The New UAE Labor Law – what you need to know
The United Arab Emirates (UAE) has revealed its New Labor Law (Federal Law No. 33 of 2021), which will take effect from February 2, 2022. The New Labor Law 2022 will replace the current Labor Law (UAE Federal Law No. 8 of 1980) and will apply to all businesses and employees in the private sector.
Employers will have a lot to consider and change, while employees may want to review the New Laws to understand their rights and obligations. Here, Pacific Prime Dubai’s article has summarized the key aspects of the New Labor Law for everyone to know.
Flexible working models
Employees in the UAE may choose to work either full-time, part-time, temporarily, or via a flexible working arrangement. This reflects the recent changes to how and where employees have been permitted to perform work since the arrival of the COVID-19 pandemic.
Template employment contracts for flexible working models
Employers will receive template employment contracts for each new flexible working model. They will also be allowed to issue their employment contracts alongside the new template contracts introduced.
Equal pay for women
Although the concept of equal pay in the UAE is not new, the New Labor Law 2022 will emphasize that women in the workforce are paid the same as men doing the same work. How this will be implemented will largely depend on employers and how leaders promote equality in this area.
Protecting against discrimination
The New Labor Law prohibits discrimination against individuals based on race, color, sex, religion, national origin, ethnic origin, or disability.
Protection against harassment
The New Labor Law prohibits (all forms of) harassment, bullying, or any verbal, physical, or mental violence against employees.
Fixed-term employment contracts
The New Labor Law states that all employees must be employed on fixed-term employment contracts not exceeding three years. As such, employers will have 12 months from February 2, 2022, to transition all their employees onto new contracts.
As of this writing, minimum notice periods are still 30 days, but notice periods are now capped at 90 days. (Notice periods for current unlimited employment contacts can be found here.)
Termination on notice
According to the New Labor Law, either the employer or employee may terminate the employment contract for “good cause” by giving written notice. See below for the duration required.
Sick pay during the probation period
Employees will not be entitled to any paid sick leave during their probationary period.
Termination by the employer during the probationary period
Employers may terminate an employee’s employment during the probationary period by giving the employee 14 days’ written notice.
Search for Work
When the employer issues a notice, the employee will be entitled to one unpaid day of leave per week during the notice period to look for new employment.
Termination by the employee during the probationary period
This depends on whether the employee leaves or remains in the UAE, as explained below:
Remains in the UAE
If the employee plans to move to another employer in the UAE during the probationary period, the employee may terminate employment by giving at least one month’s written notice. According to the New Labor Law, the employee’s new employer must compensate the old employer for costs accrued during the recruitment process.
Leaves the UAE
If the employee plans to leave the UAE during their probationary period, they may terminate their employment by giving at least 14 days’ written notice.
Do note that the New Labor Law states that if the employee returns to the UAE and obtains a work permit issued by the Ministry of Human Resources & Emiratization (MHRE) with another employer within three months of said departure, the employee’s new employer must compensate their previous employer for recruitment costs.
Reasons for termination
Under the New Labor Law, the scenarios in which an employee’s employment may be terminated have been expanded to include:
- the permanent closure of the employer
- the bankruptcy of the employer, and
- the failure of the employee to meet the mandatory immigration requirements.
Immediate or summary dismissals
The New Labor Law requires a written investigation and two written warnings from the employer to be given to an employee before dismissing for failure to perform the employee’s primary duties.
Resignation without notice
Employees in the UAE will only be able to resign without giving notice if:
- In the case of an employer’s non-compliance with their obligations, the employee notifies the MHRE 14 days before leaving, and the employer fails to resolve the matter; and
- In the case of harassment or violence, the employee notifies the MHRE within five working days of doing so.
According to the New Labor Law, in the event of suspected wrongdoing, employees may be suspended for up to 30 days with half pay to enable an employer to undertake a disciplinary investigation. However, employees may be reimbursed their full salary if they are cleared of any wrongdoing.
Internal policies and procedures
Employers will be required to implement internal work regulations following the executive regulations. More on this subject can be found here.
An employee’s end-of-service gratuity has been confirmed to be calculated based on working days, and there is no reduction in end-of-service gratuity if an employee resigns. Furthermore, employers do not have the right to withhold an employee’s end-of-service gratuity if the individual is summarily dismissed. In other words, if employment is terminated immediately without notice.
Maternity pay and leave
As announced by the New Labor Law, maternity pay is to be increased to 60 days – 45 days’ full pay and 15 days’ half pay. More so, there will be no qualifying service requirement, and employees will now be entitled to maternity leave and pay in the case of stillbirths and newborn deaths.
Employees who suffer a pregnancy-related illness will be entitled to an additional 45 days of unpaid leave. However, it is worth mentioning that this period of leave (45 days) will not be accounted for when calculating the employee’s end-of-service gratuity.
Although introduced into the Current Labor Law in 2020, from February 2, 2022, employees will be entitled to five days’ paid leave in the six months following the birth of their child.
Employees with babies who have disabilities (of any kind) may be entitled to an additional 60 days’ leave on full pay.
Once the New Labor Law takes effect, employees will be entitled to five days’ paid leave for the death of their spouse and three days’ paid leave for the death of a parent, child, sibling, grandchild, or grandparent.
Employees with more than two years’ service will be granted ten working days’ study leave. However, whether this leave will be paid or unpaid remains to be confirmed.
Employees will be required to take their holiday in the year it falls due. At the same time, payment in place of holiday pay on the termination of employment is to be calculated using basic pay only.
From February 2, 2022, deductions from wages of up to 50% of the monthly salary will be permitted.
Non-compete clauses must be no longer than two years. However, certain positions will be exempt from non-compete obligations.
Overtime payment and exemptions
Overtime payment in the UAE will be capped at 144 hours and calculated according to basic salary only. The executive regulations will also determine new exemptions.
Entitlements upon the death of the employee
Following the New Labor Law, employers should pay a deceased employee’s spouse or children (as confirmed by the employee) all due wages and end-of-service benefits within ten days from the date of the employee’s death.
Currency of salary payments
Employees may be paid in currencies other than UAE dirham if agreed in the employment contract.
Payment of final entitlements
Employers must pay their employees all their final entitlements within 14 days of the termination of their employment.
Retention of employment records
Employers are required to retain employment records for two years after the termination of employment.
Fines for breaching the New Labor Law
Employers should be aware that fines of up to UAE dirham 1 million (approximately USD $272,257) may be imposed for breaches of the New Labor Law. The fines may also be multiplied in cases where numerous employees are affected from February 2, 2022.
Important points for employers to consider
The New Labor Law will bring about significant changes to companies across the UAE. Generally, employers should:
#1. Communicate with employees regarding the impact of the New Labor Law in the UAE.
#2. Update all template employment contracts to reflect the requirement for all employees and issue fixed-term contracts not exceeding three years.
#3. Amend or update existing employment contracts or policy documents, for example, 60 days’ maternity leave.
#4. Amend current sick leave policies to confirm that employees are not entitled to paid sick leave during their probationary period.
#5. Consider reviewing equal opportunities, anti-bullying, and all forms of harassment policies to reflect the new anti-discrimination/bullying/harassment provisions by the New Labor Law.
#6. Amend working time and pay policies to reflect the cap (144 hours) on overtime hours and the changes to the calculation of overtime pay.
#7. Review all the types of leaves to ensure they meet the needs of employees, such as the company’s compassionate leave policy.
#8. Consider reviewing disciplinary policies to reflect:
a. the additional reasons for termination;
b. the confirmation that an employee’s end-of-service gratuity can no longer be withheld under any circumstances; and
c. the prohibition on discrimination, bullying, and harassment in the workplace.
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