UAE employers be aware - new UAE employment requirements

Three new Ministerial Decrees came into effect on 1 January 2016. These Decrees, issued by the Ministry of Labour (“MOL”), impact upon the way job offers are made and have implications regarding certain terms of the employment arrangement.

Applicability: Currently the Ministerial Decrees do not apply to freezone entities. Nonetheless, we recommend that freezone entities remain aware of the developments.

The key features of these new Ministerial Decrees is as follows:

  1. Offer Letter Required. Under Ministerial Decree (764) of 2015 it has become a mandatory requirement for the employer and prospective employee to enter into an offer letter. The MOL has produced a standard form which must be used for this purpose. The offer letter must be filed with the MOL and the future contract of employment must adhere to its terms. This is relevant for employers as they will now need to tailor their recruitment processes around the new requirements.
  2. Changes to Fixed Term Contracts. Under Ministerial Decree (765) of 2015, limited term contracts can now be for a maximum duration of 2 years. The new Decree also provides that a limited term contract can now be terminated by: (i) the term expiring and/or not being renewed; (ii) mutual consent; (iii) dismissal without notice and with immediate effect (Article 120 of the UAE Labour Law); or (iv) either party terminating unilaterally, subject to (a) notice in writing (as specified in the employment contract and being a period of between 1 to 3 months); (b) contractual obligations being honoured; and (c) the payment of a pre-agreed compensation, which is to be capped at 3 months salary.
  3. Changes to Unlimited Contracts. Under Ministerial Decree (765) of 2015, the termination of an unlimited term contract can be achieved by: (i) mutual consent; (ii) either party terminating unilaterally, providing notice in writing (as specified in the employment contract and being a period of between 1 to 3 months); (iii) dismissal without notice and with immediate effect (Article 120 of the UAE Labour Law); or (iv) either party unilaterally terminating without notice (subject to PILON).

We recommend that companies now review their templates to ensure they are consistent with the new requirements.

  1. Visas and Work Permits. Ministerial Decree (766) of 2015 sets out new provisions on granting work permits for UAE employees and is intended to provide a more flexible and mobile workforce across the UAE. In brief, new UAE work permits may be granted to employees in many instances of termination from their previous employment including those circumstances listed above in paragraph 2 and 3 above.