Hiring staff from a free zone: employment law and payroll rules

When a free zone company hires staff, the employee's work permit and residence visa are issued through the free zone authority, and the number of visas the company can hold depends on its package. The UAE Government portal states that free zone employees are generally governed by the free zone authority's employment regulations together with Federal Decree-Law 33 of 2021, the federal labour law. The two financial free zones, DIFC and ADGM, have their own employment laws. Federal schemes such as the Wage Protection System and unemployment insurance apply differently from zone to zone, so confirm each one with your zone.

The table compares zones on this site's team reference set-up: three residence visas with a flexi-desk or small office. Prices are as published by each zone on the date shown; see how we verify.

Which employment law applies

Federal Decree-Law 33 of 2021 applies to "all Establishments, Employers and Workers in the Private Sector in the State", except government employees, the armed forces, police and security, and domestic workers (Article 3). It has been amended since 2021; the UAE Legislation portal publishes the current English text. Ask your zone for its employment regulations and which federal rules it applies alongside them.

Contracts, work permits and visas

The labour law requires an employer to obtain a work permit before employing a worker (Article 6). It also prohibits charging the worker recruitment fees or costs. In a free zone, the UAE Government portal says the company applies for the employee's work permit and residence visa through the free zone authority.

Under the labour law:

• Contract. The employer must conclude an employment contract in two copies, one for each party, on the forms set by the Executive Regulation, for a definite term that can be renewed (Article 8).
• Probation. Probation may last up to six months. An employer who ends employment during probation must give at least 14 days' written notice (Article 9).
• Notice. Either party may end the contract for a legitimate reason with written notice of between 30 and 90 days, as set in the contract (Article 43).
• Final pay. The employer must pay the worker's entitlements within 14 days of the end of the contract (Article 53).

In ADGM, the guidance states that the employer is responsible for obtaining and maintaining the employee's ADGM work permit and, where applicable, UAE residence visa and Emirates ID, and pays the costs.

Visa quotas and your package

The UAE Government portal states that the number of visas a free zone business can get depends on factors such as the package it signed up for, and that the zone authority can advise on eligibility and on increasing the quota. The residence visa guide explains how the allocation works, and the team with three visas ranking compares published packages.

Paying wages: the Wage Protection System

Cabinet Resolution 1 of 2022, the labour law's Executive Regulation, states that all establishments registered with the Ministry of Human Resources and Emiratisation must pay wages on the due date through the Wage Protection System (WPS) or another system approved by the Ministry (Article 16). The UAE Government portal adds that, under Ministerial Resolution 340 of 2026, salaries for the previous month are due on the first day of each month. It lists escalating measures for late payment, starting with alerts and moving to suspension of new work permits from the fifth day.

Whether WPS applies to a free zone company depends on the zone. JAFZA, for example, states that all businesses registered with it must comply with the UAE WPS, and has required this since 2012. Ask your zone whether it requires WPS and through which bank or provider.

End-of-service gratuity

Article 51 of Federal Decree-Law 33 of 2021 sets the gratuity for a foreign full-time worker with at least one year of continuous service, calculated on the last basic wage:

• 21 days' wage for each of the first five years;
• 30 days' wage for each year after that;
• a pro-rata amount for part years;
• a total cap of two years' wage.

UAE national workers receive end-of-service benefits under the pensions and social security legislation. Cabinet Resolution 96 of 2023 also lets private-sector employers, "including free zones", place selected workers in a voluntary alternative end-of-service savings scheme instead.

The financial free zones differ. The DIFC Employment Law requires monthly contributions to a qualifying scheme of 5.83% of basic wage for the first five years of service and 8.33% for each further year. ADGM's guidance states that an employee with at least one year of continuous service is entitled to a gratuity whatever the reason for termination, and that employers may offer a pension or savings scheme as an alternative.

Unemployment insurance

Federal Decree-Law 13 of 2022 applies to all workers in the private and federal government sectors. Article 3 excludes investors who own the establishment they work in, domestic workers, temporary-contract workers, under-18s and retirees who draw a pension and have taken a new job. The UAE Government portal states that:

• the worker pays the premium: up to AED 5 a month where basic salary is below AED 16,000, and up to AED 10 a month where it is above;
• compensation is 60% of the subscription salary for up to three months, capped at AED 10,000 or AED 20,000 a month depending on the category;
• the worker must have been subscribed for at least 12 continuous months and must claim within 30 days of the end of employment;
• a worker who does not subscribe, or does not pay the premiums, is fined AED 400.

For free zones, IFZA's guidance states that employees of companies registered in a UAE free zone were required to subscribe from 3 May 2023. ADGM's guidance states that the scheme is not mandatory in ADGM. Check with your zone.

Working hours and leave

Federal Decree-Law 33 of 2021 sets these minimums:

Zone regulations, DIFC law and ADGM regulations set their own figures, so check the rules that apply to your employees. For a specific dispute or contract question, ask your zone's employment office or a lawyer licensed in the UAE.

Next steps

Shortlist zones by the number of visas you need on the team with three visas ranking, or use the free zone finder. The annual compliance guide covers recurring obligations, and each zone page links to the zone's own published information.