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Luke Tapp and Andrea Hewitt-Sims of Pinsent Masons explore key changes announced recently by the Ministry of Human Resources and Emiratisation (MOHRE), which will have a positive impact on employees in the UAE. The changes impact:
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 the management of their workforce.
The payment of salary within the UAE has been regulated and monitored by the authorities for several years following the introduction of the Wage 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 the Central Bank of the UAE, the system allows the MOHRE to create a database that records wage payments in the private sector to guarantee the full
and timely payment of agreed wages. The WPS applies to all institutions registered with the MOHRE across all sectors and industries.
The WPS had an extremely positive impact in respect of the regularity and timing of salary payments within the UAE. However, where employers based within the UAE have failed to comply with the WPS, although there has been business interruption,
there has historically been no associated financial penalty. Therefore some companies have failed to comply with the WPS 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 the statutory 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 the Decree are:
The introduction of this Decree adds further regulation to the provisions of the WPS and better protection to employees. It provides the MOHRE with greater authority to enforce its provisions.
The UAE Labour Law (Federal Law No. 8 of 1980, as amended) provides that employment is the right of UAE nationals and that non-nationals should only be employed if there is no suitably qualified UAE national available. A number of Ministerial decrees
and regulations set out the UAE's Emiratisation programme which has been in place for over ten years. This programme includes, for example, the requirement that companies employing more than 100 employees must appoint an Emirati or GCC national public
relations officer. Further, companies should contact the National Human Resource Development and Employment Authority (Tanmia) who will nominate UAE nationals for the role of secretary, and a UAE national must be employed as HR manager.
While these latter requirements, in relation to the employment of secretaries and the appointment of HR manager, may not be rigidly enforced, the fact remains that practice may change at any time and businesses can derive benefits from compliance with
the Emiratisation programme. The three new provisions recently announced by the MOHRE confirm the UAE's ongoing commitment to encourage Emiratisation within the UAE private sector. Increasing the number of local nationals employed within the
private sector continues to be an important theme for all of the governments of the GCC countries. Within the UAE in particular, the MOHRE remains committed to encouraging Emiratisation in a positive and inclusive manner.
The three new requirements which UAE businesses must adhere to with effect from 1 January 2017 are:
Organisations which fail to comply with the Resolution may lose their sponsorship privileges and be unable to obtain new work permits. The MOHRE may also apply additional administrative and financial penalties.
Organisations who do not comply with the Resolution will not be able to obtain new work permits until an Emirati is appointed to the role. The MOHRE may also impose additional sanctions.
The new Resolution amends the existing categories by introducing additional sub-categories to enable organisations to improve their rating by applying certain enhanced Emiratisation requirements.
In light of these changes, businesses should in the first instance assess staff population and if the required 500 or 1,000 person threshold is met, complete the necessary registration and appoint or employ a UAE national to the required role.
It should also be noted that the Emiratisation requirements both existing and newly introduced do not currently apply in the UAE's free zones.
The introduction of Ministerial Resolution No. 591 of 2016 applies to employees earning less than AED 2,000 per month (Low Income Employees). Employers who employee more than 50 Low Income Employees must provide such employees with accommodation
at the employer's cost.
The Resolution took full effect from 1 January 2017 and compliance is expected to be monitored closely by the MOHRE. It is important for employers who engage Low Income Employees to ensure they have suitable employee accommodation available for
The scope of the Resolution may expand in future as Local authorities have discretion to apply the Resolution to employers with fewer than 50 Low Income Employees or to employees earning above the AED 2,000 threshold. This demonstrates the importance
the UAE government places on protection of employees, particularly those on low incomes.
The introduction of these new provisions demonstrates the importance of wage protection, Emiratisation, and employee accommodation to the UAE government. These are key areas of labour management which the MOHRE and the UAE government wish to focus
on, protect and improve. It is important for contractors and employers to be aware of the emphasis which the local authorities are placing on labour management and Emiratisation and of course, it is essential for companies to understand how
the above Regulations may impact on their business.
It is an exciting time to be growing business and engaging employees in the UAE and the development of the statutory framework around key issues such as Emiratisation, wage protection and employee accommodation is a positive development for business growth
and commercial activity within the region.
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