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As the ongoing regional tensions continue to weigh on sectors from hospitality and events to retail and logistics, several employers across the UAE are having to make tough decisions. Some have offered reduced pay while others have placed staff on partial unpaid leave, sometimes without the required legal safeguards, experts said.
Under UAE labour law, a pay cut cannot simply be imposed by an employer. According to Asma Siddiqui, Senior Associate at BSA LAW, the requirement for a lawful salary reduction is clear: the employee must give explicit written consent, and the change must be formally registered with the Ministry of Human Resources and Emiratisation (MoHRE).
she added that employers were also required to explain the reason, scope, and duration of the reduction, and to apply it fairly across the workforce.
Hasan Elhais, legal consultant at Amal Al Rashedi Lawyers and Legal Consultants, echoed her view, adding that a change in contract, especially one that left an employee in a worse position, was unlikely to be lawful if imposed unilaterally.
"Employee consent is central," he said. "An employer cannot force an employee to sign a revised contract containing less favourable terms. If an employee is dismissed for refusing to sign a revised contract with a lower salary, they may have grounds to challenge the dismissal, file a complaint, and seek employment entitlements as well as compensation for arbitrary dismissal."
No pause
One of the most important protection measures in the UAE's labour framework is the Wage Protection System (WPS), a government-mandated mechanism that ensures salaries are paid on time and in full through electronic transfers. Employers who miss payment windows face penalties, freezes on new work permits and, in some cases, legal action.
Siddiqui pointed out that, unlike during the COVID-19 pandemic when MoHRE issued specific guidance permitting temporary adjustments under defined conditions, there had been no equivalent official guidance issued in response to the current regional tensions.
"There is no automatic suspension of WPS obligations due to geopolitical events, and no current Cabinet decision or MoHRE circular provides such relief," she explained.
She acknowledged that some cases may exist, for instance, where sanctions has disrupted banking channels, making payment transfers genuinely impossible. But she stressed that such claims would be assessed on a case-by-case basis, and that the default expectation remained uninterrupted wage payment.
Elhais noted that, as per regulations, salaries should be paid within the first 15 days of the month following the month in which they were earned, unless the employment contract provided for a shorter period. Non-payment beyond 30 days, he added, could trigger enforcement measures.
Hard-hit sectors
For workers in sectors like hospitality, tourism, and events, which are among those most immediately impacted by a fall in regional visitor numbers and cancelled bookings- the situation felt particularly precarious.
Dr Elhais said these sectors did not receive any automatic exemption from wage payment obligations in the UAE, but a federal law of 2021 did offer some respite.
"In exceptional emergency circumstances to be determined by a decision of the Cabinet, work mechanisms appropriate to such circumstances may be applied, with due regard to the interests of all parties to the employment relationship," he said.
Siddiqui added that this meant employers may be able to explore temporary adjustments or restructuring arrangements, but consent and proper documentation remained essential-especially in the absence of sector-specific exemptions issued by the government.
One entertainment sector employee who did not wish to be identified told Khaleej Times that he would face pay cuts for the next three months.
"I cannot fault my employer because I know their business has taken a big hit due to the disruptions," he said. "We employees have agreed to take a reduced salary and we are just praying that things improve after the three months."
While the legal framework set the floor for employee rights, workforce strategy experts argued that smart companies should think beyond compliance.
Anil Singh, Chief Business Officer for KSA at TASC Outsourcing, said the short-term appeal of pay cuts needed to be weighed carefully against longer-term costs.
"Today's workforce values transparency, fairness, and a sense of shared purpose, especially during periods of uncertainty," he said. "In many cases, businesses are exploring alternative measures that balance cost management with sustaining morale, recognising that retaining skilled talent remains a key driver of future growth."
Singh said TASC was advising its clients to take a people-centric approach to cost optimisation. This included prioritising open communication, offering flexible work arrangements, and investing in employee development even during difficult periods. Many organisations, he added, were also re-evaluating workforce structures to improve efficiency while ensuring employees felt supported and valued.
He described the current environment as a catalyst for longer-term change. "This period has accelerated a broader shift in how organisations approach workforce strategy," he said. "Many companies are using this as an opportunity to build more agile, resilient, and future-ready operating models."
He reported increased client interest in contingency planning, flexible workforce models, and remote or hybrid work policies.
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