TL;DR, Hiring in United Arab Emirates
- Expat employees: 0% statutory employer tax; end-of-service gratuity accrues at ~5.8% of basic salary
- Emirati nationals: 12.5% employer pension to GPSSA (general pension authority)
- No personal income tax, no payroll tax, but corporate tax 9% above AED 375K profit (since 2023)
- DEWS (DIFC) workplace savings scheme replaced gratuity for DIFC-based employers since 2020
Last reviewed:
Statutory employer costs in United Arab Emirates
In the UAE, employer statutory cost depends on the employee's nationality. For UAE / GCC nationals, employer GPSSA pension contribution is 12.5% (plus 1% for Emiratisation). For the vast majority of EOR hires (expatriates), there is no statutory payroll tax, but the End of Service Gratuity (EOSG) accrues at 21 days of basic salary per year for the first 5 years and 30 days/year thereafter, approximately 5.8–8.2% of basic salary. UAE has no personal income tax. DIFC-based employees use the DEWS scheme instead (5.83% / 8.33% employer contribution).
| Contribution | Employer rate | Notes |
|---|---|---|
| GPSSA pension (UAE nationals only) | 12.5% | Employer share for Emirati employees. Employee adds 5%. Does NOT apply to expatriates. |
| Emiratisation contribution (UAE nationals) | 1.0% | Additional employer contribution for Emirati hires under the Nafis programme. |
| End of Service Gratuity (expats) | ~5.8% of basic | Accrues at 21 days basic salary/year for years 1–5, then 30 days/year. Payable on termination (full if employer-initiated, reduced if employee resigns). |
| DEWS workplace savings (DIFC only) | 5.83–8.33% | Replaces EOSG for DIFC-licensed employers. 5.83% years 1–5, 8.33% thereafter, paid monthly into employee account. |
| Health insurance | Employer-funded premiums | Mandatory in Dubai (since 2014) and Abu Dhabi (since 2008). Typical cost AED 3,000–15,000/employee/year depending on plan tier. |
Mandatory employee benefits
Beyond statutory contributions, United Arab Emirates law requires the following benefits the employer must fund.
- Annual leave
- 30 calendar days per year after 1 year of service (Federal Decree-Law 33 of 2021). Pro-rated 2 days/month between 6–12 months.
- Public holidays
- ~13 days per year including Eid al-Fitr (3 days), Eid al-Adha (4 days), Islamic New Year, Prophet's Birthday, National Day (2 days).
- Sick leave
- After 3 months of service: 15 days full pay, 30 days half pay, 45 days unpaid, per illness episode.
- Maternity leave
- 60 days total: 45 paid (full pay), 15 paid at half pay. Plus optional 45 days unpaid related to illness. Paternity: 5 paid days.
Termination, notice and severance
Probation
Maximum 6 months under Federal Decree-Law 33 of 2021. Termination during probation requires 14 days notice from employer.
Notice period
30 days minimum for indefinite contracts, or as specified in the contract (up to 3 months max). Pay in lieu permitted.
Severance
End of Service Gratuity is the primary statutory exit payment: 21 days of basic salary per year for first 5 years + 30 days/year thereafter, capped at 2 years' total basic pay. Reduced if employee resigns before 5 years (typically by 1/3 to 2/3). The 2021 reform abolished the historic limited/unlimited contract distinction. Arbitrary dismissal can add 3 months' wages compensation.
Common compliance pitfalls
- EOSG is calculated on basic salary only, NOT on total compensation. Employers who structure offers as low base + high allowances (housing, transport) significantly reduce gratuity exposure. Conversely, salary inflation just before termination is challengeable.
- Federal Decree-Law 33 of 2021 abolished unlimited contracts; all contracts are now fixed-term (max 3 years, renewable). Old unlimited contracts auto-converted by Feb 2023; ensure your EOR has rewritten any legacy paperwork.
- WPS (Wage Protection System): salaries must be paid via licensed UAE banks/exchange houses and reported monthly to MOHRE. Foreign-bank transfers or cash payments trigger fines and visa suspension.
- DIFC and ADGM are separate jurisdictions with English-common-law employment regimes. DIFC mandates DEWS (workplace savings) instead of EOSG; ADGM employers must use ADGM's own scheme. EOR providers may default to mainland UAE Labour Law inappropriately.
Frequently asked questions
EOR platform fees for UAE range from $199–$699 per employee per month. For expatriate hires (the typical EOR profile), there is no statutory employer payroll tax, but End of Service Gratuity accrues at ~5.8% of basic salary per year and mandatory health insurance adds AED 3,000–15,000/year. Total true cost is unusually low at ~10–15% above base salary.
No personal income tax in the UAE for individuals (federal or emirate level). No employer payroll tax on expatriates either. The only employer-side costs are End of Service Gratuity accrual, mandatory health insurance (Dubai/Abu Dhabi), and the EOR's fee. This makes UAE among the cheapest OECD-grade markets to hire into.
Yes, but it triggers the 12.5% GPSSA pension contribution plus the 1% Emiratisation levy, materially raising cost vs an expatriate hire. Additionally, under the Nafis programme, mainland employers with 50+ workers must meet Emiratisation quotas (2% increase per year). EORs hosting Emiratis count toward your effective quota under audit interpretations; confirm with the provider.
EOSG is a lump-sum payment owed to expatriate employees on contract termination or non-renewal: 21 days of basic salary per year for the first 5 years, then 30 days/year, capped at 2 years' total basic. Full amount if employer terminates without cause; reduced (~1/3 to 2/3) if the employee resigns before 5 years. It must be paid within 14 days of last working day.
DIFC has a common-law employment regime (DIFC Employment Law No.2 of 2019) with the DEWS workplace savings scheme paid monthly instead of EOSG at termination, better cashflow visibility but slightly higher headline cost (5.83–8.33% vs ~5.8% EOSG accrual). Mainland is governed by Federal Decree-Law 33 of 2021. Choice usually depends on which jurisdiction your EOR's local entity is licensed in.
Sources
Statutory rates and rules verified against the following authorities. We update this page when rates change.