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Practice Area Articles

UAE

February 05, 2024

By Paul Hastings Professional

Back to International Employment Law

UAE

KEY DEVELOPMENTS FOR 2024

New investment scheme alternative to end of service gratuity (“ESG”)

Cabinet Resolution No. (96) of 2023 allows employers in the private sector (including those in freezones) the option to pay monthly contributions into a licensed investment scheme as an alternative to accruing service for ESG purposes. At present, employers are obliged to pay ESG accrued in one lump sum payment on termination of employment. Paying monthly contributions into an investment scheme mitigates the risk of employment liabilities not being accrued on the balance sheet and employers being unable to afford to pay out large lump-sum amounts toward an employee's ESG on termination of employment (a common issue in the UAE particularly in times of mass redundancies and company closures due to bankruptcy). Freelance employees and employees working in the government sectors may subscribe voluntarily. UAE and other Gulf Cooperation Council national employees in the government sector may also choose to subscribe, however statutory contributions must continue to be made toward the state pension scheme as well. Skilled employees may choose any type of investment options when registering in the scheme, whereas unskilled employees may only participate in a risk-free investment scheme. In order to opt into the investment scheme, an employer must submit a request to the Ministry of Human Resources and Emiratisation (“MOHRE”). Any accrued ESG must be calculated up to subscription date based on the basic salary as of date of subscription. Thereafter, contributions to the investment scheme will be calculated on the basis of the employee’s monthly salary. Contributions are non-refundable (save for circumstances where employment is terminated by either party prior to one year of service). Failure to pay contributions may lead to the MOHRE issuing warnings, fines, or a temporary suspension on the issuance of new work permits, thereby preventing the employer from hiring new employees. Employees will also have the option of contributing additional amounts on a monthly or lump sum basis (subject to a maximum of 25% of the employee’s total salary). This is an important step in moving away from defined benefit ESG and transitioning towards a defined contribution model which is much more prevalent in other developed markets.

Ongoing Emiratisation developments

In line with a 2023 Ministerial Resolution, private sector employers in mainland UAE (i.e. not applicable to freezone-based entities) with 20 to 49 employees will soon be required to comply with a new “Emiratisation” (nationalisation programme) initiative, which aims to increase the number of UAE nationals employed in the private sector. Prior to the issuance of the Resolution, employers in mainland UAE with less than 50 employees were not required to comply with Emiratisation requirements. In 2024, all companies falling under the scope of the Resolution will be required to hire at least one UAE national employee, with a further hire in 2025. Companies which do not meet the target in 2024 will face a fine of AED 96,000 issued in January 2025 and a further fine of AED 108,000 issued in January 2026. For a UAE national to count as part of this threshold, they must hold a “family book”, receive a salary of at least AED 4,000 per month and must be registered in the applicable state pension scheme. This change reflects a further strengthening in the resolve of the UAE Government to promote the advancement and growth of UAE nationals in the private sector.

Expedited employment claims

The Federal Decree No. 20 of 2023 (the “Decree”) aims to accelerate the disposal of employment claims and reduce the cost of litigation for smaller claims. The Decree gives the MOHRE the authority to adjudicate claims worth not more than AED 50,000 or in circumstances where the dispute is related to the failure of either party to comply with an amicable settlement decision previously issued by the MOHRE, regardless of the value of the claim. Either party may appeal the MOHRE’s decision via the Court of Appeal within 15 days of receipt of the MOHRE’s decision. The Court of Appeal’s decision will be binding. Further, where the dispute results in the temporary cessation of payment of salary, the MOHRE may oblige the employer to pay the employee’s salary for up to two months. While the Decree has been issued, it is expected to come into force in January 2024. This change reflects a desire to promote a fast track process for lower value employment claims in an effort to streamline the judiciary process and reduce case load for the UAE Labour Courts..

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

Unemployment insurance

In September 2022, the UAE government issued Federal Decree Law No. 13 of 2022 Concerning Unemployment Insurance Scheme (the “Scheme”). The Scheme will be mandatory for all employees in the private and public sectors including UAE nationals, with the exception of: (i) investors; (ii) domestic workers; (iii) temporary workers; (iv) juveniles under the age of 18; (v) pension receiving retirees who have joined a new employer; and (vi) employees within the UAE’s many free zones. The objective of the scheme is to provide the insured with income for a period during unemployment, ensuring that employees in the private and public sectors in the UAE are able to sustain a financial safety net.

As part of the scheme, employees will be eligible to receive compensation upon becoming unemployed, subject to having been insured for 12 consecutive months under the Scheme. All employees will be eligible to receive 60% of their basic salary during unemployment. The subscription fee and maximum compensation is dependent on the category of employee.

Employers in the private and public sectors should remain diligent in ensuring that their employees are notified about the introduction of the Scheme and further ensure that their employees are periodically updated as new regulations in relation to the Scheme are announced by the UAE government, including disseminating information on methods for employees to subscribe to the Scheme.

It is to be noted that the Scheme stipulates that compensation will not be applicable if an employee was dismissed for disciplinary reasons (including gross misconduct) under UAE Federal Law No. 33 of 2021, Regarding the Regulation of Employment Relations (the “Labour Law”). In addition, compensation will not be provided to the employee if there has been fraud or deceit involved in the insurance claim (fines and penalties will be issued accordingly).

NAFIS & Emiratisation of the private sector

The UAE aims to recruit approximately 75,000 UAE National employees into the private sector within the next five years. NAFIS is a governmental federal program introduced by the UAE Government to implement its Emiratisation initiatives aimed at increasing the competitiveness of the Emirati human resources and empowering them to occupy jobs in the United Arab Emirates’ private sector over the next five years.

Enrolment and subsequent compliance with the NAFIS programme has been made mandatory with all private sector companies in the UAE (with the exception of employers within the UAE’s many free zones for which NAFIS is not mandatory) now being mandated to create a company account and register on the NAFIS platform and meet the prescribed Emiratisation targets or alternatively have made provision in their accounts for the imposition of penalties. From January 2023, non-compliant companies will have to pay an amount of AED 6,000 per month for every citizen vacancy that has not been filled.

Furthermore, in October 2022, the Ministry of Human Resources and Emiratisation implemented Cabinet Resolution No. 95 of 2022 regarding violations and administrative penalties related to the initiatives and programmes of NAFIS, which lays out the statutory framework for curtailing business practices that could impede the objectives of the NAFIS programme through administrative fines and penalties.

Employers who are required to enrol in NAFIS (i.e. all private sector employers save for those set up in UAE’s free zones) will need how best to structure their recruitment to keep in line with the Emiratisation percentages announced. This may include developing training programs in line with their respective fields to ensure that they remain compliant with their legal obligations and mitigate any risk of penalties that may be imposed as a result of not meeting the Emiratisation target.

Employers should also ensure that they do not engage in any business activities that violate the goals and objectives of the NAFIS programme, including inter alia, circumventing the NAFIS programme, fabricating documents or data to obtain benefits under the NAFIS programme, failing to keep the programme updated about any changes to the terms of an employee’s benefits or undertaking false Emiratisation practices, in order to mitigate any risk of administrative fines or penalties (which may include recovery of any disbursed amounts paid out to the employers) that may be imposed by the Ministry of Human Resources and Emiratisation.

DEWS saving scheme and its extension as an ESG initiative across Dubai

In February 2020, the DIFC Authority replaced the historic arrangement of end of service gratuity, payable on termination of employment, with a defined contribution savings scheme, the DIFC Employee Workplace Savings plan (“DEWS”), in which contributions are made monthly, which resulted in DIFC employees’ end of service gratuity ceasing to accrue and employers being required to enrol their employees into the DEWS.

Subsequently, in July 2022, the Dubai government approved the extension of the DEWS to its expatriate employees, employed across the 61 governmental/government-affiliated entities in the Emirate of Dubai. A noteworthy legislative development on this subject is the Labour Law, which was introduced on 02 February 2022, which (through Article 51(8)) sets up the opportunity for employee savings plans such as the DEWS to be approved for employees across the UAE, replacing the existing end of service regime.

The adoption of the DEWS Scheme by the Government of Dubai for its expatriate employees serves as a positive template for the adoption of an employee savings plan for the benefit of public and private sector employees across the UAE. The impact has not crystallised as of yet, given that this change has not been implemented to date. In due course, it will be important that employers are aware of the legislative changes that may be implemented in respect of the removal of the obligation to pay gratuity and the implementation of any employee savings plan, and ensure that their employees are registered with such employee savings plan in accordance with any new regulations / laws that may be published to mitigate adverse risk of fines or other penalties being imposed.

It would also be important to seek legal advice to understand how this change would affect the employer’s business, to ensure that the transition is smooth, and that the employer remains legally compliant. For example, employers would need to consider: (i) how the change affects the existing gratuity accrual; (ii) how payroll arrangements will be made for any employer and employee contributions; (iii) whether any changes need to be made to their employment contracts, handbooks and policies; and (iv) how the new system will be implemented. Many of these points are likely to be addressed in due course by legislation, whether primary or secondary, that would be introduced to implement the new requirements.

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

KEY DEVELOPMENTS FOR 2022

Implementation of a new labour law and data protection law and introduction of new visas

The UAE recently announced the launch of 50 new national projects, the first 13 of which were announced in September 2021. These initiatives outline the UAE’s vision in regards to matters such as residency visas, the development of the private sector (skilled workers), entrepreneurships, coding, artificial intelligence and a wave of new legislations that were issued in November 2021.

The most significant initiatives are in respect of the introduction of a number of new visas, a new Federal Data Protection Law (Federal Law No. 45 of 2021) effective as of 2 January 2022 and a new UAE Labour Law (Federal Decree Law No. 33 of 2021 “Regulating Labour Relations”), effective as of 2 February 2022.

Visas

Currently, upon termination of employment and the subsequent cancellation of an individual’s residence visa, that individual is granted a 30 day ‘grace period’ within which they are required to either obtain alternative sponsorship to remain in the UAE, or leave the country. The UAE Government has declared that this grace period shall be extended to a minimum of 90 days and a maximum of 180 days. This extension was tailored to take into consideration difficult humanitarian situations.

In addition to the above, the UAE Government announced the introduction of two new visas, the first being the “Green Visa” and the second being a “Freelancer Visa”. Unlike the existing visa framework, these new visas allow for a distinction to be made between a work permit and residency, which essentially means that an individual’s residency shall no longer be linked to their employer. Employees with a Green Visa or Freelancer Visa will be able to sponsor themselves and their family members (parents) alike. However, only a certain criteria of the workforce are eligible to be considered for these visas, such as but not limited to those who work in artificial intelligence, block chain, digital currencies and entrepreneurship. The Freelancer Visa in particular is designed to help individuals work independently.

The UAE has implemented a new system for long-term residence visas (called ‘Golden Visas’) which enable expatriates to live, work and study in the UAE without the need of a national sponsor. Golden Visas have a validity of 5 or 10 years.

Generally, employers should monitor the visa and immigration developments in the coming months. To date, the Immigration Authority has confirmed that no directives have been issued with regards to the Green Visa and Freelancer Visa. Where employees opt for either a Golden Visa, Green Visa or Freelancer Visa (where applicable), this could result in an administrative burden in respect of the cancellation of their existing visa and the application of a new visa. Where these individuals are employed in the UAE, this arrangement will result in the termination of their existing employment and rehire once their new visa has been approved.

Federal Data Protection Law

Until recently, there was no unified set of privacy or data protection laws at the federal level and there was no one single national data privacy regulator. Consequently, while there were UAE laws that provide general rights to privacy, the concept of processing or transferring data was not extensively regulated for companies operating outside of the Dubai International Financial Centre (“DIFC”), the Dubai Healthcare City or Abu Dhabi Global Market.

However, the UAE recently enacted a new Data Protection Law effective as of 2 January 2022. Under the Data Protection Law, there are certain circumstances pursuant to which employers do not need to obtain consent of employees when processing and sharing personal data required to fulfil their obligations and rights in the field of employment within the UAE.

Employers should obtain legal advice in respect of how the Data Protection Law affects their ongoing business operations. Specifically, consideration will need to be given as to whether (i) internal processes need to be updated in accordance with the Data Protection Law; (ii) consent (meeting the outlined restrictions) from employees will need to be obtained to process / store / transfer their personal data; (iii) employment contracts / handbooks / policies need to be reviewed and amended in compliance with the Data Protection Law.

UAE Labour Law

The new UAE Labour Law came into effect as of 2 February 2022. The executive regulations of the new Labour Law, which effectively supplement and clarify various provisions of the new Labour Law, have now also been released.

Employers should obtain legal advice in respect of how the new UAE Labour Law will affect their ongoing employment contracts and internal policies and handbooks. Employers must ensure that their employment contracts, policies and handbooks are reviewed in line with the new Labour Law from a legal compliance perspective. Legal advice should be sought to ensure compliance with the new Labour Law from 2 February 2022

Emiratisation of the private sector

The UAE aims to recruit approximately 75,000 UAE National employees into the private sector within the next 5 years. The UAE has (under ‘Vision 2021’) already started to implement an Emiratisation drive, requiring employers to consider available UAE Nationals prior to any expatriate hire. The new initiative requires that all private sector employees must ensure that 10% of their workforce are made up of UAE Nationals.

This initiative is applicable only to skilled professionals. In order to incentivise the local community to take up more positions in the private sector, the Government is committed to supporting the cost of training citizens for up to a year, which includes a monthly salary of AED 8,000 for university fees.

In addition to the above, financial incentives include a monthly bonus of AED 5,000 for both Emirati university graduates opting to work in the private sector and Emirati nationals working in specialized fields in the private sector (for example, nurses, programmers, accountants etc.). For families whose monthly income is less than AED 20,000, the Government will provide financial aid of up to AED 3,200 in total per family and AED 800 per child. Pensions for those in lower paid jobs will also be supplemented by Government funds for the next five years. Should an Emirati lose their job in the private sector, the Government will support them for up to six months while they search for an alternative position.

Employers should be diligent in keeping in line with the Emiratisation percentages announced and developing training programs in line with their respective fields to ensure that they remain compliant with their legal obligations and mitigate any risk of penalties that may be imposed as a result of not meeting the Emiratisation target.

Introduction of the DEWS Saving Scheme

In February 2020, the DIFC replaced the historic arrangement of end of service gratuity, payable on termination of employment, with a defined contribution savings scheme, in which contributions are made monthly (called a ‘Qualifying Scheme”). The Qualifying Scheme which is being supported by the DIFC Authority is the DIFC Employee Workplace Savings plan (“DEWS”). The introduction of the Qualifying Scheme meant that end of service gratuity ceased to accrue and employers were required to enrol their employees into a Qualifying Scheme.

Currently, the Qualifying Scheme arrangement is limited to any employers / employees based in the DIFC (with some exceptions). However, it is proposed that by the end of 2022, all employees in Dubai will also be enrolled in a Qualifying Scheme and the end of service gratuity obligations would cease.

It is important that employers are aware of the legislative changes that may be implemented in respect of the removal of the obligation to pay gratuity and the implementation of a Qualifying Scheme, and ensure that their employees are registered with a Qualifying Scheme in accordance with any new regulations / laws that may be published to mitigate adverse risk of fines or other penalties being imposed.

It would also be important to seek legal advice to understand how this change would affect the employer’s business, to ensure that the transition is smooth, and that the employer remains legally compliant. For example, employers would need to consider (i) how the change affects the existing gratuity accrual; (ii) how payroll arrangements will be made for any employer and employee contributions; (iii) whether any changes need to be made to their employment contracts, handbooks and policies; and (iv) how the new system will be implemented.

KEY DEVELOPMENTS FOR 2021

The DIFC Employee Savings Scheme (DEWS) and its potential expansion

The Dubai International Financial Centre ("DIFC") introduced the new DIFC Employee Workplace Savings Scheme ("Scheme"), which came into effect on 1 February 2020. The Scheme amended the current DIFC Employment Law (DIFC Law No. 2 of 2019) by replacing the existing end of service gratuity ("ESG") regime with a defined contribution scheme. All DIFC employers are now required to make mandatory monthly contributions into the Scheme (or an alternative qualifying scheme) for each eligible employee.

We anticipate further developments in this area with the Scheme potentially being rolled out to other Dubai free zones.

Expansion of available visas to diversify and stimulate the workforce in the UAE

This year has seen many initiatives taken by the UAE Government which show a gradual departure from the limited and rigid visas available to foreigners and introducing a range of new visas to incentivise individuals to take up work of different natures in the country.

The first of these initiatives is the introduction of freelancing licences by the Department of Economic Development in the Emirate of Abu Dhabi. Individuals, whether employed full‑time or on a part‑time basis, can now be licenced to perform one of the available 48 business activities on a freelancing basis. Accordingly, individuals can now obtain residency visas through this channel, along with the freedom to sponsor their dependants as well. Additionally, licence holders do not need to have a registered office space (contrary to other licences available) and subsequently, working from home is legally acceptable.

Another initiative introduced specifically in the Emirate of Dubai is the Virtual Working Programme which was rolled out in October 2020. The programme allows individuals who are remotely working for their overseas employers the opportunity to reside in the Emirate with their families while continuing to serve their employers in their home country (i.e., without having a local employer). The virtual working programme is valid for one year, renewable thereafter and costs USD 287 per person. The criteria for eligibility includes having health insurance coverage in the UAE and proof of employment from a current employer with a minimum monthly salary of USD 5,000.

Finally, the 10‑year golden residency visa, which was introduced to a very limited number of individuals in 2019, is now available to an extended list of professionals. These include PhD degree holders, doctors and engineers of certain specialties.

We anticipate further relaxation of the somewhat rigid UAE immigration system to facilitate the gig economy and provide additional flexibility in the labour market to help efforts to kick start the economy following a difficult year.

Amendments to the Labour Law

Federal Decree No. 6 of 2020 (the "Decree") introduced/amended certain provisions of the Federal UAE Labour Law No. 8 of 1980 (the "Labour Law").

Firstly, the Decree introduces paid parental leave as a statutory entitlement for all employees in the private sector. Both male and female employees will be entitled to up to five working days of leave, which can be availed from the date of the birth of their child until he/she turns six months old. The right to parental leave can be availed by female employees in addition to their maternity leave entitlements.

Secondly, the Decree amends a provision of the Labour Law which relates to equal payment of men and women. Previously, Article 32 of the Labour Law provided that "a woman's wage shall be equal to that of a man if she performs the same work". The Decree therefore amends (and expands) Article 32 by stating that a woman should be granted a similar wage to a man if she conducts the same work "or other work of equivalent value". The Decree states that a resolution is due to follow with the procedures, limitations and standards required for the evaluation of the work of equivalent value. However, at this stage no resolution has been issued and we anticipate that further clarity will be provided with regards to this provision. These changes were important in that they signalled that the UAE Government was focussed upon introducing and improving family‑friendly legislation, a direction of travel that we expect to continue.

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, Roxanne Vesuvala, Samir Kantaria, Sabrina Saxena and Youstina Ailabouni of Al Tamimi & Company for their invaluable collaboration on this update.