Labour Law change causes complications for some international companies

In February 2015, HH the Emir of the State of Qatar issued an amendment to Law No (14) of 2004 (the Labour Law) to require that all employees are paid their salaries in Qatari Riyals and into a Qatari bank account. There is a six-month grace period for compliance with the amended law.

The Labour Law governs the employer-employee relationship for most private-sector companies in Qatar with some exceptions. In particular, companies in the oil & gas sector and companies incorporated in the Qatar Financial Centre are not affected by the recent change.

Whilst the change would not appear to be significant - most employers already pay employees in this manner or can adjust payroll processes to meet requirements, it is presenting (potentially unintended) problems to employers who have employees with dual residency. This is common where the regional operations of an international company may be managed from the UAE and the same branch manager is also responsible for the branch in Qatar. It also presents issues for companies that second employees to Qatar with the employee’s main employment contract being in the ‘home’ jurisdiction and payment being made to a bank account in that jurisdiction.

Qatari immigration law requires the registration of an employment contract with the Ministry of Labour to allow a company to sponsor an employee for a work visa in Qatar. This means that employees in Qatar will typically have a Qatari employment contract even if this is not considered the ‘main’ contract.

Care should always be taken whenever an employee has more than one employment contract for the same job; if there is any conflict between the terms of the different contracts it is likely that the Qatari courts will favour those terms most beneficial to the employee. Regardless of the understanding in place at the time the contracts were entered into, if an employee is entitled to salary payments under two employment contracts there is a risk that a claim for salary payments under both contracts could be successful in the Qatari courts. An attempt to minimise the salary provided in the Qatari employment contracts to mitigate this risk may not be successful, particularly for more senior positions, as the Ministry of Labour will often insist on the salary being suitable to the position.

The issues with dual contracts are not new but the requirement to pay salary into an account in Qatar further complicates the situation. Where possible, we recommend that the non-Qatari salary is reduced by the amount of the Qatari salary and the Qatari salary is paid into an account in Qatar. This may not be acceptable to the employee and also a reduction in salary may trigger payment of accrued end of service benefit in some jurisdictions. Whilst our experience is that the Qatari courts have taken a pragmatic approach to date, the Qatari courts cannot be guaranteed to enforce a side-agreement where an employee agrees to waive his or her rights to salary under the Qatari employment contract.

This is a new law and it is not possible to predict how the authorities will seek to apply it in practice. Until the situation becomes more clear, we recommend employers review the employment contracts in place and consider how best to minimise risk to the business.