KEY EMPLOYMENT ISSUES IN THE UAE

SME Advisor Success Series EventRAK Free Zone

Gordon Barr Senior Associate 26 September 2012

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AGENDA

• Practical Employment Considerations

• The Labour Law – Key Issues

PRACTICAL EMPLOYMENT CONSIDERATIONS

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PRACTICAL ISSUES

• Sources of law

• RAK Free Zone

• Formal Requirements

• Practicalities for Termination

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SOURCES OF LAW

• Federal Laws including UAE Federal Law No. 8 of 1980 as amended (the “UAE Labour Law”)– Applicable throughout the UAE, including free zones, other

than the DIFC– Applies to all workers, save for limited categories– Expatriate employees, even those on short-term assignments

in the UAE, will be covered by the UAE Labour Law• RAK Free Zone Rules & Regulations

• Islamic Shariah, Civil Code, Penal Code, Laws of an Emirate

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RAK FREE ZONE

• RAK Free Zone Rules & Regulations:– UAE Labour Law prevails over the RAK free zone employment

regulations, except where the free zone regulations are more favourable to the employee

• Administration of labour relations in RAK entails the following:– Employment Rules & Regulations– Template Employment Contract– Personnel Secondment Agreement between the free zone and

the employer• RAK dispute management process.

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RAK FREE ZONE (cont’d)

• Template Employment Contract:– English/Arabic– Salary in UAE Dirhams– Complete Company Name & Stamp

• Very limited detail – requirement for a further ‘internal’ contract between parties.

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FORMAL REQUIREMENTS

• An expatriate employee shall be sponsored via the RAK Free Zone Authority.

• The employer (the licensee) must agree to abide by certain terms (contained in a Personnel Secondment Agreement) and shall apply to the RAK Free Zone to obtain the employee’s visa/ID card.

• There are certain exceptions, where the licensee can employ non sponsored staff, namely:– A female sponsored by her father or husband.– Where the Authority grants dispensation for employees of a

parent/group company to work in the Free Zone.

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FORMAL REQUIREMENTS (Cont’d)

• Practical difficulties:– Contractor/consultant arrangements– It is not possible to use a RAK free zone visa to work onshore– Company’s sphere of influence goes beyond RAK– Short term international assignments

• Potential implications:– It is illegal to commence or carry out work without the

appropriate visa and work permit – The RAK Free Zone and the Immigration Authority may impose

a substantial fine on the company– The employee could face fine/imprisonment/deportation

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PRACTICALITIES FOR TERMINATING

• Employer must submit the cancellation of the work permit and residence visa within 30 days of the termination date.

• Passport of the employee must be obtained in order to cancel the visa.

• Employee then has a further 30 days from the cancellation of the visa in which to find alternative sponsorship or leave the country.

• Limited options in UAE: – co-operate; – abscond; – bring claim.

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KEY CONTRACT ISSUESTHE LABOUR LAW – KEY ISSUES

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KEY ISSUES

Limited or unlimited term contract?

• A limited contract is for a fixed duration– Notice cannot be given during the fixed term.– Early termination compensation payable by

employer/employee.– Unless the employee has more than 5 years’ service, no

gratuity payable if the employee terminates the contract.

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KEY ISSUES

Limited or unlimited term contract?

• An unlimited term contract – May be validly terminated at any time with a minimum 30 day

notice period.– gratuity payable if the employee terminates the contract but

on reduced basis.– Risk of arbitrary dismissal compensation.

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KEY ISSUES

• Hours of work– Maximum of eight hours per day (+ national holidays)– Ramadan reduction – 2 hours

• Overtime– Overtime is payable unless the employee holds a senior

managerial position– 125% of the normal hourly rate– 150% of the normal hourly rate - Friday, a public holiday, or

between the hours of 9.00pm and 4.00am • Probation

– Maximum of six (6) months during which time eligibility for paid sick leave and annual leave will not apply.

– Can terminate with immediate effect with no notice or end of service gratuity.

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KEY ISSUES

• Annual Leave– First year of service - leave accrues at two days per month after

the first six months.– Service exceeding one year - 30 calendar days’ leave each year.

• Sick Leave– Maximum entitlement = 90 days (either consecutively or in

aggregate) during each year of service.– Sick leave pay entitlement:

• The first 15 days on full pay• The next 30 days on half pay• The remaining 45 days without pay

— An employer may dismiss once the employee has exhausted the 90 day entitlement.

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KEY ISSUES

• Maternity Leave– 45 days maternity leave entitlement– One year or more service = full pay– Less than one year = half pay– A maximum of 100 (consecutive or non-consecutive) days‘

unpaid leave, if illness resulting from pregnancy or birth, which means inability to resume work.

• Notice – Either party can terminate an unlimited term contract by

giving a minimum of 30 days’ notice.– If either party fails to serve adequate notice to the other party,

compensation in lieu of notice is payable.

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KEY ISSUES

• End of service gratuity– Distinction between “basic salary” and “remuneration”– Commission/bonus – guaranteed and regular?

• Bonus?– Entitlement to bonus and the amount is purely discretionary

• Post termination restrictions?– Must be reasonable, and limited in respect of geographical

scope/duration – No injunctive relief – consider liquidated damages clause

Questions?

For further information please contact:

Gordon Barr, Senior Associate: g.barr@tamimi.com

: : +971 (0)4 364 1641