Top workplace issues
UAE issues mandatory employment insurance schemes
Top workplace issues
The last 12 months have seen a flurry of activity from a legislative perspective, with a particular focus on employment and immigration. In this bulletin we reflect back on 2022 and some of the key statutory changes brought into effect in the UAE.
On the 15 November 2021, the UAE Cabinet approved a new Labour Law, Federal Law Number 33 of 2021 (the New Labour Law) which came into force on 2 February 2022 and repealed Law Number 8 of 1980 (the Old Law); replacing it entirely. Cabinet Resolution No. 1 of 2022 providing the implementing regulations to the New Labour Law was subsequently published.
Significant changes were introduced relating to work models, probation, family leave entitlements, discrimination laws, termination of employment, and end of service entitlements.
As we enter 2023, it is imperative to remember that under the New Labour Law the concept of unlimited term contracts has been removed and only fixed term contracts can be issued. Employers are mandated to transition all existing employees that remain on unlimited term contracts to fixed term contracts by 2 February 2023.
Federal Decree No. 29 of 2021 on the entry and residence of foreigners was issued at the end of 2021 repealing the previous immigration law – Law No. 6 of 1973. What followed in 2022 was the publication of Cabinet Decision No. 65 of 2022 on the issuance of the implementing regulation for Decree No. 29 of 2021 (Immigration Regulations) which came into force on 5 September 2022 repealing previous regulations (Decision No. 360 of 1997) and Cabinet Decision No. 8 of 2021 regulating Golden Residence Permits.
The Immigration Regulations include significant changes to the country’s immigration system by introducing new visit and residency visa systems. The regulations classify entry visas into five main types, including visit, temporary and emergency, entry for work, entry for residence without work, and GCC residents. Residence permits have also been divided into two main types, depending on whether the purpose of stay in the UAE is related to work or not, and finally, the regulations identify the categories of applicants eligible for the Golden Visa and Green Visa.
Ministerial Resolution No. 598 of 2022 Regarding the Wages Protection System was issued by MOHRE in December 2022 repealing previous legislation. The decision upholds the requirement for all establishments registered with MOHRE to pay their employees through the WPS in accordance with the New Labour Law.
If the wage is not paid within 15 days of the due date, the payment will be considered late (unless specified otherwise in the employment contract) and penalties will be imposed. Companies are considered compliant with WPS where they pay a minimum of 80% of the total wage of eligible employees. Where a legal deduction has been made, employees are deemed in receipt of their wage where they receive a minimum of 80% of their registered wage providing proof of deduction is provided on request. Any agreement to a period of unpaid leave must be communicated to MOHRE. Various categories of employees are excluded from WPS requirements.
Ministerial Decision No. 46 of 2022 Regarding Work Permits, Job Offers and Employment Contracts’ Forms was issued in February 2022 and mandates employers registered with MOHRE to ensure that parties to the employment relationship execute a MOHRE standard form employment contract which must conform with the offer letter and provide the same during the work permit application process. Additional provisions more beneficial to the employee not otherwise stated in the offer letter may be added and it is permissible to add an annex to the contract on the basis that it does not conflict with the provisions of the law and executive regulations.
The decision further obliges employers to maintain a digital or hard copy of both the offer letter and contract for a minimum period of two years from the date of termination, and highlight to the employee their contractual rights and obligations.
In relation to work permits, the decision provides that employers will not be considered late in issuing or renewing a work permit in the following instances:
UAE Ministerial Decision No. 47 of 2022 on Regulating Labour Disputes and Complaints Procedures was issued in February 2022 and sets out the process and procedure for filing a labour complaint with MOHRE, and the procedures for collective labour disputes.
The decision provides that labour complaints for breach of contract be filed with MOHRE by either party within 30 days of the breach. Once filed MOHRE will seek to mediate a settlement between the parties within 14 days of the complaint being submitted. Where settlement cannot be reached MOHRE will approve referring the complaint to the Labour Court.
Where the complaint is made by the employee, the employee is required to record their claim with the Labour Court within 14 days of MOHRE’s referral approval. During such period the employee may not work for another employer without obtaining a permit from MOHRE. Once final judgement is issued, the employee is required to submit an application to MOHRE to cancel their original work permit within 14 days from issuance of the final judgement of the dispute, where their employment relationship is terminated.
The decision provides that an employee may obtain a temporary work permit with their new employer whilst their claim with the Labour Court is pending save in instances where a complaint for absence from work is recorded against such employee. Employees may also request MOHRE to cancel their work permit without the employer’s consent.
Ministerial Decision No 48 of 2022 Regulating Labour Inspection Procedures was issued in February 2022 and sets out various controls and monitoring powers MOHRE labour inspectors have, including, entering the establishment, summoning employers, carrying out investigations, and mandating that data or information be provided by the employer.
Ministerial Decision No. 203 of 2022 on the regulation of granting electronic work permit quotas to establishments came into effect on 15 April 2022 and sets out quotas for companies obtaining electronic work permits. Quotas change depending on whether the company is classed as being within an economic sector with high priority (as set out in the annexure to the decision), and also whether the company is a new establishment or an existing establishment.
Emiratisation has continued to be one of the hot topics in the UAE during the course of 2022 particularly in light of the promotion of foreign investment into the UAE and the relaxation of restrictions on foreign ownership.
Ministerial Resolution No. 279 of 2022 on the mechanisms of Monitoring the Emiratisation Ratios in the Private Sector, and Contributions Imposed on the Establishments not Abiding by Said Ratios was published on 6 June 2022 increasing the requirement for establishments registered with the MOHRE employing 50 or more employees to increase their UAE national intake by two percent annually until it reaches 10% in 2026 commencing January 2023. The actual number of Emiratis required is calculated according to the overall number of skilled workers in the company.
In order for Emirati nationals to be counted against the quota, employers are required to ensure that they comply with all labour regulations, and that they have furnished each UAE national with a work permit and employment contract, registered them with the applicable pension authority, and ensure wages are paid through the Wages Protection System.
Existing Emirati employees pre-January 2023 are not counted when calculating the quota (although this may be subject the employer’s existing number of Emirati employees and the composition of their workforce), and therefore companies will need to ensure they have complied with the initial two percent recruitment requirements by 1 January 2023 without taking into consideration existing Emirati employees.
Companies who are non-compliant with the quota will be subject to fines. Each employer who does not comply with the relevant Emiratisation rate will be fined AED 6,000 per month per Emirati employee falling short of the quota. This fine will be increased by AED 1,000 per month per year and are payable annually at the end of each Emiratisation cycle.
Ministerial Resolution No. 663 of 2022 regarding compliance with Emiratisation regulations in the private sector was subsequently issued in December 2022, setting out various requirements and parameters to comply with when advertising, recruiting, and working with Emirati nationals. Cabinet Decision No. 95 of 2022 regarding penalties and violations relating to the Emirati cadres was issued at the same time outlining various fines that will be imposed on those who violate the Emiratisation schemes and requirements.
Furthermore, MOHRE announced amended conditions for the Platinum membership of the Tawteen Partners Club. To receive the Platinum membership, employers must now increase their Emiratisation quota by at least three times the prescribed annual ratio (if the number of Emirati employees is at least 30) or participate in the Nafis programme and train at least 500 Emirati nationals per year.
Cabinet Decision No. 18 of 2022 on the Classification of Private Sector Establishments Subject to the Provisions of the Law Regulating Labour Relations came into force on 1 June 2022, issuing new requirements in how private companies falling under the jurisdiction of MOHRE will be classified. The decision classifies companies into three tiers, first, second, and third, with the first tier being the highest and most beneficial tier. The classification depends on the extent of companies’ compliance with the UAE labour laws, payment of wages through the wage protection system, and compliance with Emiratisation policies.
Ministerial Decision No. 209 of 2022 on the classification of establishments under the third tier also came into force on 1 June 2022 and sets out the requirements for those companies falling under the third tier (being the lowest category for non-compliant companies) as set up by Decision No. 18 of 2022, and the duration the company will be classified under this tier according to the violation committed.
Ministerial Decision No. 208 of 2022 on the standards of determination of high-risk establishments came into effect on 1 June 2022. The decision creates a ‘high-risk’ designation for such companies registered with the MOHRE and who are in breach of their requirements. Pursuant to the decision, companies falling within the below criteria will be classified as ‘high-risk’ establishments:
Historically, UAE establishments have had to pay a bank guarantee for each employee they recruit. In June 2022 the UAE updated previous legislation pertaining to this requirement, allowing for the option of an insurance policy to be taken out in place of such guarantee.
Ministerial Decision No. 318 of 2022 concerning bank guarantees and employee protection insurance, provides that establishments must either pay a bank guarantee equal to AED 3,000 for each employee, or take out an insurance policy as directed by MOHRE. In conjunction with such requirement, Dubai Insurance Company has launched the Workers Protection Program (WPP Insurance) which fulfils such insurance requirement. The WPP Insurance has been set up to provide a safety net in instances where the employee is not paid their salary, is not paid end of service gratuity, suffers a workplace injury, where the cost of repatriation is not paid, or where the cost of repatriating a deceased employee’s remains need to be paid.
In September 2022 the UAE launched for the first time an unemployment insurance scheme. The scheme comes into force on 1 January 2023 and mandates all employees to subscribe by 30 June 2023. Federal Decree No. 13 of 2022 concerning unemployment insurance, together with Cabinet Decision No. 97 of 2022 concerning the mechanisms and controls for implementing the unemployment insurance scheme, and Resolution No. 604 of 2022 concerning the unemployment insurance, form the statutory framework for this new initiative.
The new law applies to all employees in the private sector, state government, or federal government except for investors (owners of the establishments in which they work), domestic workers, contractual workers, juveniles under 18 years of age, and pension-receiving retirees who have joined a new employer. Failure to subscribe may lead to penalties being imposed. Furthermore, it is currently understood that this scheme does not apply within the free zones.
The insurance will pay monthly compensation calculated at 60% of the insured’s basic salary, subject to statutory maximums, for a period of no more than three months from the date of the insured’s unemployment per claim subject to a maximum of 12 months’ compensation in aggregate during the insured period of service in the UAE.
Dubai Decree No. 46 of 2022 regarding the end-of-service reward management program for employees in the Emirate of Dubai mandates various government entities (including some Dubai free zone authorities) to enrol their employees in the Dubai International Financial Centre’s workplace saving scheme or any other saving scheme, as recommended by the Department of Finance, and pay contributions in place of end of service gratuity. Further resolutions are expected to be issued outlining the implementation and registration requirements, and category of investments permitted, as well as setting out the phases of implementation of the schemes and registration of employees.
Decree No. 9 of 2022 regarding Domestic Workers, and Decision No. 106 of 2022 issuing the executive regulations, came into effect on 15 December 2022 repealing the previous law (Law Number 10 of 2017 in relation to Domestic Workers) and sets out the minimum entitlements and requirements pertaining to the employment of domestic workers in the UAE.
Decision No, 33 of 2022 on work injuries and occupational diseases was published in April 2022 setting out a list of diseases and permeant disabilities classed as work injuries and occupational diseases. The list is set out in a table format annexed to the Decision and mirrors largely what was originally attached to the old labour law (now repealed law no. 8 of 1980). The Decision further sets out the reporting procedure in the event of a work injury or occupational disease and compensation payable by the employer in such instance.
Ministerial Resolution No. 657 of 2022 on rules and guidelines to deal with work injuries and occupational diseases was subsequently published in December 2022 setting out the MOHRE’s employer requirements including the requirement to maintain records and report work related injuries and occupational diseases through the MOHRE approved channels, adopt a system for monitoring work injuries and occupational diseases, and comply with the requirement to pay compensation.
Should you wish to discuss the details of this bulletin in more detail, please reach out to a member of the Clyde & Co Employment Team.