This move could really boost confidence in using digital currencies for more everyday things, like getting paid.
The new policy of Dubai government will surely bring big changes in the long run. If one or two companies pay their employees in a token in this way, gradually crypto payments will be established. But even if it is only now supported by the courts, it will take some time to see how it will affect the people there. However, the Dubai authorities have taken a far-reaching decision. Those who are tourist will also welcome this initiative. Especially if workers were paid in Bitcoin rather than other tokens it would seem more positive aspects. However, due to the volatility, there will be different opinion from different people. But all in all, I think such a decision by the Dubai government will create a positive impact on their economy as well as crypto currency world.
I think this idea will require some time before it will actually spread, and you have already mentioned the main reason: volatility. I'm not even considering altcoins but let's take a look at bitcoin alone, sometimes it loses even 5-10% in a day, in that way is difficult to plan your life and expenses. They best way would be getting maybe something like 15-20% in bitcoin and the remaining part still in fiat until the moment bitcoin will be more stable.