I've set up my free zone company. Now I want to take someone on. What do I actually need to do?

I regularly have this conversation with clients who have set up a free zone company in the UAE and are now busy enough to need help. The licence is issued, the bank account is open, the first invoices have gone out, and then the work picks up faster than anyone expected. Suddenly you need a person, not just a licence.

And it is easy to see why. Setting the company up felt like the hard part. Taking someone on feels like it should be the easy bit. You agree a salary, they turn up, you pay them.

The one thing not to forget is this: in the UAE, your company is that person's sponsor. Their right to live here, work here and open a bank account here runs through your licence. That is a considerably bigger responsibility than signing a contract in the UK, and it comes with a list of things the free zone, the immigration authority and the insurer all expect you to have done, in the right order.

Before you read on, log into your free zone portal and look at your visa quota. Every licence comes with a number of visas it can sponsor, usually linked to the office or desk package you chose when you set up. If it says one, and you already hold that one yourself, you have found your first job. It takes a few minutes and it tells you where you are starting from.

Now, the client call. A client contacted me last week. He set up his free zone company earlier this year, has more work than he can handle, and wants to bring his brother over from the UK to help him run it. His questions, more or less word for word: “Can I just pay him and sort the paperwork later?”, “It's my brother, do we really need a contract?”, “Do I have to use this WPS thing?” and “Is there a pension?”

Here is what we told him. As usual, I have changed the details, and the brother is a composite of several clients who have asked me the same things this year. The questions are real.

So I thought I'd get this out there.

At a glance

• Your company sponsors the employee's residence visa. Check your visa quota before you promise anyone a job.

• The visa process generally takes two to four weeks and costs roughly AED 3,500 to AED 7,500 per person in fees, depending on the free zone, plus health insurance.

• A written employment contract on the free zone's template is required by law, brother or not. The UAE Labour Law applies in almost every free zone. DIFC and ADGM have their own rules.

• Whether you must pay salaries through the Wage Protection System depends on your free zone. Where it does, expect the free zone to follow MOHRE's timing, which since 1 June 2026 has meant salaries due on the first day of the month.

• Health insurance is compulsory for every employee, paid for by you, and must be in place before the visa is issued.

• Unemployment insurance (ILOE) is the employee's own subscription, but you should make sure it is done within four months of the work permit.

• There is no pension. There is end of service gratuity, and you should be putting money aside for it from month one.

“Can I just pay him and sort the paperwork later?”

No. And I say that with affection, because I understand the temptation.

Until your company has sponsored his residence visa and the free zone has issued his work permit, he is not allowed to work for you in the UAE. Paying someone who is here on a visit visa to do a job is exactly the situation the authorities look for, and the fines land on the company, not on the employee.

Here is how it generally works in a free zone:

1. Establishment card and immigration file. Your company needs an active establishment (immigration) card with the free zone and the immigration authority. For most companies this was set up as part of licensing. Check it has not expired, because it renews every year and everything else stops if it has.

2. Visa quota. Confirm you have a spare visa on your licence. If not, you either upgrade your office package or apply to the free zone for an additional allocation, and most free zones now want to see evidence of real trading before they say yes.

3. Entry permit. The free zone applies for an entry permit on your behalf. If he is still in the UK, he travels in on it. If he is already here on a visit visa, an in-country status change is usually possible without leaving.

4. Medical fitness test and Emirates ID biometrics. A blood test, a chest X-ray, fingerprints and a photograph, at approved centres.

5. Health insurance. This has to be active before the visa is finalised. More on this below.

6. Residence visa and work permit. The visa is issued, generally for two years in a free zone, and the free zone issues its own employment card or work permit. Then he can open a bank account and start.

Realistically, allow two to four weeks from start to finish if every document is right first time. Budget somewhere between AED 3,500 and AED 7,500 per person for the government and free zone fees, with insurance on top. Some free zones also ask for a refundable deposit or a bank guarantee per employee, so read your free zone's fee schedule rather than assuming.

One thing that surprises people. If the person you want to hire is already in the UAE on a family visa, sponsored by their spouse for example, you do not need to sponsor a new residence visa. However, you do still need the free zone to issue them a work permit before they can work for you. Same contract, same insurance, same rules, just without the visa cost.

“It's my brother. Do we really need a contract?”

Yes. For two reasons, one legal and one human.

The legal reason. Federal Decree-Law No. 33 of 2021, the UAE Labour Law, applies to companies in almost every free zone. The exceptions are the two financial free zones, DIFC and ADGM, which have their own employment laws and their own end of service arrangements. Everywhere else, the free zone authority will not issue a work permit without a signed employment contract on its own template, and that contract is the document that governs the relationship. It is not optional and it is not a formality.

The human reason. Sometimes brothers fight. I have watched family businesses come apart over a disagreement that a two-page contract would have settled in an afternoon. If the salary, the notice period, the hours and what happens when someone leaves are written down at the start, the conversation later is about the document, not about who said what over Sunday lunch. It is the kindest thing you can do for the relationship.

What generally goes into the contract:

• A fixed term, renewable. UAE contracts are limited-term rather than open-ended.

• Basic salary and allowances, shown separately. This matters more than people realise, because end of service gratuity is calculated on basic salary only. A package of AED 15,000 split as AED 9,000 basic and AED 6,000 allowances produces a significantly different gratuity from AED 15,000 basic. Be fair, be consistent, and be aware of it.

• Probation of up to six months. During probation you can end the contract on 14 days' notice. The employee needs to give 30 days if they are moving to another UAE employer, or 14 days if they are leaving the country.

• A notice period after probation of between 30 and 90 days.

• Working hours of no more than 8 a day or 48 a week, and 30 calendar days' annual leave once they have completed a year (two days a month once they pass six months).

• The job title. Make sure it matches the activity on your licence and the qualifications the person actually holds. The free zone checks, and a mismatch delays the visa.

And a tax point, because I cannot help myself. Your brother is a connected person for UAE Corporate Tax purposes. His salary is a deductible expense for the company, but only to the extent it is what you would pay an unconnected person to do the same job. Pay him a market rate, note down why it is a market rate, and you have nothing to worry about. Pay him AED 60,000 a month to run the diary and the Federal Tax Authority may take a different view.

“Do I have to use this WPS thing?”

It depends on your free zone. That is not me dodging the question, it is the actual answer.

The Wage Protection System is the electronic salary transfer system run through the Ministry of Human Resources and Emiratisation. Every mainland company must use it. Among the free zones, JAFZA and DMCC require it, DIFC and ADGM run their own equivalent monitoring, and many of the smaller and newer free zones do not currently mandate it at all. Your licence conditions and your free zone's employment rules will tell you which camp you are in. Ask them, in writing, and keep the answer.

The rules tightened considerably this year. Ministerial Resolution No. 340 of 2026 came into force on 1 June 2026 for employers licensed with the Ministry. Salaries for the previous month are due on the first day of the month, the old grace period has gone, and at least 85% of total wages must go through on time. Miss it and the consequences escalate automatically: warnings first, then a block on new work permits within days, then fines, and eventually legal action. JAFZA and DMCC run WPS under their own rules, so if you are in one of those, check whether your free zone has adopted the same deadline yet, and work to it either way. In practice, payroll needs to be prepared and submitted early enough for salaries to reach employees by the first of the following month, not on the third when you get round to it.

If you are not in a WPS free zone, do this anyway: pay salaries from the company bank account, on the same date every month, with a payslip showing basic, allowances and any deductions. If there is ever a dispute, or the free zone asks, or you need to prove substance for Corporate Tax, that record is what saves you. And frankly, it is what a professional employer does.

“What about health insurance?”

Compulsory, paid for by you, and in place before the visa is issued.

Every emirate now requires private sector employers to insure their employees. Dubai has since 2014, with the employer covering the employee and the spouse and children being the employee's responsibility unless you choose to cover them. Abu Dhabi goes further and requires the employer to cover a spouse and up to three children under 18 as well. Sharjah and the Northern Emirates joined on 1 January 2025, so if your free zone is in Ras Al Khaimah, Ajman, Fujairah, Umm Al Quwain or Sharjah, this applies to you too.

The immigration authority will not process the residence visa without proof of cover, and it will not renew it either. Fines for uninsured staff generally run to AED 500 to AED 1,000 per employee per month depending on the emirate. A basic compliant policy for a healthy adult starts in the low thousands of dirhams a year, and a good one costs more. Get quotes before you agree the package, because it is part of the real cost of employing someone.

“Unemployment insurance. Is that me or him?”

Him, mostly. But you should check that he has done it.

The Involuntary Loss of Employment scheme (ILOE) has applied to free zone employees since 2023. It is the employee's own subscription, not yours, and the cost is small: AED 5 a month plus VAT for a basic salary of AED 16,000 or less, and AED 10 a month plus VAT above that. They need to subscribe within four months of their work permit being issued, and the fine for not doing so is AED 400.

Business owners who own and run their own company are exempt, so you do not need it for yourself. DIFC has its own position. For everyone else, put it on the onboarding checklist and ask to see the certificate. It takes ten minutes online, and it is a very cheap way of avoiding an awkward conversation with your brother about a fine that arrived because nobody mentioned it.

“Is there a pension?”

Not as you know it from the UK. There is no employer pension, no auto-enrolment and no National Insurance. Instead there is end of service gratuity, which you pay as a lump sum when the employment ends.

For an employee who has completed at least one year, gratuity is 21 days' basic salary for each of the first five years and 30 days' basic salary for each year after that, calculated on the final basic salary and capped at two years' total pay. It is due within 14 days of the employment ending, and since 2021 it is payable in full whether the employee resigns or you let them go. DIFC and ADGM replace this with funded savings schemes (DEWS in the DIFC), into which the employer contributes every month.

A worked example. Say your brother's package is AED 15,000 a month, split AED 9,000 basic and AED 6,000 allowances. After three years, his gratuity would be:

AED 9,000 ÷ 30 = AED 300 per day

AED 300 × 21 days × 3 years = AED 18,900

If he stayed six years: five years at 21 days (105 days) plus one year at 30 days, so 135 days at AED 300 is AED 40,500, assuming his basic salary has not moved. If you had set the whole AED 15,000 as basic, the same six years would cost AED 67,500.

None of this shows up in your monthly payroll, which is exactly why it arrives as a shock for so many small businesses. My advice is to accrue for it from month one. On a AED 9,000 basic that is roughly AED 525 a month, and it should be sitting in your accounts as a liability whether or not you have physically moved the cash. When someone leaves, the money is there and the accounts have been telling the truth all along.

If your new hire is coming from the UK, their own position (telling HMRC they have left, split year treatment, whether to keep paying voluntary National Insurance) is a separate conversation, and one we have written about before.

“What else am I going to get wrong?”

A short list of the things I see most often:

• Holding passports. You cannot keep an employee's passport. Ever. Even if they ask you to look after it.

• Charging the employee for their visa. Recruitment and visa costs are the employer's. You cannot deduct them from salary or claw them back if the person leaves early.

• Letting the establishment card, the visa or the Emirates ID expire. Diary all three. Renewals are considerably cheaper than fines.

• Not cancelling properly. When someone leaves, the visa must be cancelled through the free zone and the final settlement paid. Leaving a visa live on your licence blocks your quota and leaves you responsible for someone who no longer works for you.

• Forgetting substance. If you rely on the 0% rate as a Qualifying Free Zone Person, you need adequate substance in the free zone, and real employees on real contracts doing real work are the clearest evidence of it. Done properly, hiring strengthens your Corporate Tax position rather than complicating it.

• Emiratisation. The requirements depend on the type of entity, workforce and employment authority. Do not assume that being in a free zone automatically means you are outside every Emiratisation requirement. Check the current rules applying to your company.

What this means for you

Taking someone on through your free zone company is entirely doable, and for most small businesses the process is more paperwork than pain. But it is your paperwork, in a set order, and the company carries the responsibility. Put the contract in place, sponsor the visa properly, insure them, pay them from the company account on the same day every month, accrue for the gratuity and keep the records. Do that and you will have very few surprises, whoever you are hiring.

Even your brother.

We started Sterling & Hunter because we saw a gap in the market. People weren't being looked after the way we wanted them to be looked after, and the way we would like to be looked after if we were taking a service. Helping a client make their first hire without a single nasty surprise is exactly the kind of work we had in mind.

If you are about to take someone on through your free zone company, or you already have and you are not sure everything above is in place, we'd be delighted to have a look with you. Drop me a message and we can't wait to move forward with you.

Kate

British Expertise. UAE Experience.

This article is a general overview of employing staff through a UAE free zone company as at September 2026. It is not advice. Every free zone has its own rules, fees and employment templates, certain criteria apply to each of the points above, and the position for DIFC and ADGM companies is different again. You need to take advice on your own position before acting on anything here. Last reviewed September 2026.