Employers in the United Arab Emirates (“UAE”) began 2023 with a to-do list for HR and employment law compliance that was overflowing. After a busy 2022 that saw several initiatives and reforms related to employment and immigration, our most recent round-up describes the deluge of legislative developments affecting UAE companies, this article will outline the different changes introduced in the UAE Labour Laws.
- Employment Contract: Extension of deadline for change to fixed-term contract and elimination of the three-year fixed period.
The UAE Government has extended the deadline by which companies must change workers’ unlimited-term contracts to fixed-term contracts from February 1 2023 to December 31 2023, under Ministerial Resolution No. 27 of 2023. This choice was made following Federal Decree-Law No. 33 of 2021, which governs labour relations in the private sector, and is based on the Ministry’s Resolution No. 27 of 2023 about the extension of the window for rectification of employment contracts.
According to international standards, the Decree-Law amended several of its terms, including fixed-term contracts that are subject to renewal depending on what is agreed upon by both parties to the contractual connection without defining a maximum contract length.
You should know: The UAE New Labour Law
What has been modified?
The New UAE Labour Law initially required all workers to be hired on fixed-term contracts. It offered a one-year conversion opportunity for those who already had unlimited-term contracts. Initially, the restricted term had a three-year cap. However, the cap was removed from such a requirement. It is now possible for businesses and their workers to mutually decide on the duration of the limited period.
- ILOE Insurance Scheme, a new initiative for income protection
Federal Law 13 of 2022 was passed by the UAE’s Ministry of Human Resources and Emiratization (the “MoHRE”) and established a compulsory unemployment insurance program in September 2022. This program is intended to give workers more financial security if their company dismisses their employment for non-discipline-related grounds such as a layoff.
What has been modified?
- Onshore UAE workers must register with the Involuntary Loss of Employment (ILOE) Scheme and contribute as of January 1, 2023. When an employee’s employment is terminated for a cause other than disciplinary action or resignation, the Scheme intends to provide income for them for three months while they look for a new position.
- All UAE onshore workers must adhere to ILOE (i.e. excluding those working in any of the UAE free zones). Depending on which of the two groups listed below an employee belongs to, they may have distinct responsibilities and rights to compensation:
- Employees in the “first category” who make AED 16,000 or less per month are required to pay AED 5 (plus VAT) each month (AED 60 plus VAT yearly), and their monthly remuneration is limited to AED 10,000 per month for the first three months.
- Employees who fall into the “second category” and earn a basic salary beyond AED 16,000 must pay AED 10 (plus VAT) each month (AED 120 plus VAT yearly), and their monthly remuneration is limited to AED 20,000 per month for the first three months.
What consequences would there be if you didn’t comply?
AED 400 in fines may be imposed on the employee for failure to register with the Scheme, and AED 200 in penalties may be imposed for failure to pay the requisite premiums for more than three months. There are several ways to join the Scheme.
- Private sector goals for Emiratization
- Nafis
National efforts are carried out by the Emirati Human Resources Competitiveness Council, or “Nafis,” to boost Emiratization in the commercial sector. By strengthening their competitiveness and supplying this sector with Emirati expertise, the council helps residents in the private sector.
Over the next five years, the council wants to place 75,000 individuals in the private sector. Additionally, it provides a variety of measures to strengthen Emirati cadres and encourage private businesses to hire Emirati workers.
- Emiratization Rate
To reach an overall rate rise of 10% by 2026, the Cabinet adopted a resolution to boost the Emiratization rates for skilled occupations in private sector companies with 50 or more workers to 2% yearly. Along with this, institutions that do well in the education and employment of individuals are rewarded with incentives.
- Penalty for non-compliance
Non-compliant businesses will be required to pay a fee of AED 6,000 per month, commencing in January 2023, for each citizen who has yet to be employed to assist the commitment to attain the employment as mentioned earlier objectives for nationals. Under the condition that the value of the monthly payments grows by AED 1,000 per year until 2026, the sum will be paid through MoHRE’s digital systems.
- Bank guarantees and Employee Protection Insurance Scheme
Concerning bank guarantees and employee protection insurance, the Minister of Human Resources and Emiratization issued Ministerial Decision No. 318/2022 on June 27, 2022 (hereafter referred to as “New Decision”). The UAE Government has made several modifications to the entrance and resident visa options for those working or exploring business prospects in the UAE as part of its ongoing efforts to attract and retain top talent from across the world. The revised resolution gives institutions a choice between two options:
- Offer a bank guarantee of Dh3,000 or more for each employee paid by a UAE-based bank. The warranty may be automatically renewed after one year.
- Provide each skilled worker with a 30-month insurance policy worth Dh137.50; each low-skilled worker with a policy worth Dh180; and each employee of high-risk businesses that aren’t Wages Protection System registered with a policy worth Dh250 (WPS).
The insurance coverage is up to Dh20,000 and covers other rights and entitlements that the employer cannot fulfil. Based on a decision by the relevant ministry or labour court, in addition to the worker’s last 120 working days’ wages, end-of-service gratuity, travel costs back to their home country, and costs associated with repatriating the worker’s body in the event of his death.
To whom do these modifications apply?
On the surface, most of the duties arising from these new legislative amendments only apply to employers registered with the MoHRE and do not immediately have legal effect against businesses headquartered in any of the company or financial-free zone zones. Employers in the UAE must be aware that the jurisdictional applicability of these changes might vary, and they must consult with a lawyer to ascertain the extent to which they apply to their company.
You may be interested in reading: Fixed term contract under UAE new Labour law
How may HHS Lawyers and Legal Consultants assist you?
All types of company sectors and people deal with labour and employment difficulties. The variety of labour in the UAE, which includes everything from merchants to the industrial industry, is exceptional and needs specific consideration. Every employer in the United Arab Emirates is required to abide by the various requirements of the UAE Labour Laws for the preservation of Employee Employment Rights. The need for labour lawyers in Dubai is high since Dubai is the business centre of the United Arab Emirates. The most renowned labour lawyers in Dubai are Emirati nationals.
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