Considered a prime market for international expansion due to its open economy, robust infrastructure, high per capita income, and large annual trade surplus, the United Arab Emirates (UAE), continues to draw interest from multi-national corporations across the globe. In the recently published Doing Business 2017: United Arab Emirates, the World Bank found that the UAE ranks 26 out of 190 economies. Further, analysts expect GDP growth in 2017, as policy-makers have taken action to diversify the economy and due to the slight increase in oil prices.
While a desirable market, it is important to consider the process and implications of UAE employment law, which is inseparably linked to immigration. When researching entry into this market, an oversight of employment law can cause delays or unintended consequences.
While authorities have taken steps to increase the participation of Emiratis in the UAE through initiatives encouraging the employment of locals, it is estimated that over 80% of the workforce in the UAE is composed of foreign nationals. While the Ministry of Human Resources and Emiratization has implemented an Emiratization Scheme, requiring employers in the private sector to recruit and maintain a certain percentage of locals for specified positions in non-free zones, foreign nationals remain a key component within the labor market.
Immigration rules in the UAE mandate that foreign nationals (any national outside of one of the six Gulf Cooperation Council (GCC) countries) must have a valid work permit and residency visa sponsorship through a locally licensed and registered company. In general, permits and visas are valid for two to three years and are renewable. This depends, however, or if the work permit and visa sponsorship are based on a free zone or non-free zone. It is important to consider, when exploring potential candidates, that certain nationalities will have more difficulty than others obtaining approval to live and work in the UAE.Velocity Global is excited to announce that we are now offering Immigration Consulting
Velocity Global is excited to announce that we are now offering Immigration Consulting Services that can help you navigate this employment market.
Private sector employment relationships in the UAE are governed by the Federal Law 8/1980, and its amendments. In addition, the labor law is supplemented by a number of ministerial decrees and resolutions. The scope of the labor law includes Emirati, GCC nationals, and expatriates, and does not distinguish between full versus part-time employees.
Written contracts from the Federal Ministry of Labor and Social Affairs (MOL) are required.
The probationary period in the UAE is six months. During this time, an employer may terminate an employee’s service without notice.
Pension schemes/end of service gratuity payment:
It is neither common practice or mandatory for employers to provide expatriates pension schemes. The statutory end of service gratuity payment is the most comparable to a pension and is mandatory for employers to provide to expatriates. The payment is calculated based on a fixed formula and is payable to the employee at the termination of an employment contract. The payment cannot be waived or taken out of the employment contract, however, it can be changed for a company pension scheme that meets certain requirements.
Working hours may not exceed eight hours per day. In a six-day working week, normal business hours are 48 hours per week. During a five-day working week, working hours are 40 hours per week. The maximum number of working days is six.
Annual Leave is Calculated as Follows:
- Two days off per month, within 6-12 months of employment
- 30 days off per year, after one year of employment
45 calendar days of paid leave (full pay) if the employee has been employed for one year. In instances when an employee has worked for less than one year, she is entitled to half of her remuneration, however, she maintains the 45 days of leave.
Employees are entitled to 90 calendar days of sick leave per year, following the successful completion of their probationary period plus three months of consecutive employment, broken down as follows:
- First 15 days, full pay
- Next 30 days, half pay
- Remaining 45 days, no pay
Employers are required to provide expatriate employees with employer-paid private medical coverage. In addition, if a foreign national’s spouse (wife) is unemployed, the employer is required to sponsor their visa and medical insurance. However, the employer may require the employee to pay for the medical coverage.
Notice Period: If an employee holds an indefinite contract and is terminated with cause, the employer must provide at least a 30-day prior written notice. Payment in lieu of notice is accepted. The severance payment is required in cases of dismissal with cause.
If an employee is terminated for an invalid reason, the employer may be required to pay up to three months’ gross salary for an unfair dismissal.
UAE Nationals: Local nationals are awarded special protection from dismissal.
Employers in the United Arab Emirates are required to repatriate their foreign national employees at the end of their visa sponsorship.
If you have any questions regarding UAE employment law or global expansion in general, contact us today! Velocity Global is the leading expert in international expansion and wants to help you succeed overseas.