If you are interested in the latest developments in the UAE legal landscape, you might want to read this blog post. We have compiled a summary of some of the most important news and updates from June to July 2023, covering topics such as employment law, Emiratisation, and unemployment insurance.
Employment Law: Deadline for compliance with the new UAE Labour Law
One of the most significant changes in the UAE employment law is the introduction of the new UAE Labour Law, which came into force in February 2022. The new law requires all employees of companies in the private sector (outside of the DIFC and ADGM) to be employed on fixed-term employment contracts. The deadline for transitioning employees onto the requisite fixed-term employment contracts is February 1, 2023.
The new law also removed the 3 year-cap on the length of the fixed-term, which was initially imposed by the new UAE Labour Law, allowing the parties to agree whatever length of fixed-term they wish (although a fixed-term is still mandatory). The removal of the maximum cap on the term, together with the fact that either party has the right to terminate the employment contract prior to the expiry of its term, renders the fixed-term element of the employment contract largely meaningless. For example, if the parties agree a 5 year fixed-term contract, the employment contract is, for all intents and purposes, a permanent employment contract.
Employers who fail to comply with the new law will face penalties ranging from AED 10,000 to AED 50,000 per employee. Therefore, it is advisable for employers to review their existing employment contracts and ensure that they are aligned with the new requirements before the deadline.
Emiratisation: New quotas and fines
Another major development in the UAE labour market is the implementation of new Emiratisation quotas, which came into force on January 1, 2023. Emiratisation only applies to private sector companies registered with the Ministry of Human Resources & Emiratisation (MoHRE). It does not currently apply to entities located in any of the UAE’s free zones.
With effect from January 1, 2023, at least 2% of a company’s workforce must be UAE nationals. A company’s mandatory Emiratisation quota will increase by 2% each year, until 10% of its total skilled workforce is UAE nationals.
A company which fails to comply with its mandatory Emiratisation quota will be subject to a fine of AED 6,000 per month for each outstanding UAE national employee. These fines will increase by AED 1,000 for each year. MoHRE has announced that it has already imposed fines of approximately AED400m on companies which have not complied with their obligations. Surprisingly, fines have been imposed on companies for their non-compliance for 2022, including for the period before the initial resolution was issued on 6 June 2022. Most companies had expected the fines to be “forward-looking” i.e. to apply in respect of non-compliance from January 1, 2023 onwards. It also appears that the MoHRE is calculating a company’s compliance by reference to the size of its skilled and unskilled workforce.
Employers should therefore take proactive steps to meet their Emiratisation quotas and avoid hefty fines. This may include reviewing their recruitment strategies, providing training and development opportunities for UAE nationals, and retaining existing Emirati employees.
Unemployment Insurance: Deadline to register
In October 2022, the UAE government announced the introduction of an unemployment insurance scheme. From June 30, 2023, all employees in the private sector in the UAE, excluding those in freezones (although that may change), must register with the scheme. Employees must then pay (i) AED 5 per month into the scheme if they earn less than AED 16,000 per month; and (ii) AED 10 per month into the scheme if they earn more than AED 16,000 per month.
The scheme aims to provide financial support to employees who lose their jobs due to reasons beyond their control, such as redundancy or termination without cause. The scheme will pay eligible employees up to 60% of their average monthly salary for a maximum period of six months.
Employers are required to deduct and remit the contributions from their employees’ salaries on a monthly basis. Employers who fail to do so will face penalties ranging from AED 500 to AED 10,000 per employee.
Employees who wish to benefit from the scheme should ensure that they register before June 30, 2023 and keep track of their contributions. Employees who resign voluntarily, are terminated for cause, or find another job within six months of losing their previous job will not be eligible for the scheme.
These are some of the most important legal news and updates from the UAE for June and July 2023. We hope you found this blog post informative and useful. If you have any questions or comments, please feel free to contact us.
Sources:
[1] Changes in UAE Employment Law You Need to Know for 2023, Addleshaw Goddard LLP, https://www.addleshawgoddard.com/en/insights/insights-briefings/2023/employment/changes-uae-employment-law-need-to-know-2023/
[2] Middle East Tax & Legal News, PwC, https://www.pwc.com/m1/en/services/tax/me-tax-legal-news.html
[3] Legal News & Business Law News, National Law Review, https://www.natlawreview.com/
