Cross-Border Catch-Up: Liberalization and Compliance—What’s Changing for Employers in the UAE

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Samantha Duncan: Welcome to the Cross-Border Catch-Up, the podcast for global employers who want to stay in the know about cutting-edge employment issues worldwide. I’m Samantha Duncan, and I’m here with my colleague, Shirin Aboujawde. We are cross-border attorneys here at Ogletree, and today we’re going to talk about the UAE’s recent social and employment reforms, and whether they represent genuine modernization or business as usual. Thanks for joining us today, Shirin.

Shirin Aboujawde: Thanks for having me, Sam. This is a fascinating topic because the UAE has been implementing these reforms for a while, and I think now it’s starting to really catch the attention of multinational employers and expatriates alike.

Samantha Duncan: Well, let’s get into it. The UAE has long occupied a unique position in the Gulf region, right? It’s a business-friendly hub with rapid economic development, yet we see that it’s firmly rooted in traditional values and national identity. So, can you tell us a little bit more about what’s changing there?

Shirin Aboujawde: Well, there has been a flurry of reforms on multiple fronts. On the social side, we’re seeing relaxation of alcohol licensing requirements. A few years ago, we saw the shift from Monday to Friday work week, which was huge. And there are evolving social attitude changes that we’re seeing within the government. But on the employment side, there’s increased enforcement of Emiratisation quotas, higher labor law penalties, and stricter processes for filing claims against employers.

Samantha Duncan: Okay, that’s interesting. It kind of sounds like liberalization on one hand but tightening on the other. I think kind of getting into it a little bit more, let’s start with social reforms. What’s happening with the alcohol licensing that you mentioned?

Shirin Aboujawde: What we’ve seen over the last few years is recent relaxation of UAE alcohol regulations, though the position differs by emirate. In Abu Dhabi, the personal license requirement for residents has been fully abolished, which means that local residents no longer need to have a license to hold alcohol in their homes. In Dubai, the license requirement itself remains in place for purchasing alcohol from off licenses and for home consumption. But since January of 2023, the annual fee has been removed and the process has been substantially simplified, so it only requires an Emirates ID. The Emirate of Sharjah though maintains a complete ban on alcohol.

Samantha Duncan: So really the way to think about it is it sounds like it’s kind of a pragmatic approach rather than a blanket liberalization in the area.

Shirin Aboujawde: Exactly. These reforms reflect a broader effort to attract international talent and tourists by removing the costs and administrative barriers. Alcohol remains subject to strict rules across the UAE, and prohibition on public consumption outside licensed venues continues, as well as a ban for Muslims. But the changes signal a pragmatic acknowledgement of the country’s increasingly diverse population.

Samantha Duncan: The work week change that you mentioned, that sounds pretty significant as well. Can you tell us a little bit more about how that’s been rolled out in the UAE?

Shirin Aboujawde: Yeah, so that happened a few years ago, in January of 2022. The UAE became the first Gulf nation to adopt a Monday to Friday work week for federal government entities. And that shifted the traditional Sunday to Thursday schedule, which you still see throughout the Gulf. This change has since been widely accepted by the private sector and aligns the UAE more closely with Western business hours.

Samantha Duncan: Well, that must be kind of a big deal for multinational employers.

Shirin Aboujawde: Absolutely. It’s huge. For multinational employers, this alignment reduces that lost day problem that previously complicated scheduling with headquarters in Europe and the Americas. The reform also introduced a four-and-a-half-day work week for government employees, with Friday afternoons designated for prayer and family time. It facilitates real-time collaborations with international partners and clients.

Samantha Duncan: Okay. And what about the evolving social attitudes we hear about?

Shirin Aboujawde: Well, there have been notable shifts there in the enforcement and public discourse around personal lifestyle choices, including relationships particularly within the LGBTQ community. And while the UAE’s legal framework remains very conservative by Western standards, there has been a marked relaxation in practical enforcement with the authorities adopting a more tolerant approach towards private contact among consenting adults. Even the decriminalization of cohabitation outside of marriage reflects an evolving social contract, one that prioritizes economic developments and global integration while maintaining respect for local cultural norms.

Samantha Duncan: Okay. But with those shifts, employers should still note though that public conduct standards remain?

Shirin Aboujawde: Absolutely. That’s right. Workplace policy should continue to reflect local sensitivities. It’s a balancing act.

Samantha Duncan: That makes sense. And now let’s turn to the employment law developments. You mentioned things are tightening there.

Shirin Aboujawde: Yes, to some extent. So, while the social reforms suggest liberalization, the employment landscape tells a little bit more of a nuanced story. Recent changes indicate that the UAE is not simply adopting Western employment norms, but rather strengthening protections for its workforce and increasing compliance obligations for employers.

Samantha Duncan: Okay. And can you talk about what’s been going on with Emiratisation recently and the UAE? I know that’s been kind of a longstanding part of employment law and the UAE, but what’s happening there lately?

Shirin Aboujawde: Yeah. So essentially Emiratisation rates are increasing. An Emiratisation rate is the requirement to employ certain quotas of Emirati citizens, or UAE nationals, and it remains a central pillar of the UAE employment policy. Enforcement of required quotas is expected to increase significantly in 2026, aligned with increased employment Emiratisation rates, except in the free zones, of course, which remain exempt.

Samantha Duncan: Okay. And you mentioned quotas. What are the specific requirements that employers need to meet now?

Shirin Aboujawde: Yeah. So, companies with 50 or more employees must achieve 10% Emiratisation rate of their skilled workforce by the end of 2026, while companies with 20 to 49 employees across 14 designated sectors must employ at least two Emirati nationals. The Ministry of Human Resources and Emiratisation, or MOHRE, as we like to call it, has announced plans to use enhanced surveillance mechanisms, including AI tools to detect avoidance strategies such as hiring Emiratis in roles that do not perform genuine work simply to meet the quotas.

Samantha Duncan: Okay. And AI-powered compliance monitoring, that sounds quite sophisticated. That certainly seems to indicate that MOHRE is taking enforcement seriously. Is there any flexibility that’s built in for employers?

Shirin Aboujawde: A little bit, but not much. There’s a practical accommodation. MOHRE has introduced a resignation grace period. So, if a UAE national resigns unexpectedly, causing a drop in the company’s Emiratisation numbers, employers now have a two-month grace period to hire a replacement before penalties apply.

Samantha Duncan: Okay, that’s helpful. Now I also understand that there’s a potentially significant change on the horizon regarding end of service gratuity.

Shirin Aboujawde: Absolutely. And this one’s huge. It’s probably one of the most significant potential changes that could be happening in the UAE. Under cabinet resolution number 96 of 2023, private sector employers in the UAE can already voluntarily opt into a savings scheme instead of accruing statutory end of service gratuity. For those that are in the Dubai International Financial Center, or DIFC, which is a free zone in the UAE, they’ve actually gone further than that. And for years, they’ve already had a practice of implementing a mandatory funded savings plan called the DEWS, which is a similar scheme to those that might be familiar with a 401(k). And in those cases, if you’re in the DIFC, you don’t have to pay end of service gratuity because you’ve been contributing into a DEWS scheme.

Samantha Duncan: Wow. So that does sound like a big potential shift. Do you see this then potentially becoming mandatory more broadly?

Shirin Aboujawde: Signs are definitely pointing to it. MOHRE has completed a policy evaluation, and is actively consulting with stakeholders, and has invited proposals through February of this year to replace end of service gratuity system entirely. Now, there’s no official timeline for a permanent transition, just been confirmed, but industry analysts and labor market advisors within the region are discussing the potential for a mandated transition sometime in 2026.

Samantha Duncan: Well, what are the implications for employers if this does become mandatory?

Shirin Aboujawde: The implications are significant. A shift to mandatory savings contributions is likely to result in adjustments to wage growth to offset contributions, along with additional compliance measures for employers. Because when an employee leaves, there’s probably going to be a bifurcated analysis for times in employment that fell under the end of service gratuity period versus the mandatory contribution period. This reform would align with the UAE more closely with Western pension models. So that would be great going forward, but it would fundamentally change the economics of expatriate employment packages.

Samantha Duncan: So, stepping back, I guess, what’s the overall picture here? Is this kind of modernization like we talked about, or is this more business as usual?

Shirin Aboujawde: The evidence suggests that the UAE is pursuing a carefully calibrated strategy rather than a wholesale Westernization. On the social front, reforms to alcohol licensing, the work week, and personal conduct reflect more pragmatic adaptations to compete for global talent and investment. These changes remove friction points for expatriates and multinational operations without fundamentally altering the UAE’s cultural identity.

Samantha Duncan: And what about on the employment side?

Shirin Aboujawde: Well, on the employment front, the trajectory is more complex. While the voluntary savings scheme and work week changes align with Western practices, the intensified Emiratisation enforcement and AI-powered compliance monitoring show the UAE is simultaneously strengthening, not loosening, its regulatory grip on employers. This is not deregulation. It’s strategic modernization with distinctly local characteristics.

Samantha Duncan: Okay. Those are all really helpful points about the way in which the UAE has been shifting recently. What would you say is the key takeaway for multinational employers?

Shirin Aboujawde: I think the message is pretty clear. The UAE offers increasingly attractive environment for doing business and attracting talent, but this comes with heightened compliance expectations. Success requires understanding that the UAE is forging its own path, one that borrows selectively from Western models while remaining firmly anchored in its national priorities.

Samantha Duncan: Thank you, Shirin. You’ve definitely given employers operating in the UAE a lot to think about. And thank you for joining us for today’s Cross-Border Catch-Up. Follow us to stay in the know about cutting edge employment issues worldwide.

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