New GCC rules for UAE employers

During 2022, the GCC states introduced a number of changes (some of which have already been implemented, while some will come into effect later in 2023). In this article (the first in a short series covering these changes), we briefly summarize the key employment developments expected to affect employers in the UAE.

United Arab Emirates

Discrimination/Bullying and Harassment

On February 2, 2022, Federal Decree No. 33 of 2021 (UAE Labor Law) on the management of labor relations came into force in the UAE. This prohibits discrimination on the basis of race, colour, sex, religion, national origin, social origin or disability which would impair an employee’s equal opportunity or impair an employee’s access to and/or continued employment. In a major change, UAE labor law now also prohibits sexual harassment and/or any verbal, physical or psychological form of bullying against an employee by an employer or an employee’s supervisor/co-worker. Employers may be fined for one-off and multiple offenses ranging from Dh5,000 to Dh1 million. Therefore, it is important to ensure that all employees and management are aware of these changes. In particular, this may be a good time to review policies and provide training on workplace equality, diversity and dignity.

fixed term contract

• UAE labor law initially set February 1 as the deadline for private sector businesses registered outside the DIFC and ADGM to convert all indefinite employment contracts to fixed-term contracts. The Ministry of Human Resources and Emiratisation (MoHRE) has now issued Ministerial Resolution No. 27 of 2023 providing for an extension of the deadline until December 31 this year. The extension of the deadline is welcome as employers have more time to ensure that their employees’ contracts comply with UAE labor laws.

• While the MoHRE announcement provides employers with additional breathing room, companies should be mindful of the risk of fines or penalties if the changes are not in effect by December 31. Employers who have not yet taken the necessary action should endeavor to review and amend their existing contracts and engage with affected employees in time for the extended deadline, as further extensions are unlikely. It may also be prudent for employers to align the issuance of new fixed-term contracts with their employees’ upcoming visa renewal dates this year.

Strengthen protection against work-related injuries and occupational diseases

• From January 3 this year, employers with 50 or more employees must implement a monitoring system for work-related injuries and occupational diseases, and must also establish preventive tools and regular health checks for employees. In addition, the UAE’s “Labor Law” clearly stipulates that employees should be compensated for work-related injuries and permanent disabilities, and confirms that if an employee’s death is caused by a work-related injury, his family members are entitled to compensation.

Unemployment Insurance Program

• First announced in October 2022, the UAE Unemployment Insurance Scheme aims to provide financial support to unemployed employees.

• Participation in the scheme is mandatory for all onshore employees of the federal government and the private sector, except investors, domestic helpers, part-time employees, pensioners and those under the age of 18.

• Compensation payments of 60% of the employee’s previous basic salary are paid for up to three months from the date of unemployment, up to a maximum of AED 20,000 (US$5,445/£4,500) per month.

• Monthly salaried employees with a basic salary of AED 16,000 or less will have a monthly insurance fee of AED 5. Those whose salary exceeds AED16,000 will have a monthly insurance fee of AED10.

• Employees are eligible for unemployment benefits if they have worked and subscribed to an insurance plan for at least 12 months and their employment was terminated for reasons other than disciplinary reasons or resignation. Employees who work on a commission basis can also subscribe to the plan. Covered employees are not eligible for payment if they leave the country or start a new job immediately.

• Employees with labor cards issued before January 1, 2023 must subscribe by June 30; otherwise they will be fined Dh400

• Employees with labor certification issued after January 1, 2023, have four months from the date of issuance, after which they will be subject to the same penalty

• While employers are not required to enroll their employees in an insurance plan, nor are they required to pay any contributions to the plan, from an employee relations perspective, employers are advised to remind employees of their obligation to enroll.