UAE & GCC Labour Laws
The Labor Law applies to all those employed in the UAE for some categories of workers such as domestic workers and government workers and employees of a Dubai International Financial Centre (DIFC) entity. The DIFC has its own employment legislation. Free Zone entities will be required to additionally comply with the regulations of that Free Zone. These generally deal with immigration and administrative procedures.
The general principle is that all non-nationals are required to secure a residency visa and work permit through their employer in order to work and live in the UAE. Such permissions are granted at the discretion of the UAE authorities. Therefore, any offer of employment should be made conditional upon the appropriate permissions being obtained.
Before an entity can enter into any employment arrangement, it must be legally established in the UAE. In our experience, this is not well understood and the following workarounds are sometimes considered but these are not in line with the laws of the UAE and come with risks:Therefore, if a foreign company does not have a legal presence in the UAE but wishes to offer some services in the UAE then the usual solution is to enter into a sub-contracting arrangement with a UAE company that can provide such services through its own employees.
There is no legal concept of secondment in the UAE. Therefore, any employee who is ‘seconded’ from their home country to the UAE, will be treated at law as a full employee of the UAE employing entity. They will receive all of the employment protections as any other employee in the UAE would. In secondment arrangements, dual employment rights may also arise (i.e. employment rights in the UAE as well as the country where their other employment is continuing) and therefore it is important that any such arrangement is properly structured.
Upon expiry of the probationary period an employee is entitled to at least 30 days’ notice of termination or such longer period as may be stipulated in the employment contract. Written notice of termination may be given at any time for a “valid reason”. In order for a reason to be valid it must be work related, (i.e. performance or misconduct). If termination is not work related, it will be considered arbitrary and the employee is entitled to submit a claim to the authorities. If the claim is successful the employee will be awarded compensation up to a maximum of three months’ total salary. In the case of a fixed term contract that is terminated prior to the expiry of the term, the employee is entitled to be paid for the remainder of the term or to receive three months’ salary (whichever is the lesser) as compensation.
All GCC nationals must be registered with the UAE pension authority. The UAE pension authority will administer the pension contributions, which must be made in the proportions specified by the applicable GCC pension authority. The company will then be required to pay the pension contributions in those proportions. The GCC national employee may also be required to contribute to the pension scheme.
The employment contract should expressly state that the employee, as a GCC national, is receiving a pension instead of an end of service gratuity. This waiver will be enforceable at law.
In all other cases (and subject to meeting the criteria specified below), employees are entitled to an end of service gratuity at the end of their employment. To be eligible, the employee must have completed one years’ continuous service. Any days of absence from work without pay will not be included in calculating the continuous period of service. The amount of the end of service is calculated as follows: (a) 21 days’ basic salary for each of the first five years of service; and (b) 30 days’ basic salary for each additional year of service; provided always that the aggregate amount of end of service should not exceed two year’s salary.