How is end of service gratuity calculated in the UAE?

UAE end of service (EOS) gratuity is calculated at 21 calendar days of basic salary per year for the first five years of service, and 30 calendar days per year for each year beyond five years. The calculation uses basic salary only — not allowances, commissions, or overtime. An employee who worked 3 years at a basic salary of AED 3,000/month receives AED 6,300 in gratuity (21 days × 3 years × daily rate of AED 100). Verify calculations using the MOHRE gratuity calculator at mohre.gov.ae.

How many days of annual leave are UAE employees entitled to?

UAE employees are entitled to 30 calendar days of paid annual leave per year after completing one year of service. Employees with less than one year but more than six months of service accrue leave on a pro-rata basis. Annual leave cannot be denied once earned — unused leave must be paid out at end of service. Many Dubai service businesses stagger leave during quieter periods (summer or post-Ramadan) to maintain staffing levels.

What is the Wage Protection System (WPS) and is it mandatory?

WPS (Wage Protection System) is a mandatory UAE government system requiring employers to pay employee salaries through approved financial institutions by a specific date each month. All businesses registered with MOHRE must comply. Non-compliance — including late salary payments — results in fines and restrictions on new visa applications. Salaries must be paid within 10 days of the agreed salary date. Your bank must support WPS payroll transfers; confirm this before opening a business account.

What are the rules for terminating an employee in the UAE?

UAE labour law (Federal Decree Law No. 33 of 2021) governs termination. Notice periods depend on contract type: a minimum of 30 days notice is required for employees with less than 5 years service, and 60 days for more than 5 years. Termination without notice or cause can result in compensation obligations. Arbitrary dismissal (termination without valid reason) entitles the employee to additional compensation of up to 3 months' wage. Always document performance issues before terminating.

How do I register employees with MOHRE as a Dubai service business?

Register your business with the Ministry of Human Resources and Emiratisation (MOHRE) at mohre.gov.ae or via the MOHRE app. You will need your trade licence, establishment card, and owner Emirates ID. Each employee then requires a work permit and residence visa (if not a UAE citizen). For salon and restaurant staff, the process takes 2–4 weeks per employee. Use a registered typing centre to submit visa applications, or apply directly through the MOHRE portal.

UAE Labour Law for Dubai Service Businesses: End of Service, Leave, and Termination

A practical guide to UAE Labour Law for salon, restaurant, and clinic owners in Dubai — covering MOHRE registration, gratuity calculations, annual leave entitlement, sick leave rules, termination procedures, and the Wage Protection System.

Why UAE labour law matters more than most business owners realise

A Dubai salon owner hired a stylist without a formal employment contract. When the relationship broke down after two years, the stylist filed a MOHRE complaint claiming arbitrary dismissal and unpaid gratuity. The owner had no documentation of the terms agreed. The settlement cost more than six months of the stylist's salary.

This is not an unusual story. UAE labour law is employee-protective. The obligation on the employer is to maintain records, follow procedures, and pay what is owed. Service businesses with high staff turnover — salons, restaurants, cafes — are the most exposed to labour claims.

This guide covers the practical essentials for a Dubai service business employing 3–30 people.

The legal framework

UAE labour relations are governed by Federal Decree Law No. 33 of 2021, which replaced the previous 1980 Labour Law. Key changes in the 2021 law:

New contract types introduced (unlimited term contracts are abolished; all new contracts are fixed-term, renewable)
Flexible and part-time work formally recognised
Arbitrary dismissal compensation strengthened
Non-compete clauses regulated (maximum 2 years, limited geographic/professional scope)

The Ministry of Human Resources and Emiratisation (MOHRE) administers the law for non-free-zone businesses. Free zone companies are subject to their own free zone employment regulations, though the underlying principles are similar.

MOHRE registration: the starting point

Before hiring any staff, your business must be registered with MOHRE. Without an establishment number, you cannot issue work permits.

Registration process:

Apply at mohre.gov.ae with trade licence, establishment card, and owner Emirates ID
Receive your establishment file number (usually within 5–7 working days)
Apply for work permits for each employee (new hires or transfers from other employers)
Complete the residence visa process through GDRFA (immigration)

Each employee requires: work permit (issued by MOHRE), entry permit, status change or visa stamping, Emirates ID application, and medical test. The full process typically costs AED 3,000–6,000 per employee and takes 3–6 weeks.

Employment contracts: what must be included

Under the 2021 law, all employment contracts must include:

Job title and description
Basic salary and any allowances (housing, transport)
Working hours
Start date and contract duration (fixed-term)
Leave entitlement
Notice period
Probation period (maximum 6 months)

Contracts must be in Arabic or bilingual (Arabic + English). Verbal agreements carry legal weight in UAE courts, but written contracts are your protection if a dispute arises.

Gratuity: the full calculation

End of service gratuity is a statutory entitlement that accrues from day one of employment. It cannot be waived in a contract.

Calculation formula:

Years of service	Daily rate basis	Formula
Up to 5 years	21 calendar days per year	(Basic salary ÷ 30) × 21 × years worked
Over 5 years (for years beyond 5)	30 calendar days per year	As above, using 30 days
Maximum payout	—	Capped at 2 years' total basic salary

Example: An employee with 7 years of service at AED 4,000/month basic salary:

Years 1–5: (4,000 ÷ 30) × 21 × 5 = AED 14,000
Years 6–7: (4,000 ÷ 30) × 30 × 2 = AED 8,000
Total: AED 22,000

Gratuity is reduced if the employee resigns (below 5 years of service). If the employer terminates, full gratuity is paid regardless of tenure.

Leave entitlements

Leave type	Entitlement
Annual leave	30 calendar days per year (after 1 year service)
Annual leave (6–12 months service)	Pro-rata
Sick leave (paid)	First 15 days: full pay
Sick leave (half pay)	Next 30 days: half pay
Sick leave (unpaid)	Remaining 45 days: unpaid
Maternity leave	60 calendar days (45 paid + 15 unpaid)
Paternity leave	5 working days
Compassionate leave	3–5 days (depending on relationship)
Hajj leave	Once in service, unpaid
Study leave	As agreed or per sector rules

UAE sick leave rules are often misapplied by employers. Sick leave requires a medical certificate from a MOHRE-recognised medical provider. You cannot terminate an employee on sick leave for the first 45 paid days of illness.

Termination: the process and pitfalls

With notice: Either party can end a fixed-term contract with the agreed notice period (minimum 30 days, 60 days for employees with 5+ years). During notice, the employee works normally and is entitled to full pay.

Summary dismissal (without notice): Permitted only in specific circumstances set out in the law — including conviction of a crime at the workplace, intoxication on duty, physical assault of colleagues, or serious breach of workplace policy. All other terminations require notice and gratuity.

Arbitrary dismissal: If a court finds a termination arbitrary — meaning not for a valid, documented reason — the employer pays an additional 3 months' wage on top of standard entitlements.

Documentation is your defence: Keep written records of performance conversations, warnings, and any incidents. A signed warning letter on file changes the position in a labour claim.

The Wage Protection System (WPS)

WPS is non-negotiable. Every business registered with MOHRE must pay salaries through the WPS system by the due date (within 10 days of the agreed salary date).

How it works:

You register your employee payroll details with MOHRE through your WPS-compatible bank
Salaries are transferred via your bank using the WPS format
The Central Bank receives confirmation
Non-compliant employers are blocked from new visa applications until rectified

Repeat non-compliance results in progressive fines. Keep your payroll on time — it protects you from fines and from employee complaints that immediately trigger MOHRE inspection.

Practical recommendations for service businesses

Probation period: Use the maximum 6-month probation period. During probation, either party can terminate with 14 days notice. After probation, the full notice regime applies.

Document everything: Written employment contracts, signed warning letters, leave approval records, and WPS payroll records. Store them for at least 2 years after an employee leaves.

Gratuity provisioning: Set aside gratuity monthly. It is not an unexpected cost — it accrues daily. A common financial mistake is treating gratuity as a future liability that "someone else" manages, then discovering a AED 50,000–100,000 obligation when a long-serving employee resigns.

HR advice: For businesses with 10+ employees, a one-time consultation with a UAE-registered HR or employment lawyer (AED 500–2,000 for a session) is worth the cost to review your contracts and procedures.