United Arab Emirates: Additional Details Released on Impact of Forthcoming Labor Law
November 29, 2021
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At a Glance
- A new labor law, effective February 2, 2022, will replace existing employment regulations applicable to workers and companies in the private sector, except those in the Abu Dhabi Global Market and Dubai International Financial free zones (which have their own labour laws) and domestic workers.
- The law consolidates many changes which have been implemented in the United Arab Emirates through various regulations over the past few years, and also introduces new changes. Topics covered include work models, employment contracts, probationary periods, wages, termination notices, and penalties, among others.
- As a result, employers in the private sector should review their strategies and policies for the recruitment and employment of workers.
The situation
A new labor law, effective February 2, 2022, will replace existing employment regulations applicable to workers and companies in the private sector, except those in the Abu Dhabi Global Market and Dubai International Financial free zones (which have their own labour laws) and domestic workers.
A closer look
The new law consolidates many changes which have been implemented through various regulations over the past few years and introduces new rules. Details of the law include the following:
| CURRENT LAW | FUTURE LAW | IMPACT |
| Work models. Alternative employment arrangements, including part-time work, are recognized by the main law and its executive regulations, to a limited extent. |
Alternative employment arrangements will be addressed in more detail and new work models, including flexible work, will be introduced. |
Employers will have additional options to consider for their recruitment needs. Alternative work models may result in reduced costs of employment while increasing work efficacy and providing flexibility for workers who require non-traditional work models. |
| Employment contracts. Limited- and unlimited-term employment contracts are recognized. |
Only limited-term employment contracts not exceeding three years (renewable for similar or shorter periods) will be recognized.
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Unlimited-term employment contracts for all employees will have to be converted into limited-term agreements by February 1, 2023. This is likely to create additional administrative burdens and extra costs, depending on the jurisdiction of the sponsoring entity. |
| Probationary period. The probationary period (the official time when an employer can monitor the employee’s performance) is currently for a maximum of six months and can be terminated by either party without notice. |
The maximum probationary period will remain at six months. However, both parties will be required to serve a 14-day termination notice unless the employee has secured an alternative employment option in the United Arab Emirates, in which case the employee will be required to serve a one-month notice. |
Employers must assess any specific obligations relating to the termination of the employment during and after the probationary period, including the reimbursement of recruitment costs where workers are seeking new employment in the United Arab Emirates. |
| Wages. Wages must be paid in the local currency (UAE Dirhams) | Wages will be required to be paid in the local currency (UAE Dirhams), unless otherwise agreed between the parties in the employment contract. | The payment of wages in a foreign currency may have an impact on employer’s compliance with the United Arab Emirate’s Wages Protection System. However, any specific implications should be assessed on an individual basis. |
| Termination notices. The minimum termination notice period is 30 days and the maximum period is three months. | The minimum notice period will remain at 30 days and the maximum period will be 90 days. All financial dues will need to be paid by the employer to the employee within 14 days of the employment termination date. | Employers will have to revise their internal policies to ensure that the applicable termination mechanisms comply with the 14-day deadline. This new requirement may also impact the date the employment residence permit cancelation can be processed by the employer. |
| Penalties. Companies employing workers without the relevant work authorization may be subject to a fine of AED 50,000 to 100,000. | Companies employing workers without the relevant work authorization may be subject to a fine of AED 50,000 to 200,000. | Employers should ensure that they comply with the applicable work authorization requirements or risk being subject to higher fines. |
Background
These changes have been introduced after the implementation of numerous enterprising immigration laws, which are expected to support the United Arab Emirate’s economy and make the country a leader in attracting business in the region.
Looking ahead
The Ministry of Human Resources and Emiratization is expected to issue implementing regulations that will set out further frameworks and will contain additional explanatory provisions of the law. It is not clear when these regulations will be available.
This alert is for informational purposes only. If you have any questions, please contact the global immigration professional with whom you work at Fragomen or send an email to [email protected].
