What We Need to Know: UAE Labour Market Reform Update

by | Sep 26, 2016

There are three (3) new employment rules introduced by the Ministry of Labour (“MOL”) by way of the following three Ministerial Decrees:

• Ministerial Decree No. (764) of 2015 (“Decree No. 764”) – confirms the documents an employer must issue to a foreign employee when offering him/her employment.

• Ministerial Decree No. (765) of 2015 (“Decree No. 765”) – deals with the termination of limited and unlimited term contracts.

• Ministerial Decree No. (766) of 2015 (“Decree No. 766”) – sets out the circumstances in which a worker will be issued with a new work permit (and not be subject to a labour ban).

The above came into force on 1 January 2016. The decrees are not amendments to Federal Law No 8 of 1980, as amended (“UAE Labour Law”) but should be treated as enhancements / flexibilities.

• Ministerial Decree No 764 – Offering Employment

When offering employment to foreign nationals, employers will be required to submit an offer letter signed by the employee. This is part of the visa and work permit application process. The terms in the offer letter must be consistent with those subsequently included in the MOHRE/MOL Contract.

A copy of the template offer letter (“Offer Letter”) (English / Arabic version) is now available from the MOHRE. It contains the key terms of the employment relationship. If the employee does not speak English or Arabic, the Offer Letter will also need to be in their local language (in addition to English and Arabic) and there are further templates in various languages available from the MOHRE.

• Ministerial Decree No. 765 – Terminating Contracts –

Unlimited and Limited Terms

Unlimited term contracts

Notice – Decree 765 states that the notice to terminate an unlimited contract cannot be less than one month and should not exceed three months. Therefore, employers who have in place notice periods which exceed three months should be mindful that this could be subject to challenge.

Limited term contracts

Duration – Limited term contracts should be for a maximum duration of 2 years.


Previously, the position was that limited term contracts did not necessarily need to include a notice period, they simply ended upon expiry.

Amendment: Decree 765 now requires that notice of between 1 to 3 months’ is given. Where a limited term contract is renewed and no notice period is agreed, the default position will be a notice period of 3 months.

Early termination compensation / indemnification

Previous: Under the UAE Labour Law, an employer who terminates an employee’s limited term before its expiry is liable to pay the employee three months’ pay as “early termination compensation”. On the otherhand, an employee who terminates his limited term before its expiry is liable to pay the employer half of his three months’ pay.

Amendment: Indemnify the other party to the level that was agreed by both parties, not to exceed the equivalent of three (3) months of gross wages.

If a contract has been entered into between both parties before this Decree enters into effect and no amount of indemnification has been agreed upon, this indemnification shall be the equivalent of three (3) months of gross wages.

Labour Ban

Decree 766 lists the circumstances in which an employee will be issued with a new work permit and will not be at risk of being subject to a labour ban.

Limited Term: after expiry of the first fixed term

Unlimited Term: after 6 months (unless the employee has a high school diploma in which case the 6 month period is waived) provided that the terminating party

(i) gives notice to the other party as per the MOL Contract, and

(ii) honours the contractual obligations for the duration of the notice period.