New labour legislation in the United Arab Emirates

New labour legislation in the United Arab Emirates

Luke Tapp and Andrea Hewitt-Sims of Pinsent Masons explore key changes announced recently by theMinistry of Human Resources and Emiratisation (MOHRE), which will have a positive impact on employees in theUAE.  The changes impact:

  • salary protection
  • Emiratisation, and
  • employee accommodation

It is important for UAE based companies, senior managers and HR professionals to be aware of these important developments and how they may impact on themanagement of their workforce.

Wage protection

The payment of salary within theUAE has been regulated and monitored by theauthorities for several years following theintroduction of theWage Protection System (WPS) in 2009. The WPS is an electronic salary transfer system that requires all companies to pay employees via banks, UAE Exchange or registered financial institutions. Developed by theCentral Bank of theUAE, thesystem allows theMOHRE to create a database that records wage payments in theprivate sector to guarantee thefull and timely payment of agreed wages. The WPS applies to all institutions registered with theMOHRE across all sectors and industries.

The WPS had an extremely positive impact in respect of theregularity and timing of salary payments within theUAE.  However, where employers based within theUAE have failed to comply with theWPS, although there has been business interruption, there has historically been no associated financial penalty.  Therefore some companies have failed to comply with theWPS for long periods of time without accruing any punitive penalties.

The MOHRE has sought to tackle this by introducing a punitive Wage Protection Decree, Ministerial Decree No (739) of 2016, which reinforces thestatutory obligation on employers to pay their employees on time and in full and introduces possible financial penalties.  The Decree was introduced in October 2016. The key provisions of theDecree are:

  1. The Decree applies to all organisations which are registered onto theWPS. Such companies

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