Hiring Your First Employee in the UAE: Contracts, WPS & Labour Law

Quick Read

• Contracts are fixed-term only. Every private-sector contract must be registered with MoHRE within 14 days of the employee's arrival or change of status.
• Salaries are due on the 1st. Since 1 June 2026, Ministerial Resolution No. 340 of 2026 makes the previous month's salary due on the first day of each month through the WPS, with no 15-day grace period.
• Probation is capped at six months. After probation, notice must be between 30 and 90 days.
• Statutory costs go beyond salary: 30 days' annual leave, paid sick leave, health insurance in every emirate, and gratuity of 21 days' basic pay per year for the first five years.
• Fines are steep. Employing someone without a valid work permit can cost AED 100,000 to AED 1,000,000 under Federal Decree-Law No. 9 of 2024.

To hire your first employee in the UAE, you need four things in place: a valid trade license with an establishment file at MoHRE or your free zone authority, a work permit and residence visa for the employee, a fixed-term employment contract registered with the authorities, and a payroll set up to pay salaries through the Wage Protection System (WPS). On top of that, you must provide health insurance and budget for leave, end-of-service gratuity and the new first-of-the-month salary deadline that came into force in June 2026.

This guide walks founders through each step in order, explains what UAE Labour Law requires in the contract, and shows where first-time employers most often get fined. It covers mainland companies and the main points for free zone companies. It does not cover DIFC or ADGM, which have their own employment laws.

What Law Governs Hiring in the UAE Private Sector?

Private-sector employment is governed by Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relationships, known as the UAE Labour Law, which came into force on 2 February 2022. Its implementing rules sit in Cabinet Resolution No. 1 of 2022. The law has since been amended, most importantly by:

• Federal Decree-Law No. 14 of 2022, which removed the original three-year cap on fixed-term contracts.
• Federal Decree-Law No. 9 of 2024, effective 31 August 2024, which raised fines for serious violations to between AED 100,000 and AED 1,000,000, gave MoHRE binding decision powers on claims up to AED 50,000, and extended the limitation period for labour claims to two years.
• Ministerial Resolution No. 340 of 2026, which replaced the earlier WPS rules and set a single salary due date on the first day of each month.

The regulator is the Ministry of Human Resources and Emiratisation (MoHRE). If your company is on the mainland, MoHRE issues your work permits and registers your contracts. If you are in a free zone, the free zone authority handles visas and contracts, but most core Labour Law rights still apply.

Before You Hire: What Your Company Needs in Place

MoHRE only issues a work permit when the following conditions are met, according to the official UAE work permit guidance:

• Your trade license is valid and free of violations. If it is close to expiry, renew your trade license first.
• The job title matches your licensed business activity. You cannot hire an accountant under a license that only permits general trading if the role is not aligned with the activity.
• The application is submitted by a person legally authorised to represent the company.
• The worker is at least 18 years old (special permits exist for juveniles and students) and holds any professional license their role requires.
• Your company is compliant with the WPS. MoHRE can refuse or cancel permits for establishments that are not.

You will also need a corporate bank account that can process WPS salary files. If you have not opened one yet, see our business bank account setup service, since account opening can take longer than the hiring process itself.

Mainland vs Free Zone: Who Handles Your First Hire?

If you have not chosen a jurisdiction yet, our comparison of free zone vs mainland vs offshore company setup explains how hiring flexibility differs. Among the free zones Consult Kumar works with:

• IFZA (Dubai): popular with consultants and trading start-ups. Example: a two-founder consultancy hiring its first business development executive.
• Meydan Free Zone (Dubai): suits service businesses wanting a Dubai address. Example: a digital agency hiring a first designer.
• RAKEZ (Ras Al Khaimah): covers commercial, industrial and service activities. Example: a small manufacturer hiring its first warehouse supervisor.
• Ajman Free Zone: often chosen for cost-conscious trading and e-commerce businesses. Example: an online retailer hiring a first operations coordinator.
• Fujairah Free Zone (FFZA): suited to trading and logistics linked to the east coast. Example: a shipping services firm hiring a first documentation officer.

How to Hire Your First Employee: Step by Step

Most of these steps can now be completed on a single platform, the Work Bundle (workinuae.ae). According to the UAE government, it cuts the process from 15 steps and 16 documents to 5 steps and 5 documents, with a target processing time of 5 working days instead of 30.

1. Issue a job offer. The offer must be in Arabic and English, with an annex summarising the Labour Law. The worker can ask for a third language from nine approved options, including Hindi, Malayalam, Tamil and Urdu. The employer signs electronically and the worker signs to accept. Giving MoHRE false information can lead to fines of up to AED 20,000.
2. Apply for the work permit. Attach the signed job offer to the work permit application. MoHRE offers 13 types of work permit; the standard permit for recruiting from abroad, and the permit for transferring a worker already in the UAE, are each valid for two years.
3. Get the entry permit or change of status. An employee abroad enters on an employment entry permit; an employee already in the UAE has their status changed.
4. Complete the medical fitness test and Emirates ID biometrics.
5. Sign and register the employment contract. Both parties sign, and the contract must be submitted to MoHRE within 14 days of the employee's arrival or status change, as set out in the official job offers and employment process guidance.
6.  Arrange health insurance and stamp the residence visa. Health insurance is now a precondition for issuing or renewing residency in every emirate.
7. Set up payroll on the WPS before the first salary falls due, and remind the employee to subscribe to the unemployment insurance scheme (ILOE).

Our visa and PRO services team handles these steps end to end, including the Work Bundle application.

What Must a UAE Employment Contract Include?

A UAE employment contract is the signed agreement, based on the accepted job offer, under which the employee works under the employer's supervision in return for a wage. It must state the start date, type of work, workplace, duration and salary, and once signed, no clause can be changed unless the employee agrees, the change stays within the law and MoHRE approves it.

Fixed-term only

All private-sector contracts are fixed-term. Since Federal Decree-Law No. 14 of 2022, there is no statutory maximum term, so employer and employee can agree the length; many employers choose two years to match the work permit. If a contract expires and both sides simply carry on working, the official guidance on contract duration says it is treated as renewed on the same terms, and the renewed period counts towards gratuity.

Probation rules

• Maximum six months, with no extension or second probation with the same employer.
• Employer ends employment during probation: 14 days' written notice.
• Employee leaves to join another UAE employer: at least one month's written notice, and the new employer must compensate you for recruitment costs unless agreed otherwise.
• Employee leaves the UAE: 14 days' notice. If they return on a new work permit within three months, the new employer owes you recruitment costs.
• No paid sick leave during probation, although unpaid sick leave can be granted on a medical report.

Notice period after probation

Article 43 of the Labour Law requires the notice period in the contract to be at least 30 days and no more than 90 days, and it applies equally to employer and employee.

Non-compete clauses

Article 10 allows a non-compete restriction, but only as far as needed to protect legitimate business interests, limited by time, place and type of work, and for a maximum of two years after the contract ends.

Work models you can use

The law recognises full-time, part-time, temporary, flexible, remote and job-sharing arrangements. A first hire does not have to be full-time: a part-time work permit lets you employ someone for fewer hours, and they can work for more than one employer with MoHRE approval.

WPS in 2026: The New First-of-the-Month Salary Rule

The Wage Protection System (WPS) is the UAE Central Bank's electronic salary-transfer system that lets MoHRE monitor whether private-sector employers pay wages in full and on time. Salaries must be transferred through banks, exchange houses or financial institutions authorised by the Central Bank, and can be paid in AED or another currency if the contract says so.

The biggest change for new employers this year is Ministerial Resolution No. 340 of 2026, effective 1 June 2026. Under the previous Resolution No. 598 of 2022, a salary was only considered late after 15 days. Now, according to the official UAE guidance on payment of wages:

• Salaries for the previous month are due on the first day of each Gregorian month.
• At least 85% of total wages due must be transferred on time (after lawful deductions).
• Penalties escalate automatically from the day after the due date.

What happens if salary is late

First-hire tip: the salary in your WPS file must match the salary in the MoHRE contract. A raise or allowance that was never registered can cause a mismatch. Choose your WPS agent or bank and test the salary file before the first payday, not on it. Our accounting and bookkeeping team can run payroll and WPS files for you.

Free zone note: Resolution No. 340 applies to establishments registered with MoHRE. Some free zones apply WPS to their companies and others use their own payroll rules, so confirm with your zone authority.

Working Hours, Leave and Other Employee Entitlements

These are the statutory minimums. You can offer more, but not less. Sources: official guidance on working hours and types of leave.

Is there a minimum wage? Not for expatriate employees: the Labour Law only requires wages to cover basic needs. For UAE nationals, MoHRE set a minimum salary of AED 6,000 a month for private-sector Emiratis from 1 January 2026.

Insurance and Social Security You Must Arrange

• Health insurance: employer-funded health insurance was already compulsory in Abu Dhabi and Dubai, and since 1 January 2025 it has applied in all seven emirates, as a condition of issuing or renewing residency.
• Unemployment insurance (ILOE): under Federal Decree-Law No. 13 of 2022, employees must subscribe to the Involuntary Loss of Employment scheme. The obligation is the employee's, but a missed subscription creates fines that can hold up work permit renewals, so build it into onboarding.
• Hiring an Emirati: UAE nationals are covered by the national pension system run by GPSSA instead of gratuity, and must be paid at least AED 6,000 a month.
• Emiratisation targets: these don't apply to your first hire, but they start once a company reaches 20 to 49 employees in designated sectors, and rise for companies with 50 or more. Plan for them as you grow.

End of Service: Gratuity and Final Settlement

End-of-service gratuity is the lump sum an expatriate employee earns after one year of continuous service. According to the official end-of-service guidance, under Article 51 of the Labour Law:

• 21 days of basic salary for each of the first five years, and 30 days of basic salary for each year after that.
• Calculated on the last basic salary, excluding housing, transport and other allowances. Unpaid absence does not count as service.
• Fractions of a year are paid pro rata once the first year is complete.
• The total is capped at two years' wages.
• All wages, gratuity and other dues must be paid within 14 days of the contract ending.

Worked example: an employee on AED 9,000 basic salary leaves after three years. Using the common 30-day daily rate, that is AED 300 a day × 21 days × 3 years = AED 18,900.

Employers can instead join MoHRE's voluntary Savings Scheme (Cabinet Resolution No. 96 of 2023), contributing 5.83% of basic salary a month for employees under five years' service and 8.33% after that into an approved investment fund. Your bookkeeping records should accrue gratuity monthly either way, so the liability never comes as a surprise.

Penalties First-Time Employers Most Often Face

Employees also have more leverage than many founders expect: either side can bring a labour claim for up to two years after employment ends, and MoHRE can issue binding decisions on claims of up to AED 50,000 without going to court.

First-Hire Compliance Checklist

1. Trade license valid, activity matches the job role.
2. Establishment file active with MoHRE or your free zone.
3. Corporate bank account open and WPS agent selected.
4. Job offer issued in Arabic and English, signed by both parties.
5. Work permit approved; entry permit or change of status done.
6. Medical test, Emirates ID biometrics and health insurance completed.
7. Contract registered within 14 days, with probation of six months or less and notice of 30 to 90 days.
8. Employee subscribed to ILOE.
9. Payroll calendar set to pay by the 1st of every month.
10. Monthly gratuity and leave accruals set up in your books.

How Consult Kumar Helps

For your first hire, we can handle the work permit and visa through our visa and PRO services, set up WPS-ready payroll through our accounting team, and make sure your license and activities support the role. Speak to our team before you make your first offer.

This article is general information based on UAE federal law and official guidance as of November 2026. It is not legal advice. Free zone rules vary by zone.

Frequently Asked Questions

What do I need before hiring my first employee in the UAE?

You need a valid trade license with no violations, an establishment file with MoHRE (mainland) or your free zone authority, and a job role that matches your licensed business activity. The employee then needs a work permit, residence visa, Emirates ID and health insurance before starting work.

Is there a minimum wage in the UAE?

There is no general minimum wage for private-sector employees under the UAE Labour Law. The exception is UAE nationals: since 1 January 2026, MoHRE requires a minimum monthly salary of AED 6,000 for Emiratis employed in the private sector.

When must salaries be paid under the WPS in 2026?

Under Ministerial Resolution No. 340 of 2026, salaries for the previous month are due on the first day of each Gregorian month and must be paid through the Wage Protection System. At least 85% of total wages due must be transferred on time. MoHRE starts sending alerts from the second day after the due date and suspends new work permits on the fifth day.

How long can a probation period be in the UAE?

Probation cannot exceed six months and cannot be extended. If the employer ends employment during probation, it must give 14 days' written notice. Probation counts towards total service if the employee is confirmed.

What notice period applies after probation?

Under Article 43 of Federal Decree-Law No. 33 of 2021, the notice period stated in the contract must be at least 30 days and no more than 90 days, and it applies to both employer and employee.

Can an employment contract in the UAE be unlimited?

No. All private-sector contracts under Federal Decree-Law No. 33 of 2021 are fixed-term. The original three-year maximum was removed by Federal Decree-Law No. 14 of 2022, so the parties can agree the length of the term, and contracts can be renewed.

How is end-of-service gratuity calculated for an expatriate employee?

After at least one year of continuous service, gratuity is 21 days of basic salary for each of the first five years and 30 days of basic salary for each year after that, capped at two years' wages. It must be paid with all other dues within 14 days of the contract ending. Emiratis receive pension benefits through GPSSA instead.

Is health insurance mandatory for employees in all emirates?

Yes. Employer-funded health insurance was already mandatory in Abu Dhabi and Dubai, and since 1 January 2025 it has applied to private-sector employers across all seven emirates when residency permits are issued or renewed.

Do free zone companies follow the UAE Labour Law?

Most free zone employers follow Federal Decree-Law No. 33 of 2021 on core employment rights, but the employee's visa, work permit and contract are processed through the free zone authority rather than MoHRE. DIFC and ADGM have their own employment laws. Always confirm your zone's contract template and payroll requirements before the first hire.

What is the penalty for employing someone without a work permit?

Since Federal Decree-Law No. 9 of 2024 took effect in August 2024, employing a worker without a valid permit can lead to a fine of AED 100,000 to AED 1,000,000, and fines for certain violations are multiplied by the number of workers involved.

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