UAE Hiring & Payroll Compliance: WPS, Labor Law & Employee Visa Guide

UAE Employment Framework

The UAE's employment framework is governed by Federal Decree-Law No. 33 of 2021, which came into effect in February 2022 and was amended by Decree-Law No. 9 of 2024. This legislation applies to all private sector employers in the UAE, with some variations for free zone companies operating under zone-specific regulations.

Employers operating in the UAE must understand and comply with multiple interconnected requirements: visa sponsorship for foreign workers, salary payments through the Wage Protection System (WPS), mandatory health insurance, and end-of-service gratuity obligations. Non-compliance carries significant penalties including fines, license suspension, work permit blocks, and potential criminal charges.

Employee Visa Sponsorship

Foreign nationals require valid work permits and residence visas to be employed legally in the UAE. Employers are responsible for sponsoring their employees' visas and bearing all associated costs. Working on a tourist or visit visa is strictly prohibited.

Visa Sponsorship Process

Step 1: Labor Quota Approval. Before hiring, employers must have approved labor quota (visa allocation) from MOHRE or the relevant free zone authority. Quota is based on office space, license type, and compliance history. Processing takes 5 to 7 days for mainland, 2 to 3 days for most free zones.

Step 2: Employment Contract Registration. A bilingual Arabic/English employment contract must be filed with MOHRE or the free zone authority. Contracts must be fixed-term (maximum 3 years, renewable) as unlimited contracts were phased out in 2023.

Step 3: Work Permit Application. The employer applies for a work permit (labor card) through MOHRE's Tas'heel system or the free zone portal. Processing takes approximately 5 working days.

Step 4: Entry Permit Issuance. Upon work permit approval, an entry permit is issued allowing the employee to enter the UAE. The permit is valid for 60 days.

Step 5: Medical Fitness Test. The employee undergoes mandatory medical examination at an approved DHA or DOH center to confirm they are free from communicable diseases.

Step 6: Emirates ID Biometrics. The employee provides fingerprints and photographs at an Emirates ID center.

Step 7: Residence Visa Stamping. The final residence visa is stamped in the employee's passport, however this process is currently done electronically.

Visa Quotas

Mainland Companies: Quota is based primarily on office space, typically 80 to 100 square feet per visa. A 400 square foot office generally qualifies for 4 to 5 visas. Additional factors include license activities, financial standing, WPS compliance history, and Emiratisation compliance. Companies with better compliance records receive higher quotas.

Free Zone Companies: Quota is tied to license packages. Flexi-desk packages typically allow 1 to 3 visas. Physical office packages allow 6 to 15 visas depending on size. Virtual office packages generally allow 0 to 1 visa. DMCC, for example, allows 1 visa per 9 square meters or 3 visas per flexi-desk.

Visa Costs (Per Employee)

Work Permit: AED 200 base fee plus AED 50 to AED 3,450 depending on employer's MOHRE classification.

Medical Test: AED 300 to AED 500.

Emirates ID: AED 370 for 2-year validity.

Visa Stamping: AED 500 to AED 1,000.

Health Insurance: AED 550+ annually (mandatory).

Total First-Year Cost: AED 3,000 to AED 8,000 per employee, borne entirely by the employer under UAE labor law.

Employment Contracts

Contract Type: All employment contracts must be fixed-term (limited), with a maximum duration of 3 years. Contracts are renewable. Unlimited contracts were phased out by February 2023.

Language: Contracts must be in English and filed with MOHRE or the relevant free zone authority.

Probation Period: Maximum 6 months. During probation, either party may terminate with 14 days written notice.

Notice Period: Minimum 30 days after probation, up to 90 days for senior roles as specified in the contract.

Wage Protection System (WPS)

The Wage Protection System is the UAE's mandatory electronic salary transfer platform, operated by MOHRE in partnership with the Central Bank. Introduced in 2009 and significantly upgraded in January 2026, WPS ensures employees receive their wages on time and in full. Monthly transfers through WPS exceed AED 35 billion, covering over 99% of private sector workers.

WPS Requirements

Registration: All employers registered with MOHRE must subscribe to WPS. New hires must be registered within 30 days of work permit issuance.

Payment Currency: Salaries must be paid in UAE Dirhams unless both parties agree otherwise in the contract.

Payment Method: At least 80% of salary must be transferred to employee bank accounts via authorized WPS agents (banks, exchange houses, or fintech providers approved by the Central Bank).

Payment Timing: Wages are due from the first day of the month following the period specified in the contract. Payment is considered late if not made within 15 days of the due date.

Coverage Requirements: Employers must pay at least 90% of employees within the month and at least 80% of total salary amounts. Any deductions must be documented.

Salary Information File (SIF)

Employers must prepare and upload a Salary Information File to the WPS system each pay period. The SIF includes employee details (name, labor card number, bank account), basic salary, allowances, deductions, and the salary period. MOHRE and the Central Bank verify that SIF details match employment contracts before authorizing payment.

WPS Exclusions

Certain employees are excluded from monthly WPS SIF files: employees who filed wage-related complaints referred to judiciary, employees reported absent via work abandonment report, new employees during the first 30 days from wage due date, and employees on documented unpaid leave. These exclusions must be documented through the MOHRE WPS dashboard.

WPS Penalties

MOHRE's system sends reminders on the payday, 3 days after, and 10 days after. If salary remains unpaid 15+ days after the due date, penalties begin:

Day 16+: Company blocked from new work permits.

Day 30+: MOHRE enforcement actions begin.

Administrative Fines: AED 5,000 per violation for late payments (can accumulate monthly). False wage data incurs AED 1,000 per affected employee. Maximum fines can reach AED 50,000 for multiple violations.

Additional Consequences: License suspension or cancellation, criminal referral for serious violations, inability to sponsor future employees.

Free Zone WPS

WPS requirements vary by free zone. DMCC adopted WPS in February 2023 with sanctions beginning January 2024. JAFZA requires WPS compliance. Some free zones like Meydan do not require WPS, allowing more flexible payroll arrangements. Shareholders are typically excluded from WPS requirements.

End-of-Service Gratuity

End-of-service gratuity is a mandatory payment employers must provide to employees upon termination of employment. It serves as a form of retirement benefit and financial security for workers.

Eligibility

Employees are entitled to gratuity after completing at least one full year of continuous service. Both UAE nationals and expatriates qualify. Days of absence without pay are not included when calculating the service period.

Calculation

First 5 Years: 21 days of basic salary for each year of service.

After 5 Years: 30 days of basic salary for each additional year beyond 5 years.

Maximum Cap: Total gratuity cannot exceed 2 years' worth of basic salary.

Calculation Basis: Gratuity is calculated on the last basic salary only. Housing allowance, transportation allowance, bonuses, and commissions are excluded.

Formula: Gratuity = (Basic Monthly Salary / 30) x [21 or 30] x Years of Service

Example: An employee with AED 15,000 basic salary and 7 years of service would receive:

• First 5 years: (15,000/30) x 21 x 5 = AED 52,500.

• Next 2 years: (15,000/30) x 30 x 2 = AED 30,000.

  
  

  Total gratuity: AED 82,500.

Payment Timeline

Employers must pay gratuity within 14 days of contract termination. Employers may deduct any amounts owed by the employee from the gratuity payment. Unused annual leave must also be paid out at final settlement.

Health Insurance

Health insurance is mandatory for all employees in the UAE. Employers are legally required to provide coverage, and employees cannot renew residence visas without valid insurance.

Dubai: Employers must provide health insurance covering the employee. Family coverage is not mandatory but commonly provided.

Abu Dhabi: Employers must provide health insurance for employees AND their immediate family members (spouse and children).

Cost: Basic employer plans start at AED 550 to AED 1,500 annually per person. Penalty for non-coverage is AED 500 monthly fine.

Visa Cancellation and Termination

Employer Obligations: When employment ends, employers must initiate visa cancellation within 30 days. Delays cause overstay fines charged to the sponsor.

Employee Grace Period: Standard employment visa holders receive 60 days after cancellation to find new employment, change visa type, or depart the UAE. Green Visa and Golden Visa holders receive extended grace periods up to 6 months.

Final Settlement: Employers must pay all outstanding wages, unused annual leave, and gratuity within 14 days of termination.

Changing Employers: Under 2022 labor law reforms, employees can transfer to new employers more easily. The previous visa is cancelled and a new visa issued under the new sponsor. Transfers can often be processed without leaving the UAE.

Employer Compliance Checklist

Contracts: Written, bilingual, fixed-term, filed with MOHRE or free zone authority.

Payroll: WPS registration, payment in AED, on schedule (maximum 15 days late), documented deductions.

Visas: Sponsor all expatriate employees, track visa status, renew before expiry, cancel promptly upon termination.

Insurance: Mandatory health coverage for all employees (plus family in Abu Dhabi).

Termination: Proper notice period, pay gratuity and unused leave within 14 days, cancel visa within 30 days.

How We Support Your HR Compliance

Our team provides comprehensive employment compliance support for businesses operating in the UAE. From visa processing and WPS registration to contract drafting and gratuity calculations, we ensure your HR operations meet all regulatory requirements.

Contact Gravity Power Management Consultancies to discuss your hiring and payroll compliance needs.

Article Written By:

Laura Jihad Berrouan,

Co-Founder / UAE Business Expert

Dubai, United Arab Emirates

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Disclaimer: Thank you for reading our article! This content is for informational purposes only and does not constitute legal, tax, or investment advice. Please consult qualified professionals for guidance specific to your situation.