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Oman

February 05, 2024

By Paul Hastings Professional

Back to International Employment Law

Oman

KEY DEVELOPMENTS FOR 2024

New Labour Law

On 25 July 2023, Oman issued Sultani Decree No. 53/2023 setting out the New Labour Law (the “New Law”) which repealed the Old Labour Law issued by Sultani Decree No. 35/2003 as amended. The New Law, which entered into force on 31 July 2023, has introduced significant changes to Oman’s labour landscape in different aspects, including, but not limited to: types of work and contracts, types of leave, working hours, termination, etc. The New Law provides a grace period of six months for employers to reconcile their positions in accordance with its provisions. As regards non-compete clauses, the New Law permits the employer and employee to agree to a non-compete period that lasts no more than two years after the employee's employment contract ends, provided that the employee's line of work gives him access to the employer's trade secrets or knowledge of its customers and clients. In such a case, the employee agrees not to compete with the employer or take up similar activities after employment ends. As regards sick leave, the New Law increases the employee’s entitlement to paid sick leave to not exceeding in total 182 days in one year, whether such weeks are continuous or separate. Additionally, regarding termination for economic reasons, the New Law permits termination of employees due to economic reasons, provided that the employer obtains an approval from a committee to be established by the Ministry of Labour, Ministry of Commerce, Industry & Investment Promotion, the Oman Chamber of Commerce, and the General Federation of Trade Unions of Oman. Alternatively, the committee may propose another solution such as reducing working hours, working days, salaries, and offering sabbaticals in order to maintain business operations without resorting to termination. Economic reasons are now clearly defined as experiencing financial losses for two consecutive years. It’s important to note that failure to achieve profits or closure of company activity or branch due to feasibility issues does not qualify as a financial loss. Furthermore, the New Law has capped the compensation amount to 12 months’ gross salary in the event of unfair dismissal. Finally, under the New Law, employees are allowed to carry up to 30 days of leave into the next year’s balance.

New legislation regarding social protection

Oman introduced Royal Decree No. 52/2023 setting out the Social Protection Law (the “SPL”) on 17 July 2023. The SPL aims to enhance the social welfare framework by creating a single and unified social protection fund that improves financing and provides a wide range of benefits to workers and their families. One of the key features of the SPL is the introduction of a saving scheme for expat employees which will replace the lump-sum end of service gratuity. The savings scheme will have an individual account for each employee and is expected to be funded by a monthly contribution of 9% of the employee’s salary. It is still unclear who will be contributing towards this fund. However, more details on the contributions and the functioning of the savings scheme will be provided in the forthcoming executive regulations. The implementation of the saving scheme will take place in a period not exceeding three years after the SPL was introduced.

There are two primary types of protections provided by the SPL: social insurance and social protection. Benefits under social protection include those for the elderly, people with disabilities, widows and orphans, children, family income support, first-time job searchers, and maternity benefit. Social insurance covers a variety of benefits, such as health insurance, employment security insurance, insurance against sick and unusual leaves, insurance for the aged, disability, death, and insurance against work-related illnesses and accidents. Omani employees who have involuntarily lost their job will be entitled to a pension for a maximum period of six months equivalent to 60% of their average wage for the previous two years. This new unemployment benefit will be financed through a social security contribution of a total of 1% of the employee’s salary split equally between employees and employers.

Oman’s wage protection system

The Ministry of Labour issued Ministerial Decision No. 299 of 2023 on the Wage Protection System (“WPS”) which came into effect on 10 July 2023. The WPS is an electronic system developed in collaboration with the Central Bank of Oman to protect workers' pay in the private sector. It has seen notable advancements in its implementation by the Ministry of Labour. The WPS ensures that the employers transfer and deposit the workers’ wages directly to their bank accounts according to the amount and time agreed upon in the employment contract and in accordance with the provisions of the labour law. The WPS aims to protect the transfer of wages from being delayed or non-payment as it requires private sector employers to transfer employees’ wages to locally licensed banks within a maximum of seven days from their due date. Additionally, it gives the Ministry of Labour access to an extensive database on private sector earnings, which may be used for policy creation and strategic planning. Although using the electronic WPS is required, there are several exceptions. These exclusions include a labour dispute leading to work cessation, voluntary termination of employment without cause, newly hired workers who have not completed thirty days of service, and workers who are on unpaid leave. The Ministry of Labour will progressively impose administrative penalties for noncompliance with the recently enacted decision. Those who do not comply will first be issued a warning followed by a suspension of the services related to preliminary work permits and administrative fine amounting to OMR 50, which shall be doubled in the event of repetition.

With thanks to Gordon Barr, Roxanne Vesuvala, and Sonia Shah of Al Tamimi & Company for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2023

The Ministry of Labour (“MOL”) imposes a ban on hiring expat employees for more than 200 professions as part of its ongoing efforts to boost Omanisation.

Ministerial Decision No. 235/2022 issued by the Oman Minister of Labour, regulates the practice of certain professions which are now reserved for Omanis (“Ministerial Decision”).

The professions and positions Omanised in the new decision include the positions of administrative director, director of personnel affairs, director of public relations, security supervisor, general manager, deputy director, social service specialist, social welfare specialist, social psychology specialist, social worker, student activities specialist and flight operations inspector. The decision also includes Omanisation of professions such as receptionist, grocer, sweet seller, perfume seller, gas cylinder seller, guard, tractor driver, tour guide, real estate insurance broker and vehicle insurance broker.

The implementation of the Ministerial Decision requires Omani employers to ensure that they do not hire expats in any of the aforementioned restricted positions. Most employers may be required to replace some of its expat employees with Omani citizens as a result of the Ministerial Decision. Additionally, Article 1 of the Ministerial Decision lists 200 professions that expats are prohibited from practicing and provides that expat employees can only continue to practice such professions until the expiry of their current work permits. Employers are recommended to seek legal advice to understand how they may minimize exposure to any risk as part of their business operations as a result of any expat employees’ employment contracts being terminated to ensure compliance with the Ministerial Decision.

New fees for obtaining work permit to recruit non-Omani workforce

Oman’s Ministry of Labour (“MOL”) issued a Ministerial Decision No. 12/2021 published in the Official Gazette on 31 January 2021, which introduced an increase in the fees related to obtaining work permits as part of recruiting non-Omani employees. The introduction of the referenced decision is part of a series of initiatives introduced recently by the Omani government with the aim of addressing its nationalisation program targets by making the national labour force less expensive for employers to recruit. It is also aimed at serving the objective of optimising non-oil revenue of the country amid the current economic conditions caused by COVID-19.

The newly introduced fee increases range between OMR 140, to procure work permits for domestic workers, to OMR 2,000, to procure work permits for top positions as classified by the MOL and specified professions set out in the referenced decision or for employees with monthly salary of OMR 4,000 and above, regardless of their occupation.

It is to be noted that special consideration is given to Small and Medium Enterprises (“SMEs”) for which the respective fees for obtaining work permits can be as low as OMR 100 during their first two years of establishment subject to meeting certain conditions.

Employers and business owners may seek specialized legal advice to understand the application of this decision to their business prior to setting up in the Omani market and to ensure success in the business operations in Oman.

The Ministry of Labour (“MOL”) announce new working hours in Oman

Under the recently introduced flexible work system, government sector employees in organisations governed by the Civil Service Law in Oman must put in seven hours of work, any time between 7:30 am and 4:30 pm. Many ministries in Oman have rescheduled their working hours from 7.30 am to 4:30 pm, following the implementation of the new flexible work timings that will ensure that customer service departments remain open for a longer time and enable faster processing of business operations across Oman.

Within the framework of the newly introduced flexible working system, all service delivery outlets will be available to receive and serve customers from 7:30 am to 3 pm and electronic services will continue to remain accessible during these hours. Customer services provided by various ministries in Oman have started receiving people from 8 am to 3 pm. In respect of directorates and departments affiliated to the various ministries in the 11 Omani governorates, the work timings will be from 8 am to 3 pm.

The impact of the recently introduced flexible work system has not crystallised as yet given that this change has only recently been introduced and implemented. The new change is beneficial for Omani employers to note as part of their business operations. Many commercial transactions and projects from different countries across the world involving Omani businesses could benefit from the additional hours given to customer services by Omani ministries.

With thanks to Gordon Barr and Malavika Vijayan of Al Tamimi & Company for their invaluable collaboration on this update.

KEY DEVELOPMENTS FOR 2022

Anticipated labour law amendments

In December 2020, Oman’s Government had announced plans to amend Labour Laws in the upcoming years, which would end long standing subsidies and introduce new tax laws, while simultaneously protecting low-income families. The amended law is said to specifically address NOC (no-objection certificate) requirements and income tax. However, as at 1 January 2022, the only revision that has been made to current Labour Laws relates to the removal of the requirement to obtain an NOC.

By way of an amendment (ROP Decision 157 of 2020) to the Law on the Residence of Foreigners, which previously required expatriate workers to obtain an NOC to transfer from their current employer to join another company in Oman, a transfer will no longer require an NOC provided that the existing employment contract between the employee and their respective employer has ended.

Employers should continue to monitor the announcement of legislative changes and seek legal advice upon the issuance of the amended Labour Law and the official publication of the amended legislation in Oman’s Government Official Gazette.

Nationalisation of the workforce

The Government of Oman instituted the “Omanization Program” in 1988. The program aims to provide various opportunities to increase participation of Omani labour in Oman’s economy and to reduce dependence on expatriate labour. The highest Omanization rate has taken place in the following sectors: transport, storage and communication; finance insurance; real estate and labour services; mines and quarries; and electricity, water and gas. The required percentage of Omanisation should be made by a decision from the Manpower Minister in each of the economic activities sectors.

Historically, Oman has relied heavily on the oil and gas industry for managing the country’s revenue needs. However, this was no longer sustainable due to low oil prices as a result of the COVID-19 pandemic outbreak. In April 2021, Oman’s Minister of Labour intensified the long outstanding initiative to nationalise the work force, announcing that approximately 140,000 jobs in both the private and governmental sector will be dedicated to Omani nationals.

The recent intensification of the labour reform aims to replace 10% of the roles currently occupied by expatriate workers with Oman national citizens. In the first phase of the recent project, the ministry aims to hand over 10,000 positions (4,000 of which are in the government sector) to Omani nationals. The total number of roles the Government has targeted is said to be 32,000 positions in 2021 alone.

In parallel with the nationalisation drive, the ministry is working to provide necessary training to recruit qualified personnel. There are plans for sector-specific training programs for Omani nationals. Furthermore, the Government plans to make the benefits of working in the private sector closer to those of the public sector in an effort to incentivise Omani nationals to take up positions in the private workforce.

From the inception of the “Omanization Program”, there have been occupational quotas which reserve the following roles predominantly for Omani citizens:

Specialists: Lawyers, Civil Engineers, Accountants, Legal Advisors and Department Managers;
Technicians: Primary School Teachers, Nurses, Architectural Draftsmen, TV Cameramen;
Occupational Workers: Accounts Clerk, General Car Mechanics, General Sales Person and General Leather Workers;
Skilled Workers: Leather Worker, Welder, Typist and Electricians; and
Limited Skilled Workers: Newspaper Vendor, Machine Operator and Car Repair/Fitter.

In the past year, the Ministry of Labour announced that jobs in administration, finance, student affairs and student/career guidance in the country’s 28 private higher education institutions are to be given to Omani nationals upon the expiry of existing work permits. Hiring non-nationals has also become more expensive as the Government has increased work permit fees by 50% for all expatriate workers. As a result, the expat population in Oman has decreased significantly.

Employers should be diligent in keeping in line with the Omanization percentages and the recent intensification of the nationalization program in order to ensure that they are meeting their legal requirements and obligations. Generally, employers should be committed to the Omanisation percentage of 50% of non-Omani/Omani employees in their establishment. Where necessary, employers should also ensure that they have developed sufficient training programs for specialized positions in order to support Omani nationals joining their respective establishments.

An employer who does not comply with the Omanisation percentages may be subject to a fine of not less than OMR 250 and not more than OMR 500 for each Omani employee the establishment should have employed. Employers are granted a six-month period to rectify the situation and ensure that they are compliant with the current Omanisation percentage. Should an employer fail to remedy the issue within the allocated “grace period”, the fine will be doubled.

Additionally, subject to Article No. 16 of the Oman Labour Law:

“The employer or the employer’s representative must record in a specific register the names of Omani employees working with him, and the address, age, sex, type of work assigned to each one of them, their status, the amount of salaries and the advantages they receive in cash or in kind.”

Regulation of part-time workers in Oman

According to a recent Ministerial Decree (No. 115/2021 – Regulation Part-Time Work), part time work contracts are limited to Omani nationals only. The part-time employee/temporary employee must be an Omani national and over the age of 15 years. Additionally, an employment contract should be signed between the two parties, which clearly demonstrates the work relationship, the agreed upon salary, and the working hours.

Where an employer wishes to hire a part-time employee, the employer must ensure that the employee is an Omani national citizen and that both parties have signed an appropriate employment contract meeting the legal requirements of the state.

KEY DEVELOPMENTS FOR 2021

Increased Omanisation efforts

Omanisation levels are rising in most business sectors with the previous 30—35% requirement (of Oman national employees) rising to 65% in most instances. Alongside the increased Omanisation requirement, the temporary six‑month visa ban, put in place in 2018 for 89 specific job roles and extended every six months to date, has been enhanced by Ministry of Manpower Ministerial Decision (MD) 47 of 2020 adding "sales representatives" and "sales promoters" to the list of roles banned for further visas. It is worth noting that in respect of the new roles added under MD 47 of 2020, the ban is applicable to renewals, as well as new visa applications, effectively Omanising the roles in question. MD 47 of 2020 follows MD 221/2019 which effectively Omanised nine other roles including many management positions and all administrative and clerical positions.

Job security fund

According to Royal Decree No. 82 of 2020, issued 17 August 2020, His Majesty Sultan Haitham bin Tariq Al Said, Sultan of Oman, ordered to create the job security fund, and in order to enhance the principle of community solidarity, all Omani employees working in the Sultanate for the Government and private sectors will participate in the fund at a rate of 1% of the monthly gross salary of each employee for the benefit of the fund. Whereas, governmental or private sector employers contribute 1%. This new arrangement was applied starting January 2021.

Labour disputes

Royal Decree No. 125 of 2020 (Simplification of Litigation Procedures regarding Some Disputes): stipulates that the Primary Court must issue a decision within (30 days) and may be extended if required for an additional (30 days) (previously, there was no timeline for the judge to issue a decision and it could take up to a year). The deadline to appeal Primary Court judgments is now 15 days (previously it was 30 days). The Court of Appeal will then issue its appeal judgement within 30 days and may be extended if required for an additional 30 days (before there was no timeline for the judge to issue a decision, it could take up to a year). If the appeal judgement confirmed the dismissal of the employee, then the appeal judgment may not be further appealed to the Supreme Court (the case before was that parties may appeal judgments all the way up to the Supreme Court).

KEY DEVELOPMENTS FOR 2020

Abolition of the No Objection Certificate Requirement

Termination of employment as a result of the impact of Coronavirus

The recent decisions of the Supreme Committee dealing with Oman's response to the pandemic established that employers may dismiss expatriates who could be repatriated upon payment of all contractual dues up to the end of their notice periods (including an end of service gratuity). Formerly, terminations on any ground other than an Article 40 of the Labour Law ground (akin to gross negligence or misconduct) typically gave rise to an additional compensatory payment of between 3 – 6 months' gross salary (uncapped).

KEY DEVELOPMENTS FOR 2019

Extension of recruitment ban

The Ministerial Decree, No. 38 of 2018, issued by the Ministry of Manpower (“MOM”) imposing a temporary ban on the recruitment of expatriates in a number of professions in the private sector was extended at the end of July 2018 and further extended in November 2018 (effective start of February 2019), each time for an additional 6 month period. The original decree applies to 87 roles across numerous business sectors and includes, but is not limited to, Information Technology Specialists, Insurance Agents, Engineers, Advertising Agents, Technicians, HR Specialists. The latest extension has added workers in the construction, cleaning and workshop sectors and purchase and sales representatives.

This ban does not affect expatriates who are already employed in the aforementioned list and generally does not apply to expatriates whose labour permits and/or residency visas are expired and need to be renewed.

The ministerial decree does not apply to companies that are both registered with the General Authority for the Development of Small and Medium Enterprises and insured by the General Authority for Social Insurance (PASI).

KEY DEVELOPMENTS FOR 2018

Wage Protection System Updated

From November 2017, companies in Oman have been required to adopt the Ministry of Manpower’s new wage protection system which aims to ensure that employees are paid as per their employment contracts and on a timely basis.

The Ministry of Manpower confirmed that in cooperation with the Central Bank of Oman it has upgraded the wage protection system to ensure stability of work at private sector establishments and enhance the development of systems and services offered to employers and employees.

All organisations in Oman are subject to the new regime and had 3 months to ensure that their work systems follow the new payment regulations and conform to the new system.

Omanisation Measures

The suppressed economic environment has seen the authorities in Oman tighten access to some jobs for non-Omani workers. Ministerial Decision No. 289 of 2017 prohibited new expat staff being taken on at professional skills development centres. Expat staff already employed at such centres will not have their permits renewed when they expire. Meanwhile Ministerial Decision 187 of 2017 and 192 of 2017 saw a suspension on using part time expat workers on construction sites between June and November 2017. Ministers have issued general warnings to all private companies that a failure to meet Omanisation quotas will result in the loss of government benefits.

Expectations for 2018

In 2017 a new Labour Law was anticipated but did not materialize. It is not certain if one will be introduced in 2018. It also remains to be seen whether the government will end the requirement for a No Objection Certificate (“NOC”).

KEY DEVELOPMENTS FOR 2017

Draft amendment to Labour Law

A draft Labour Law has been in circulation for a few years but has not been published. This law (if enacted) would bring about changes to the Omani Labour Law and would also have a chapter specific to Oil and Gas companies with special provisions for employees working in this field.

It is still not clear whether this will be published in 2017 or not.

KEY DEVELOPMENTS FOR 2016

Key developments from 2016

There were no key employment or labour law developments in 2016.

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