Mandatory Employee Benefits in the UAE: What Employers Must Provide in 2026

If you are hiring employees in the UAE, you need to know exactly what benefits are legally required versus what you can offer as optional extras. Getting this wrong costs money in fines, creates unhappy staff, and can lead to labour disputes.

The UAE Federal Decree-Law No. 33 of 2021 (and its executive regulations) sets the baseline for all employment benefits. Some emirates like Dubai and Abu Dhabi add extra mandatory requirements on top. Freezones like DIFC and ADGM have their own employment frameworks that differ from federal law.

This guide breaks down every mandatory benefit, the costs per employee, and what happens if you do not comply.

Mandatory Benefits Under Federal Labour Law

1. End-of-Service Gratuity

Every employee in the UAE on an employment contract accrues end-of-service gratuity from day one. This is a financial reward payable when the employment relationship ends.

The calculation is based on your total service:

The total gratuity can never exceed two years total basic salary.

Important: Gratuity is calculated on basic salary only, not on total compensation including allowances. Housing, transport, and other allowances do not count toward the gratuity calculation.

Who pays: The employer. This is not funded through any government scheme. You need to reserve this money on your balance sheet.

Example calculation: An employee earns a basic salary of AED 8,000 per month and works for 4 years. Their gratuity equals (AED 8,000 divided by 30) times 21 days times 4 years equals AED 22,400 payable on exit.

For a full breakdown of how gratuity works for different scenarios, read our UAE end-of-service gratuity guide.

2. Annual Leave

All employees are entitled to paid annual leave after completing 6 months of continuous service:

• Less than 1 year of service: 2 days per month worked
• 1+ years of service: 30 calendar days per year

Annual leave pay is at the employee’s full basic salary plus allowances. It is not negotiable.

Employees must use at least 15 consecutive days of leave each year. The remaining days can be taken separately or carried over, depending on company policy.

If employment ends before the employee takes their full annual leave entitlement, you must pay out the unused leave at their daily rate per day remaining.

3. Sick Leave

Employees are entitled to paid sick leave up to 90 days per year:

• First 15 days: 100 percent of salary
• Next 30 days: 50 percent of salary
• Remaining 45 days: Unpaid

Sick leave requires a medical certificate from a UAE-registered health provider. For casual sick leave (1 to 2 days), some employers waive the certificate requirement as a matter of policy, but the law allows you to insist on a certificate for the entire period.

Sick leave is not available during the probation period. An employee cannot take sick leave for the first 6 months of employment.

4. Maternity Leave

Female employees are entitled to:

• 60 calendar days total: First 45 days at full pay, next 15 days at half pay
• Additional unpaid leave: Up to 45 additional days (can be taken once or consecutively) if it is medically necessary due to illness from pregnancy or childbirth

Female employees can also take up to 100 additional days of unpaid leave if medically required due to health issues related to pregnancy or childbirth.

Protection: Pregnant employees cannot be terminated or served a notice during maternity leave or due to pregnancy.

5. Paternity Leave

Male employees are entitled to 5 working days of paternity leave within 6 months of their child’s birth. This is paid at full salary.

While this seems brief compared to European standards, it is the federal baseline. Some employers voluntarily offer more generous paternity leave as a recruitment perk.

6. Public Holidays

UAE employees are entitled to paid time off on official public holidays:

• New Year’s Day (January 1)
• Eid Al Fitr (approximately 4 days, dates vary by moon sighting)
• Arafat Day (9th Dhul Hijjah)
• Eid Al Adha (10th to 12th Dhul Hijjah — approximately 3 days)
• Islamic New Year (1st Muharram)
• Mawlid Al Nabi (Prophet’s Birthday)
• Commemoration Day (December 2)
• National Day (December 2-3)

In total, this is approximately 12 to 14 paid days per year depending on the year and moon sightings.

If an employee is required to work on a public holiday, they must receive either a replacement day off or payment at 125 percent of their normal rate.

7. Overtime and Working Hours

The standard working limit under federal law is 8 hours per day or 48 hours per week, with specific rules:

• Standard overtime rate: 125 percent of basic hourly rate
• Night shift overtime (10pm to 4am): 150 percent of basic hourly rate
• Weekend or public holiday work: 150 percent of basic hourly rate
• Maximum overtime: No more than 2 hours per day (unless exempt under emergency circumstances)

Ramadan hours are reduced by 2 hours per day for all employees during the holy month.

Emirate-Specific Mandatory Requirements

Dubai: Mandatory Health Insurance

The Dubai Health Authority (DHA) requires every employer to provide health insurance for all employees. This is non-negotiable and enforced through visa renewal. Without valid health insurance, an employee’s residence visa cannot be renewed.

Cost per employee:

• Basic Essential Benefits Plan (EBP): AED 700 to AED 1,200 per year (covers up to AED 150,000 annually)
• Enhanced plans: AED 2,000 to AED 8,000+ per year depending on coverage and salary grade

For dependent coverage, employers are not legally required to cover spouses and children, though many include it as part of their compensation package.

Abu Dhabi: Mandatory Health Insurance

Abu Dhabi has a similar requirement through the Department of Health (DoH). Employers must provide health insurance for all employees under the Thiqa or basic health insurance programme.

Cost per employee:

• Basic plan: AED 800 to AED 1,500 per year
• Enhanced plans: AED 3,000 to AED 10,000+ per year

Other Emirates (Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah, Fujairah)

Health insurance is not universally mandatory in the northern emirates under federal law, though many employers provide it as a standard benefit to remain competitive. The trend is moving toward full national coverage, so northern emirate employers should prepare for potential mandatory health insurance requirements in the coming years.

Optional Benefits (But Highly Recommended)

The following are not legally required, but are expected in the UAE job market, especially for skilled roles:

• Health insurance for dependents: AED 2,000 to AED 5,000 per child per year in Dubai
• Annual flight ticket allowance: AED 1,500 to AED 5,000 per employee per year
• Education allowance: AED 15,000 to AED 60,000 per child per year (common for senior roles at multinational companies)
• Company car or transport allowance: AED 500 to AED 2,000 per month or a leased company vehicle
• Performance bonus: 1 to 3 months’ salary typically tied to KPIs
• Mobile phone and allowance: AED 200 to AED 500 per month

For recruitment and HR management, tools like Horilla HRM can help you track employee benefits and ensure compliance with UAE labour law requirements.

Cost Summary Per Employee

Here is what mandatory benefits actually cost you as an employer for a typical employee earning AED 8,000 per month basic salary:

Total annual cost of employment: An employee on AED 8,000 basic salary costs the employer approximately AED 121,600 per year including gratuity accrual and health insurance.

What Happens If You Do Not Comply?

The UAE Ministry of Human Resources and Emiratisation (MOHRE) enforces labour law compliance. Penalties for violations include:

• Failure to provide end-of-service gratuity: Employee can file a claim with the labour court. The employer will be ordered to pay plus potential fines.
• Failure to provide health insurance (Dubai/Abu Dhabi): Visa renewals will be blocked. Fines of AED 500 to AED 30,000 per employee may apply.
• Failure to pay overtime: Employee can file a complaint with MOHRE. The employer must pay the shortfall plus potential penalties.
• Wrongful termination during maternity leave: The employee can claim reinstatement plus compensation equivalent to up to 12 months’ salary.

Freezone Employees: Different Rules Apply

Employees in the DIFC and ADGM are covered by those freezones’ own employment laws, which are modelled on common law frameworks and can be more generous than federal baseline:

• DIFC: Minimum 30 calendar days annual leave, 30 calendar days maternity leave at full pay, 10 days paid paternity leave, and a mandatory end-of-service gratuity scheme with employer contributions to a DIFC Employee Workplace Savings (DEWS) plan.
• ADGM: Similar to DIFC with its own mandatory benefits framework.

Freezone employees in DMCC, IFZA, RAKEZ, and other freezones follow federal labour law for their benefits unless specified otherwise in their freezone regulations.

Managing Benefits as Your Team Grows

As you hire more employees, managing benefits manually becomes impractical. You need systems to track:

• Annual leave balances and requests
• Sick leave usage and medical certificates
• End-of-service gratuity accrual per employee
• Health insurance renewals and dependent coverage
• Bonus calculations and performance reviews

For growing teams, consider best-of-breed HR software platforms that automate compliance tracking and eliminate manual errors.

Further Reading

For UAE employers seeking to expand your team with the right compliance framework:

• UAE Labour Law Guide for Employers
• How to Hire Employees in the UAE
• UAE End-of-Service Gratuity Guide
• Best HR Software for UAE SMEs
• UAE Employee Work Visa Guide
• UAE WPS Wage Protection System Guide