Employee Benefits in The United Arab Emirates

Who Is Entitled to Employee Benefits In The United Arab Emirates

In The United Arab Emirates, most statutory employee benefits apply to employees working under the UAE Labour Law (Federal Decree‑Law No. 33 of 2021) or equivalent free zone regulations, whether they are UAE nationals or expatriates. Benefits generally attach to employees with a valid employment contract and work permit sponsored by your company, including full‑time and many part‑time staff, provided they are on your payroll and under your direction.

Independent contractors and freelancers are not entitled to employee benefits under UAE labour law, although they may be protected by commercial contract terms you agree with them. Benefit eligibility can also depend on working hours, length of continuous service, and whether the employee has completed any probation period that you have lawfully set. For example, paid annual leave accrues during probation but can usually be taken only after the probation period, while maternity leave and end‑of‑service gratuity are subject to minimum service thresholds.

Overview of Employee Benefits In The United Arab Emirates

Employee benefits in The United Arab Emirates are broadly competitive by global standards, especially on paid leave and mandatory health insurance in key emirates like Abu Dhabi and Dubai. In a workforce dominated by expatriates, benefits play a central role in attracting and retaining talent, and many employers go well beyond legal minimums with allowances, enhanced healthcare, and performance‑linked rewards.

Mandatory Employee Benefits In The United Arab Emirates

Mandatory benefits are legally required and form the core of any employee benefits package in The United Arab Emirates. Here's a comprehensive list of mandatory benefits in The United Arab Emirates:

Paid Annual Leave

Employees in the UAE are entitled to paid annual leave once they complete at least six months of continuous service with your company. Under the current Labour Law, the minimum entitlement is 30 calendar days of paid annual leave per year after completing one year of service, and 2 days per month for employees with service between six and twelve months. Annual leave accrues during probation but is typically taken after probation ends, unless you allow earlier use.

Annual leave pay is based on the employee’s basic wage plus any regular allowances defined as part of their remuneration, calculated on their most recent wage. You should document accrual, carry‑over, and encashment rules in your HR policies and ensure that leave records are accurately kept. Adequate vacation time is important for employee wellbeing and is expected in the UAE’s professional labour market.

Paid Public Holidays

Employees are entitled to fully paid days off on official public holidays declared by the UAE government, such as National Day and Eid holidays. The unified public holiday calendar is generally announced annually and applies across the public and private sectors, although the exact dates of Islamic holidays can vary based on lunar observations.

If employees are required to work on a public holiday, the law provides for compensatory time off or additional pay, typically at least their basic wage plus a premium. Your company should track official government announcements, plan staffing in advance around holiday periods, and clearly outline compensation practices for holiday work in employment contracts or internal policies.

Sick Leave

After completing a probation period, employees are entitled to up to 90 calendar days of sick leave per year, which can be continuous or intermittent. The law typically provides 15 days of full pay, followed by 30 days of half pay, and then 45 days without pay, provided sick leave is properly supported by medical certificates from approved healthcare providers. During probation, employees may be absent for sickness but usually without pay unless you voluntarily provide paid sick days.

To administer sick leave correctly, your company should require timely submission of medical reports, maintain absence records, and align your sick leave procedures with any specific free zone regulations. Paid sick leave helps maintain health and productivity, particularly in a climate where employees may be far from their home support networks.

Maternity Leave

Female employees are entitled to maternity leave in The United Arab Emirates, subject to minimum service conditions. Under the Labour Law, a qualifying employee is generally entitled to 60 days of maternity leave, of which a portion is on full pay and a portion on half pay, depending on length of service and specific legal provisions. Many employers align their practices with the federal standards, although some free zones or public sector entities may be more generous.

Maternity leave entitlement typically requires the presentation of a medical certificate confirming the expected date of delivery. Maternity leave can often be taken partly before and partly after childbirth, with rules on extension in the event of complications or hospitalisation of the mother or child. Providing compliant and clearly communicated maternity benefits is crucial for supporting female talent and aligning with UAE policies on women’s workforce participation.

Parental Leave and Paternity Leave

The UAE Labour Law introduced paid parental leave for both mothers and fathers in the private sector. Fathers and mothers are generally entitled to a period of paid parental leave, which is separate from maternity leave and can be taken within a specified time frame after the birth of a child. This entitlement applies to employees who have a child, whether by birth or adoption, subject to the statutory conditions.

Your company should formalise a parental leave policy that explains eligibility, documentation requirements such as birth certificates, notice periods, and how leave interacts with maternity leave and other time off. Providing this benefit not only ensures compliance but also signals your commitment to supporting working parents, which is increasingly important in the UAE labour market.

Health Insurance (Where Mandated by Emirate or Free Zone)

In several emirates, particularly Abu Dhabi and Dubai, employers are legally required to provide health insurance to employees, and in some cases also to their dependants. For example, Dubai’s Health Insurance Law obliges employers to provide at least a minimum level of health coverage for all employees, with strict penalties for non‑compliance. Other emirates may not yet mandate employer‑provided health insurance at the time of writing, but many employers still offer coverage as a market standard.

You must register employees with an approved insurer or health scheme, issue health insurance cards, and keep records of coverage. Plans must meet minimum benefits defined by local health authorities, and premiums are typically fully employer‑funded, especially for employees themselves. Employer‑sponsored health coverage is a central component of the total rewards package in the UAE and directly affects employees’ financial security and access to care.

Work Injury and Occupational Disease Protection

The UAE Labour Law requires employers to protect employees against work‑related injuries and occupational diseases. This includes obligations to provide immediate medical care, cover treatment expenses until recovery or declaration of disability, and pay compensation in the event of temporary or permanent disability or death due to work‑related causes, according to statutory formulas.

Although the law does not always prescribe a specific insurance product, most employers arrange workmen’s compensation or employer’s liability insurance to meet these obligations and manage financial risk. You should maintain incident reports, medical and compensation documentation, and occupational health and safety procedures. These protections are critical in sectors with higher physical risk but apply broadly across the workforce.

Rest Days and Working Time Limits

The law sets maximum working hours and provides for at least one paid weekly rest day, usually Friday, Saturday, or Sunday depending on your workweek structure and sector. Standard hours are typically eight hours per day and 48 hours per week, with rules on overtime premiums when employees work beyond these limits, except for certain categories of staff.

Your company must schedule shifts and rest periods in line with the law, record working hours, and pay overtime at the mandated premium rates, especially for work at night or on rest days and public holidays. Respecting working time rules supports employee health and reduces fatigue‑related risks.

End‑of‑Service Gratuity

End‑of‑service gratuity is a statutory lump‑sum benefit payable to eligible employees when they leave your company, provided they have completed at least one year of continuous service and are not enrolled in an approved alternative savings scheme that replaces gratuity. The amount is typically calculated based on the employee’s last basic wage and length of service, with different formulas applying depending on years of service and type of termination.

While you do not need to fund gratuity in a formal pension scheme, you should track accrued liabilities over time and disclose the entitlement in contracts and HR policies. Many employees see end‑of‑service gratuity as a core financial benefit that partially replaces a pension and provides security when changing jobs or leaving the UAE.

Timely Payment of Wages and Protection Against Unlawful Deductions

Although not a “benefit” in the traditional sense, the right to timely payment of wages and protection against unauthorised deductions is a core statutory entitlement in The United Arab Emirates. Employers must pay salaries through approved channels such as the Wage Protection System (WPS) for onshore entities, within the legally prescribed timeframe following the wage period.

Your company may only make deductions in limited cases allowed by law, such as social security contributions for UAE nationals, authorised loan repayments, or court‑ordered garnishments. Compliance is closely monitored by the Ministry of Human Resources and Emiratisation (MOHRE) and relevant free zone authorities, and breaches can lead to fines, licence restrictions, and reputational damage.

Supplemental Employee Benefits In The United Arab Emirates

Supplemental benefits are not required by law, but can help you stand out as an employer and attract top talent. They include:

Housing Allowance or Company‑Provided Accommodation

Housing costs can be significant in The United Arab Emirates, particularly in major cities like Dubai and Abu Dhabi, so many employers offer a housing allowance or company‑provided accommodation. Housing allowances are often structured as a fixed monthly or annual cash amount added to the employee’s basic salary, especially for mid‑ to senior‑level roles and expatriates relocating from abroad.

Providing a clear housing benefit helps employees plan their living arrangements and can make your packages more competitive without permanently inflating base salaries. You can define eligibility and amounts by grade, marital status, or location, and should document the allowance structure in offer letters and internal compensation frameworks.

Transport Allowance or Company Car

Transport allowances are a common supplemental benefit in the UAE, given the reliance on private transport and variable public transport coverage. Employers may offer a monthly transport allowance, company car, or fuel card, especially for roles that require frequent travel or customer visits.

These benefits help employees manage commuting and work‑related travel costs, and can be positioned as part of a broader mobility policy. When designing transport benefits, you should consider job requirements, environmental policies, and whether to differentiate entitlements by seniority.

Enhanced Private Medical Insurance and Family Coverage

Beyond the minimum mandated health coverage, many employers offer enhanced medical insurance plans with broader networks, lower co‑payments, and additional services such as dental, optical, and wellness benefits. It is also common to extend coverage to employees’ spouses and children, even where the law does not require it.

Enhanced coverage is a strong differentiator in the UAE, where healthcare costs can be substantial. You can negotiate with insurers for group plans, offer tiered coverage levels by grade, and clearly communicate what is covered and how employees can access benefits. This is particularly valued by expatriate employees with families.

Performance Bonuses and Commissions

Variable pay in the form of performance bonuses and sales commissions is widely used to align employee performance with business goals. While not legally mandated, bonus schemes are often a significant part of total compensation for sales, business development, and senior management roles in The United Arab Emirates.

Your company should define eligibility, performance metrics, and payout timing in clear written policies or plan rules. Consistent and transparent administration of bonuses supports motivation and retention, while managing your fixed payroll costs.

Education Allowance for Dependants

School fees for children at international or private schools in the UAE can be substantial, so some employers offer an education allowance for employees’ dependants. This is more common for senior expatriates, specialised technical staff, or hard‑to‑fill roles where family relocation is critical.

Education allowances may be capped per child or per family and often require submission of invoices or proof of enrolment. By easing the financial burden of schooling, you make relocation and long‑term retention in the UAE more attractive for employees with families.

Remote Work, Flexible Hours, and Hybrid Models

While the UAE still values in‑person work in many sectors, remote work and flexible hours have become more common, especially in knowledge‑based roles. Offering flexibility, whether through hybrid work models, flexible start and finish times, or occasional remote work days, can significantly enhance your employer value proposition.

Flexible arrangements help employees manage commuting, family obligations, and work‑life balance. You should implement clear remote work policies that address eligibility, equipment, data security, and performance expectations, and ensure that they are aligned with any applicable free zone or sector‑specific rules.

Wellness Programs and Employee Assistance

Some employers in The United Arab Emirates are introducing wellness initiatives such as gym memberships, fitness subsidies, mental health support, and Employee Assistance Programs (EAPs). These programs aim to support employees’ physical and emotional wellbeing in a high‑performance, often expatriate‑dominated environment.

Wellness benefits can range from subsidised gym access to workshops, health screenings, and confidential counselling services. They can help reduce absenteeism, improve morale, and demonstrate your commitment to holistic employee care.

Supplementary Retirement or Savings Plans

Beyond statutory end‑of‑service gratuity, a growing number of employers are implementing voluntary retirement or savings plans, sometimes in the form of defined contribution schemes or savings platforms. This trend has gained momentum following the introduction of government‑backed savings initiatives in some free zones and the broader focus on financial wellbeing.

Offering a structured savings plan, with or without employer matching contributions, can help employees build long‑term financial security and differentiate your company, particularly for senior and long‑tenured staff. Plans should be carefully designed to comply with local regulations and clearly explained to participants.

Tax Implications of Employee Benefits in The United Arab Emirates

How Are Employee Benefits Taxed for Employees?

The United Arab Emirates currently does not levy a federal personal income tax on employment income, so salaries and most in‑kind benefits are not subject to personal income tax for employees. As a result, benefits such as housing allowances, transport allowances, and employer‑provided health insurance are generally received tax‑free by employees, which makes non‑cash and allowance‑based benefits particularly attractive.

That said, employees should be aware that their home country tax obligations may still apply if they are tax‑resident elsewhere, so you should avoid giving tax advice and instead encourage expatriate staff to seek independent guidance. Structuring benefits transparently and documenting them clearly in contracts supports both compliance and employee understanding.

How Are Employee Benefits Treated for Employers Under Corporate Tax and VAT?

The UAE has introduced a federal corporate tax regime and value added tax (VAT), so your company should consider how benefits interact with these systems. Generally, employment costs, including many benefits, may be deductible for corporate tax purposes if they are wholly and exclusively incurred for business purposes, but you should confirm specific treatment with your tax advisers and stay up to date with Federal Tax Authority guidance.

For VAT, some benefits provided to employees free of charge may not be recoverable as input tax if they are considered to be for the personal benefit of employees rather than for business purposes. Other expenses, such as travel for business purposes, may allow input VAT recovery. Your finance team should retain invoices, contracts, and policy documents to substantiate VAT treatment and corporate tax deductions.

What Documentation Is Required for Tax and Regulatory Compliance?

For compliance in The United Arab Emirates, you should maintain detailed records of salaries and benefits, including employment contracts, payroll reports, insurance policies, invoices, and any formal benefit plan documents. These records support not only tax compliance but also labour inspections and disputes.

At a minimum, your company should keep: signed employment contracts that itemise salary and allowances, health insurance enrolment and premium records, proof of payment for allowances and bonuses, and clear written policies for any discretionary benefits. Proper documentation makes it easier to demonstrate that benefits are legitimate employment costs and to withstand audits or regulatory reviews.

Legal Considerations for Employee Benefits in The United Arab Emirates

Employee benefits in The United Arab Emirates are primarily governed by Federal Decree‑Law No. 33 of 2021 on the Regulation of Labour Relations and its Executive Regulations, as well as by emirate‑level and free zone rules, especially in financial and special economic zones. In some free zones, such as the DIFC and ADGM, separate employment regulations apply that may provide different or additional benefit entitlements, so you must always check the specific framework that governs your entity.

Non‑compliance with mandatory benefit obligations can result in administrative fines, restrictions on new work permits, suspension of operations, and potential civil liability in the event of disputes or unpaid entitlements. For example, failure to provide mandatory health insurance in Dubai or Abu Dhabi can lead to substantial penalties and the suspension of visa services, while non‑payment of wages or end‑of‑service gratuity can trigger MOHRE complaints and court claims.

To manage legal risk, your company should regularly review employment contracts, HR policies, and payroll practices to ensure they align with current laws and regulatory guidance. Conducting internal audits of leave records, gratuity calculations, and health insurance coverage at least annually is advisable, particularly if you are growing rapidly or operating in multiple emirates or free zones. Staying in close contact with local legal counsel or HR compliance experts will help you anticipate changes and maintain a compliant and competitive benefits offering.

How Benefits Impact Employee Cost

In The United Arab Emirates, mandatory benefits typically add a meaningful but manageable layer to your total employment costs. When you factor in annual leave, public holidays, sick leave, health insurance in regulated emirates, and end‑of‑service gratuity accruals, it is common for total employment costs to exceed base salary by roughly 15–30 percent, depending on your sector, emirate, and how generous your supplemental benefits are. Enhanced health plans, family coverage, housing and transport allowances, and bonuses can push that percentage higher for senior or expatriate roles.

To manage costs effectively, you can design a layered benefits strategy that prioritises compliance and core health and leave benefits, then adds targeted supplemental offerings that deliver strong perceived value, such as flexible work, development opportunities, and performance‑linked incentives. When well designed, benefits in the UAE can provide a high return on investment through improved retention, reduced hiring and onboarding costs, and increased engagement and productivity, especially in a market where employees often compare offers holistically rather than focusing on salary alone.