Ministry of Human Resources & Emiratisation (‘MOHRE’) announced an overhaul to the labour laws in the UAE. The new UAE Labour Law (Federal Decree Law No. 33 of 2021) (‘New Law’), came into effect on 2 February 2022 and addresses a number of changes which aim to align the UAE labour law with international best practices. The New Law will replace UAE Federal Labour Law, Law No. 8 of 1980 and introduces some of the most significant amendments to UAE labour legislation seen in recent years.
It’s important to note that the new UAE labour law will apply to both public and private sector workers and companies are likely to be given a year to implement the changes. Some of the key changes are outlined below.
A minimum wage is yet to be announced by the cabinet but will be assessed following a proposal by the MOHRE in collaboration with the relevant authorities. The minimum wage, once announced, will be applicable to private sector employees.
Annual leave entitlements
This remains at two days per month for the first year of employment and increases to 30 days per year from then onwards.
The changes that have been implemented mean that employees can now legally request paid annual leave during their probation period and must be paid their full salary, not just the basic and housing allowances as was previously the case.
The amendment states that UAE public holidays are additional to annual leave, however if they happen to fall within your annual leave then they are considered part of the leave.
No changes were announced regarding sick leave so far, this includes Covid-related sick leave.
A number of flexible employment arrangements were introduced in the New Law covering part-time, temporary and flexible work. It remains to be seen what will be required of employers to implement these various employment arrangements and how, if at all, end of service entitlements will be required for part-time, temporary and flexible workers.
Although no specific guidance was included surrounding remote working provisions, the New Law acknowledges that an employee may work remotely (whether from inside or outside the UAE) with the approval of their employer. This is a welcome development and reflects the changing landscape of the working environment.
Changes to three-year fixed term contracts
Where an employee is currently on an unlimited term contract, the New Law states that these employees will be required to enter into fixed term employment contracts, that will be for a maximum duration of three years. On expiry of the term, the employment contract can be renewed or extended for similar or shorter durations, which can happen numerous times. If the contract is not renewed or extended by the employer, but both employee and employer continue to operate as though the contract is still in effect, it’s deemed as though the contract has been renewed on the same terms and conditions as the last signed contract. Any extension or renewal will automatically be added to the employee’s continuous service and therefore will be included in the calculation of end of service gratuity entitlement.
Employers are required to convert existing unlimited term contracts into fixed term contracts within one year (i.e. by 1 February 2023).
End of Service Gratuity
Any employee that resigns will be entitled to their full end of service gratuity payment, providing they completed one full year of continuous service.
All end of service entitlements must be paid within 14 days of the termination date, and failure to comply can result in a fine of up to AED 1,000,000.
A minimum notice period of 14 days for employers wishing to terminate an employee while on probation has been introduced. The maximum probation period remains at six months.
Employees who want to change jobs during the probation period must give their employer one month’s notice or 14 days’ notice in the event they want to leave the country. In circumstances where the employee wishes to move to another employer in the UAE during their probation period, the new employer is required to compensate the first employer for the recruitment related costs incurred by the first employer, unless agreed otherwise.
If the employee resigns during the probation period and leaves the UAE, but then returns to work in the UAE within three months of their original departure to join another employer in the UAE, the new employer will be liable to compensate the previous employer for the employee’s recruitment costs, unless agreed otherwise.
If an employee fails to adhere to the provisions under the New Law, they will be subject to a labour ban of one year from the date they leave the country (exemptions by MOHRE apply).
Additionally, the law states that there should be equal pay for men and women for the same role.
Discrimination, bullying and harassment
The law provides protection from discrimination in the workplace specifically on the grounds of race, colour, sex, religion, national origin, social origin and disability – all of which are prohibited by their employer, supervisor, colleagues or those working with them. Furthermore, employers are prohibited from terminating, or threatening to terminate, an employee due to pregnancy or those who are on maternity leave.
While there are no specific penalties attributed to discrimination an employer may be liable for fines ranging up to AED 1,000,000 for any breaches.
Maternity, paternity, and compassionate leave
Maternity leave has increased to 60 calendar days, the first 45 days are fully paid, with the remaining 15 days at half pay.
Maternity pay is no longer subject to the employee having completed one year of continuous employment. Maternity leave also applies in circumstances where an employee miscarries after six months of carrying the baby, still births and/or upon the death of an infant after birth. The New Law provides that in circumstances where the employee delivers a sick child or a child with special needs whose health condition requires continuous support, the employee will be entitled to an additional 30 days’ leave with full pay commencing from the expiry of the maternity leave. This additional 30 days’ paid leave can be further extended by another 30 days unpaid.
In addition to the amendments to maternity leave, a number of new leave categories have been introduced, including:
- Compassionate leave: five days in the event of the death of an employee’s husband or wife, and three days in the event of the death of an employee’s mother, father, son, brother, sister, grandson, grandfather or grandmother.
- Paternal Leave: five days leave which must be used within the first six months following the child’s birth.
Currency of salary payments
Salaries can now be paid in a currency other than UAE dirhams where it’s agreed in the employment contract. It remains to be seen how this will work in practice for employers who are required to make salary payments through the Wage Protection System (WPS).
The inclusion of non-competition restrictions in an employment contract is permitted provided that the provisions are reasonable in duration, geographical scope and to protect the legitimate business interests of the employer. The New Law introduces a maximum restrictive period of two years from the termination date. Where an employee is terminated by the employer, and the termination is not in accordance with the law, any restrictive covenants are automatically nullified.
The New Law introduces a number of measures designed to modernise employment legislation and bring it in line with international best practices. UAE companies, both onshore and within the free zones (with the exception of the DIFC and ADGM) should be aware of these changes and review their contracts, employee handbooks and any other employment policies and procedures to ensure they are in line with the New Law. Should you need any support or advice to ensure you are fully compliant with the New Law, the team at Equiom is able to support you. Please contact Neil Wilson for more details and to discuss the impact that these changes may have on you or your organisation.
This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it. For information on the regulatory status of our companies, please visit www.equiomgroup.com/regulatory