New labour legislation in the United Arab Emirates

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:

  • 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 the management of their workforce.

Wage protection

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:

  1. The Decree applies to all organisations which are registered onto the WPS. Such companies must pay wages within ten days of the registered payday in the WPS.
  2. In respect of companies with over 100 employees:
    1. where such companies fail to adhere to the ten day timeframe, the MOHRE will stop granting any additional work permits with effect from the 16th day of the delay.
    2. if wages are not paid within one month of the registered payday, the MOHRE will inform the judicial authorities, which will take "all necessary punitive measures against the company".
    3. if wages are not paid within 60 days of the registered payday, the company will be fined AED 5,000 per employee, up to a maximum of AED 50,000 if the delay affects multiple workers.
  3. In respect of companies employing less than 100 employees, it shall be treated in the same way as a larger company and subject to the same penalties where:
    1. the company breaches the requirements of the Decree twice within one year; or
    2. the company fails to pay within 60 days of the registered payday.

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.

Emiratisation

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:

  • Data Processing Officers – Ministerial Resolution No. 710 of 2016 requires all organisations employing 1,000 or more employees to register on the MOHRE's online platform (Tas'heel) to obtain work permits for employees. Businesses must declare that they are an employer and register every staff member. The platform can only be accessed by UAE nationals.  The Resolution also places an obligation on employers to engage two UAE nationals in the position of Data Process Officer.

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.

  • Health and Safety Officer – Ministerial Resolution No. 711 of 2016 requires all companies operating in the construction or industrial sector which employ 500 or more employees to employ a UAE national in the position of occupational health and safety officer. The employee should implement and monitor employee health and safety practices.

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.

  • Changes to Company Classifications – Ministerial Resolution No. 740 of 2016 builds on the existing Emiratisation framework in the UAE. The present framework provides incentives for organisations to engage UAE nationals within their businesses and grades organisations into one of three categories depending on how effective their Emiratisation policies are. Organisations within a higher category may avail of a number of benefits including paying lower MOHRE and immigration fees, exemption from depositing bank guarantees for employees and finding it easier to obtain visas. 

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.

Employee accommodation

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 their employees.

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.

Going forward

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.

Filed Under: Construction

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