after 15 days, and that grace period has gone.

An establishment counts as compliant if it transfers at least 85% of total wages due by the due date. The 85% is a compliance test. The employee is still owed their full wage.

Paying late sets off a published escalation. Alerts begin from day two. On day five, the establishment's new work permits are suspended and the owner receives a warning. For a company about to make its second hire, that is the step that bites. Later stages add an administrative fine where the violation is repeated within six months, and further measures beyond that.

DMCC's own rule

DMCC's WPS guideline, dated May 2025, requires every DMCC-registered company to register its employees holding an employment visa or Permanent Identity Card for salary transfer through a bank or exchange house. Salaries can be paid only in UAE dirhams, and each employee must receive at least 80% of their expected salary.

That 80% is DMCC's own figure, from a guideline that predates the federal 85%. The two are different tests from different authorities, so do not carry either figure across to the other regime. If you are licensed in another free zone, ask your authority whether it requires WPS and on what terms.

End-of-service gratuity

Under Article 51 of the Decree-Law, a full-time foreign employee who completes at least one year of continuous service is entitled to an end-of-service benefit on leaving. It is calculated on their last basic wage:

21 days' basic wage for each of the first five years
30 days' basic wage for each year after that

Part years count pro rata once the first full year is complete, and unpaid days of absence are left out. The total cannot exceed two years' wage. Basic wage excludes allowances and benefits in kind, which is why the salary split in the contract matters.

Part-time and job-sharing staff receive the benefit pro rata to their contracted hours, and it does not apply to temporary work lasting less than a year. UAE national employees fall under the pensions and social security legislation instead. Wages and all other entitlements are due within 14 days of the contract ending.

Before you make the hire

Setting up the employer side properly is far easier before the first payroll than after it. If you are about to take on your first employee, get in touch and we will walk you through what applies to your licence.

The above is general guidance only and does not constitute formal legal advice. We recommend speaking with a qualified UAE lawyer for advice specific to your situation. Figures are current as of September 2026; check with MoHRE or your free zone authority for the latest position.