Federal Law Number 33 of 2021 (“New Labour Law”) has seen a host of significant developments to the UAE’s employment laws.
Sabrina SaxenaSenior Counsel,Employment & Incentives
Kick-started by the introduction of Federal Law Number 33 of 2021 as amended (the “New Labour Law”) which came into force on 2 February 2022, last year has seen a host of significant developments to the UAE’s employment laws and regulations. This article explores recent developments.
A number of these developments will come as a welcome change to the healthcare sector given that they are aimed at increasing and retaining skilled workers in the UAE workforce.
On 2nd February 2022, the New Labour Law was brought into force replacing in its entirety Federal Decree Law No. 8 of 1980 (the “Old Law”). The New Labour Law implemented a number of changes to the Old Law including the abolition of unlimited term contracts and replacement with fixed-term contracts. Although initially there was a cap of three year terms, this was subsequently removed by way of an amendment to the New Labour Law (Federal Decree-Law No. 14 of 2022).
While strictly speaking this is not a return to unlimited contracts, companies may choose the term of employment contracts at their discretion (e.g. 5 or 10 year terms). The Labour Law stipulates that all companies must transition their employees onto fixed term contracts by the 1 February 2023. It is important the employers comply by this date otherwise fines and other penalties may be imposed.
In October 2022, the UAE government issued Federal Decree Law No. 13 of 2022 Concerning Unemployment Insurance Scheme (the “Scheme”). The Scheme is mandatory for all employees in the private and public sectors who are employed by employers based in mainland UAE including UAE nationals, with the exception of (i) investors; (ii) domestic workers; (iii) temporary workers; (iv) juveniles under the age of 18; and (v) pension receiving retirees who have joined a new employer. The objective of the Scheme is to provide the insured with income for a period during unemployment (depending on the reason for the termination of employment).
As part of the Scheme, employees will be eligible to receive compensation upon becoming unemployed, subject to having been insured for 12 consecutive months under the Scheme. All employees will be eligible to receive 60% of their basic salary during unemployment. The subscription fee and maximum compensation is dependent on the category of employee:
The first category will apply to employees earning a basic salary of AED 16,000 and under. Employees under this category will pay a subscription to the Scheme of AED 5 per month and their monthly compensation shall be limited to a maximum of AED 10,000.
Employees in the second category must earn a basic salary exceeding AED 16,000 and will pay a subscription fee of AED 10 per month with the monthly compensation limited to a maximum of AED 20,000. Eligible employees will receive this compensation for a maximum period of three months or until they find alternative employment (whichever is earlier).
The Scheme is effective as of 1 January 2023.
NAFIS is a governmental federal program introduced by the UAE Government in September 2021 to implement its Emiratisation initiatives aimed at increasing the recruitment of Emiratis in the private sector. It was launched as part of the “Projects of the 50”, which aims to accelerate the development journey of the UAE.
Enrolment and subsequent compliance with the NAFIS programme has been made mandatory with all private sector companies in mainland UAE (NAFIS is currently not mandatory to employers established in UAE free zones) now being mandated to create a company account and register on the NAFIS platform and meet the prescribed Emiratisation targets or alternatively have made provision in their accounts for the imposition of penalties.
In October 2022, the Ministry of Human Resources and Emiratisation implemented the Cabinet Resolution No. 95 of 2022 regarding violations and administrative penalties related to the initiatives and programmes of NAFIS, which lays out the statutory framework for curtailing business practices that could impede the objectives of the NAFIS programme through administrative fines and penalties. It is therefore important that employers are aware of their obligations in respect of NAFIS to ensure that fines and penalties are not imposed.
On November 23, 2022 Sheikh Mansour Bin Zayed announced the UAE Government’s plan to expand the salary support of Emiratis in the private and banking sectors under the Emirati Salary Support Scheme under the NAFIS programme that contributes to the recruitment and training costs of Emiratis in the private sector through a variety of monetary incentives. The Emirati Salary Support Scheme has been expanded to cover all employees in the private sector irrespective of their date of joining meaning that it will cover employees who have joined the workforce both before and after the introduction of the NAFIS program.
The programme will apply to Emirati employees in the private sector earning a monthly salary of not more than AED 30,000 and proposes an increase to the temporary financial support that is to be provided to Emiratis who have recently lost their jobs in the private sector due to force majeure circumstances. Any such temporary financial support period will be provided for a period of 12 months and the benefit period will not exceed six consecutive months.
The salary top-up amount is calculated based on the difference between the employee’s current salary and the designated salary for each category, on the basis of the condition that it does not exceed the prescribed salary ceiling of AED 20.000 or AED 30,000 and a minimum salary top-up of AED 1.000 is provided.
Historically, following the termination of employment in the UAE, employees were required to cancel their residence visa (where sponsored by their employer) and were given a grace period following cancellation of 30 days to either source alternative sponsorship or leave the country. However, on 3 October 2022, new (longer) grace periods were implemented aimed at retaining UAE workforce. The new grace periods are set out below:
Days
To whom it applies
180 days
Golden visa holders and their dependants, green visa holders and their dependants, expats’ widows, expats’ ex- spouses, students who have completed their studies and skilled workers holding visas of grade 1 and 2;
90 days
Skilled workers holding visas of grade 3 and above;
60 days
Residents who are under the sponsorship of a family member (excluding those being sponsored through golden / green visas) or an employer (excluding those being sponsored under a visa of grades 1 to 3); and
30 days
All other residents including persons holding investor, partner, remote worker or retirement visas or self-sponsored individuals.
The implementation of these new developments promote and encourage the UAE private sector to nurture local talent whilst remaining competitive with other markets and other jurisdictions, and it is clear that the UAE is accommodating greater flexibility to retain its existing workforce. From a healthcare perspective, this would open up an employer’s ability to access a more substantial pool of labour by encouraging individuals to continue reside in the UAE following the end of their employment.
Notwithstanding this, whilst nationalisation policies are a positive initiative that will boost growth in the UAE, companies should be aware of the additional obligations being enforced, in order to effectively manage their operational requirements.
For further information, please contactSabrina Saxena.
Published in January 2023
