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UAE

January 25, 2021

By Gordon Barr, Laya Al Hareeri, Roxanne Vesuvala and Ghazal Hawamdeh

Back to International Employment Law

UAE

KEY DEVELOPMENTS FOR 2020


 

New employee workplace savings scheme

The Dubai International Financial Centre ("DIFC") has introduced an employee workplace savings scheme ("Scheme"), which came into effect on 1 February 2020. The Scheme is a defined contribution scheme and replaces the longstanding end of service gratuity regime ("ESG"), which was a defined benefit model. All DIFC employers are now required to make mandatory monthly contributions into the Scheme for each eligible employee. The contributions can either be via the DIFC Employee Workplace Savings Scheme (commonly known as 'DEWS'), or another qualifying scheme (with the law and regulations setting out the necessary criteria). The minimum contributions that DIFC employers are required to make are as follows:

  • for the first five years of an employee's continuous employment, 5.83% of the monthly basic wage; and
  • for each additional year of continuous employment, 8.33% of the monthly basic wage.

As a result of the implementation of the Scheme, employees will no longer continue to accrue ESG from 31 January 2020. Any ESG that has been accrued prior to 1 February 2020 may either be paid to the employee on termination of their employment, or transferred into the employee's Scheme. However, several categories of individuals are exempt from the requirement to enrol, including UAE and GCC nationals who are required to be registered with the state Government pension authority, equity partners and employees who are seconded to the DIFC.


 

Increased Emiratisation efforts

The Ministry of Human Resources and Emiratisation ("MOHRE") has issued new measures to promote the hiring of UAE nationals in the private sector (known as Emiratisation). These measures are only applicable in onshore UAE (i.e., not in the free zones).

Under the new Tawteen Gate system, the MOHRE may prevent or delay an employer's application for a work permit for an expatriate if they find that there is a UAE national seeking a job with the same job title. If this is the case, the MOHRE will send the résumé of the eligible UAE national to the employer for their consideration and, in the event that the employer does not wish to hire the recommended UAE national, it will need to provide reasons as to why it does not wish to do so (e.g., lack of experience, qualifications, etc.) The employer may only hire an expatriate if there are no UAE national candidates who fit the role, or once the employer has provided its reasons for not hiring the recommended UAE national.

Similar to the Tawteen Gate system, the MOHRE has issued a list of circa 160 job titles (primarily senior positions) in the private sector, which are reserved for UAE nationals and will block an employer's application for a new work permit for expatriates in these positions. This will only apply for new work permit applications and does not apply where work permits for expatriates with the aforementioned job titles are being renewed.

It should be noted that further Emiratisation measures are expected to come into place in the coming years. The UAE Government hopes to create 20,000 new jobs for UAE nationals in the private sector in the next 3 years and has announced that it will invest significantly in the training of UAE national job seekers.


 

Amendments to the Labour Law

Federal Decree No. 6 of 2019 (the "Decree") has amended certain existing provisions of the Labour Law relating to the treatment of female employees, discrimination between employees and the training of citizens.

The Decree repeals provisions of the Labour Law, which previously prohibited women from being employed at night and from working in jobs that were dangerous or detrimental to their health. It also removes criminal liability on employers, guardians and husbands who employ women under these conditions and prohibits the termination of a female employee while she is pregnant. If a female employee is dismissed while she is pregnant, any such dismissal will be deemed to be an arbitrary dismissal.

The second amendment prohibits discrimination that prejudices equal opportunity and discrimination between people with the same jobs and duties. The Decree also specifies a list of jobs whereby the employment of both sexes together is prohibited.

The third amendment requires establishments to comply with statutes, resolutions and regulations issued by the Minister of Human Resources and Emiratisation in relation to the training of citizens. In addition, the Decree states that the Minister may issue resolutions to promote the participation of national workers in the labour market and resolutions which regulate the employment of workers.

 

KEY DEVELOPMENTS FOR 2019


 

UAE nationals in the private sector

The Ministry of Human Resources and Emiratisation (“MOHRE”) introduced Ministerial Decree No. 212 of 2018 regarding the process of recruitment and termination of UAE national employees in the private sector. The key changes are as follows:

Recruitment:

  • employers recruiting UAE national employees must register the employee with the pension authority (GPSSA) within 6 months of the start of their employment. This creates a conflict with the UAE pension law which requires companies to register their employees within one month of starting employment; and
  • UAE national employees will also need to enter into employment contracts of a two-year duration which may be renewed, however the MOHRE are still issuing unlimited term contracts in practice;

Termination:

  • employers must conduct and submit an “exit interview” report with the UAE national employee to identify the reasons for termination;
  • where an employee is on a limited term contract and both parties are unable to agree to a notice period, the default 3 month notice period by either party will apply; and
  • the Decree also provides that termination of a UAE national employee will be considered illegal in certain scenarios which could result in the suspension of new work permits for up to six months.

 

Proposed changes to DIFC employment law

The Dubai International Financial Centre (“DIFC”) recently drafted a new DIFC Employment Law (“Proposed Law”), which will replace the current employment law once approved. Changes will include:

  • Article 18 penalty: employers currently face a penalty if they do not pay termination payments to an employee within 14 days of termination but the Proposed Law states that the penalty is no longer automatic and provides some relief if the outstanding amount is less than 5% of the amount due;
  • sick leave pay: the current annual entitlement of 60 working days of sick leave will be retained, but an employer will be allowed to deduct wages after the first 10 working days of sick leave;
  • discrimination: 'pregnancy’ and ‘age’ will be added to the list of protected characteristics and compensation is to be provided for a discrimination claim;
  • termination for cause: constructive dismissal is introduced as a concept and employers must pay gratuity even where termination is with ‘cause’;
  • salary split: an employee’s basic salary must comprise at least 50% of the total wage;
  • weekly working hours: the current 48-hour provision has been removed but provisions in terms of daily and weekly rest have been retained;
  • paternity leave: a paternity leave of 5 working days for male employees who have or adopt a child will be introduced; and
  • use of settlement agreements: the waiver of rights is permitted if the waiver intends to settle a dispute. The DIFC Courts will have the discretion to void any settlement agreements found to be unreasonable but it cannot do so when independent legal advice has been obtained.

The content of the Proposed Law may change and should not be relied upon pending enactment of the legislation which is now anticipated to be in early 2019.


 

Insurance scheme replaces bank guarantee

The UAE has introduced a new insurance system to provide protection for employees if they do not receive certain statutory sums. The system allows employers to choose between continuing to provide a AED 3,000 bank guarantee for each employee or alternatively paying an annual insurance fee of AED 60 per employee.

The insurance premium must provide a minimum of AED 20,000 per employee in the event the employer does not (or is not able to) pay the employee any statutory dues including unpaid wages, end of service payments, overtime payments, and a repatriation ticket allowance or in case of work injuries. The insurance scheme took effect on 15 October 2018 and is expected to generate a cash influx to the economy as bank guarantee payments will be released back into the private sector where employers elect to adopt the insurance scheme.

 

KEY DEVELOPMENTS FOR 2018


 

Proposed DIFC Employment Law changes

The Dubai International Financial Centre Authority has published a consultation paper on replacing DIFC Law No. 4 of 2005, as amended, with DIFC Law No.6 of 2018. If enacted, the new DIFC Employment Law may come into force before the summer of 2018. Proposed changes include:

  • reforms to the Article 18 Penalty, removing the mandatory nature of penalties on employers for late payment of amounts due to employees at termination;
  • expanding the definition and grounds for discrimination to include pregnancy and age;
  • reducing the amount of sick leave pay;
  • removing the restriction in respect of maximum weekly working time;
  • adding whistle-blower protection; and
  • introducing paternity leave for male employees.

 

Qatari Nationals

In light of terrorism funding allegations against the government of Qatar, the UAE (and several other Gulf Corporation Council (“GCC”) and non-GCC countries) cut diplomatic ties with Qatar in June 2017. As a result of this, employers were requited to terminate the employment of Qatari employees and pay any statutory dues.


 

Classification of Companies

Ministerial Resolution No. 729 of came into effect on 4 December 2017 which re-established categories that companies fall under depending on the percentage of skilled employees and UAE nationals employed by the company:

Class 1: fishing boats owned by UAE nationals and small and medium establishments (subject to certain conditions);

Class 2(A): Companies where at least 40% of the workforce are skilled workers and have a cultural diversity percentage of at least 50% (i.e. where at least 50% of employees are UAE nationals);

Class 2(B): Companies where between 10%-40% of the employees are skilled and have a cultural diversity percentage at least 50% [NOTE: Companies which have a maximum of 3 employees automatically fall under 2(B). Similarly, companies which have 4-10 employees and have a cultural diversity percentage of at least 50% also fall under 2(B)];

Class 2 (C): Companies where between 5%-10% of the employees are skilled and have a cultural diversity percentage of at least 50%;

Class 2 (D): Companies where less than 5% of employees are skilled and have a cultural diversity percentage of less than 50%;

Class 3: Companies found to be in violation of certain duties (such as human trafficking, employing illegal employees, falsifying Emiratisation percentages, etc.) fall under Class 3.

Higher categories can expect to pay lower fees for work permits issued through the Ministry of Human Resources (“MOL”).


 

New Fees for Services through the MOL

Ministerial Resolution No. 525 sets out a list of new and amended fees for services provided by the MOL.

Of significance are the AED 50- 100 fee for the Application for an Exemption from the Wage Protection System (the government-monitored system that ensures that employees are paid salaries on a timely basis and at the amount agreed upon in the employment contract) and an AED 500 fee for the Guidance and Answers to Employers. We understand that the MOL is not charging such fees yet and it is unclear as to when (if at all) these will be implemented.


 

Emiratisation Initiatives

In order to encourage more UAE nationals to work in the private sector, the government is introducing nationalisation incentives, which require employees in certain business sectors to recruit more UAE nationals. Recently there has been an increased focus on the banking and insurance sectors and it is expected that the government will introduce more requirements over the coming year.


 

New Pension System For Expatriates

There has been talk in the media of introducing a pension system for expats to replace the end of service lump sum gratuity they currently receive. It remains to be seen if and when such a system will be introduced.

 

KEY DEVELOPMENTS FOR 2017


 

Maternity law changes

Although the law has not been changed as yet, changes relating to maternity leave in the private sector are expected in 2017. This speculation has been propelled by the creation of the Gender Balance Council, which aims to promote gender equality in the workforce and (among other issues) is expected to push for increased maternity leave.

The Abu Dhabi government sector has already changed its employment regulations to allow for three months of paid maternity leave as well as three days of paternity leave, and the private sector is expected to follow suit.


 

Emiratisation measures

The Ministry of Human Resources and Emiratisation (previously known as the Ministry of Labour) (“MOL”) recently announced that as of 1 January 2017, the following will apply:

  • Companies which employ over 1,000 staff will need to register with Tas’heel (the Ministry’s service provider through which work permits are processed and issued) online system and must ensure that at least two employees involved in data entry for Tas’heel related work are UAE nationals.
  • All construction companies which employ over 500 members of staff will now require at least one UAE national health and safety officer.

Companies which fail to comply will not be granted new entry permits or visas, effectively preventing them from taking on new employees. It is expected that this decision will increase the prospects of UAE nationals joining the private sector work force

Note: It should be noted that the developments set out below apply to onshore employment in the private sector and are not applicable to the public sector or within the UAE’s many free zones.

 

KEY DEVELOPMENTS FOR 2016


 

New standard offer of employment letter

As of 1 January 2016, employers have been required to provide a standard form offer of employment letter to new employees.

Employers need to submit an acknowledged signed offer letter by the candidate to the MOL before entry permits are issued and the candidate enters the country.

An employment contract cannot be less beneficial to the employee than what was stated in the offer letter. This new legislation is meant to ensure that expatriate employees are not brought to the UAE on falsely advertised salaries.


 

Changes to notice periods and termination process

As of 1 January 2016, the following applies in respect of employees on fixed term contracts:

  • Duration: The maximum duration of a fixed term contract will be reduced from four years to two years.
  • Notice period: Employees now require a notice period of one to three months.
  • Early termination compensation: Compensation may be as agreed upon between the parties, but no more than three months.

The amended rules require a terminating employee to pay the employer as agreed between the parties, but no more than one a half months’ salary.

Employees on permanent contracts will also see changes in terms of:

  • Notice period requirements: Previously, there was no maximum notice period. The new decree states a notice period of no more than three months.

This limit may prove to be difficult for some employers, especially in regard to senior employees, where larger notice periods are often desirable (both for the employer and the employee).


 

Changes to labour bans

As of 1 January 2016, work permits will be issued or renewed and the previously mandated six month post-employment work ban will not be applied in certain prescribed cases (for example, where employees engaged on fixed term contract have worked the duration of the fixed term and the contract is not renewed).


 

Increase in UAE National Retirement Age

From 28 February 2016, the minimum retirement age for UAE nationals was increased to 49 years, with retirement ages increasing by one year annually until the minimum age is 50 years. As a side, UAE nationals are only eligible for a pension where they have worked for 20 years or more, and pension payouts only become accessible at the age of 50.


 

Extension of compulsory military service

On 7 March 2016, the National and Reserve Service Authority of the UAE stated that the minimum military service required for UAE national secondary school certificate (or equivalent) male graduates will now be increased from nine months to one year. This increase will also be seen for UAE national females who volunteer to undergo military service.


 

Accommodation for employees earning under AED 2,000

As of 1 September 2016, employers in the UAE with 50 or more employees must ensure that all employees earning a total monthly salary of under AED 2,000 are provided with accommodation.

A practical alternative for those employees earning close to AED 2,000 would be to increase employee’s salaries to just over AED 2,000 via a housing allowance.


 

Requirement for companies to pay salaries within 10 days of due date

With effect from 3 October 2016, all companies employing over 100 staff must pay their employees within 10 days of the due date registered in the government-monitored Wage Protection System (“WPS”). In practice however, a company will not face any repercussions until the 16th day of non-payment, resulting ultimately in potential fines and work permit bans.

Note: It should be noted that the developments set out below apply to onshore employment in the private sector and are not applicable to the public sector or within the UAE’s many free zones.


 
With thanks to Gordon Barr, Ghazal Hawamdeh, Laya Al Hareeri and Roxanne Vesuvala of Al Tamimi & Company for their invaluable collaboration on this update.

Contributors

Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department

Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department

Image: Aashna Parekh
Aashna Parekh
Associate, Employment Law Department