Legislation
Emiratisation

Employment contracts
Working time
Overtime
Leave entitlement

Unemployment insurance scheme
PDPL


There have been several updates in the employment sector in the United Arab Emirates. This article provides an update on the amended legislation and the implications of these changes for employers and employees and due process. The updates mainly affect Emiratisation targets, employment contracts, and working and overtime and leave entitlements, including the introduction of bereavement leave, study leave and sabbatical/national reserve leave.

Legislation

Decree-Law No. 33 of 2021 Concerning the Regulation of Labour Relations (the New Labour Law) is the primary legislation that governs employer-employee relations. This legislation became effective as of 2 February 2022. The Executive Implementing Regulations, Cabinet Decision No. 1 of 2022, supplements the New Labour Law. The New Labour Law is applicable to onshore and free-zone entities (except for the Abu Dhabi Global Market and the Dubai International Financial Centre free zones, where the New Labour Law does not apply). Free zones have their own rules and regulations, which supplement the federal laws.

Emiratisation

Emiratisation is an initiative by the UAE government to encourage private sector employers to employ UAE nationals. The Emiratisation Resolution was introduced in June 2022, and applies to all private sector employees based onshore. The following requirements are embedded within the resolution:

  • All private sector employers based onshore must increase Emiratisation by 2% per year until 2026 until the 10% target is reached.
  • Companies with more than 50 employees must increase their Emiratisation rate each year.
  • The Emiratisation rate is to be calculated based on the total number of "skilled workers".
  • Fines for not meeting the outlined quota will be 7,000 dirhams (approximately £1,500) per employee per month in 2023. This is increased from 6,000 dirhams (approximately £1,300) in 2022 and is expected to increase by 1,000 dirhams (approximately £220) per year.

Employment contracts

Changes to employment contracts only apply to employers based onshore. The following updates are available for employment contracts:

  • Unlimited term contracts have been abolished under the New Labour Law.
  • Fixed-term contracts are renewable an unlimited number of times and terminable on notice (a notice period can be 30 days minimum and 90 days maximum).
  • The maximum three-year cap on the term of a fixed-term contract has been removed.
  • All existing unlimited term employment contracts must be converted to fixed term by 31 December 2023.

Under the New Labour Law, there is no break in service and no impact on stability of employment, no change to the employee's current visa status. There is also no impact on end of service gratuity accrual or other service-related benefits.

Working time

The normal maximum weekly working hours (ie, 48 hours per week, eight hours per day) remains, in line with international standards. Currently, no sectors are permitted to work more daily hours than this limit. Previously, certain sectors such as retail and restaurants were permitted to operate on a nine-hour schedule, but this is no longer the case. Overtime has also been capped at two hours per day, and a working time cap of 144 hours in a three-week period has been introduced.

Full-time employee daily working hours are to be reduced by two hours during Ramadan.

Overtime

There has also been a change to the types of workers who are exempt from overtime pay. Those excluded from overtime pay include:

  • chairs of boards of directors and members of these boards;
  • persons occupying supervisory positions, if such positions are likely to entitle their holders to enjoy the powers of the employer;
  • employees who make up the crews of sea vessels and employees who work at sea and enjoy special conditions of service because of the nature of their work;
  • employees who job has a technical nature that requires the continuation of work through successive shifts, provided that the average working hours do not exceed 56 hours per week; and
  • employee whos job involves preparatory or complementary works which must necessarily be carried out beyond the generally established time limits for work in the establishment.

Overtime pay calculation has also undergone a change. Overtime pay is calculated as follows:

Normal overtime

Regular basic wage plus an uplift of 25% calculated at the basic salary rate.

Overtime between 10 o'clock in the evening and 4 o'clock in the morning

Regular basic wage plus an uplift of 50% calculated at the basic salary rate

Employee working on their day off

A day off in lieu for such day or regular wage plus an uplift of 50% calculated at the basic salary rate

Leave entitlement

Changes relating to leave entitlement are as follows.

Maternity leave:

  • Maternity leave has increased to 60 calendar days. 45 calendar days are fully paid, and 15 calendar days are set at a half pay rate.
  • After the employee has exhausted their statutory maternity leave, their maternity leave can extend to up to 45 unpaid days, to be taken either consecutively or inconsecutively if the employee or the child suffers an illness from the pregnancy or delivery, as proved by a medical certificate.
  • Maternity leave can extend a further 30 paid days if the employee gives birth to a sick baby, or a disabled baby and the baby's health condition requires a permanent escort pursuant to a medical report or certificate issued by the medical authority.

Paternity leave:

  • Five days paid leave can be taken consecutively or inconsecutively in the first six months from childbirth.
  • This can be taken by the father and/or mother.

Sick leave:

  • Standard sick leave entitlement remains unchanged from 90 calendar days total per year. 15 days are fully paid, 30 days are half paid and 45 days are unpaid.
  • An employer must be notified within three working days of when an employee intends to take sick leave. The employee must also provide a medical report.
  • An employee is eligible to take sick leave after their probationary period has lapsed.

Annual leave:

  • Full-time employees are entitled to 30 calendar days after one year of employment. After six months of employment, two days are added for each month if the employment lasts for less than one year.
  • The New Labour Law allows annual leave to be pro-rated for part-time employees.
  • Carrying over leave is permitted at a limit of one half of the usual entitlement (eg, if a full-time employee has 30 calendars days entitlement in one year, they may carry over a maximum of 15 days to the following year).

Student leave:

  • 10 working days' paid leave is permitted for full-time or affiliate students at accredited educational institutions in the state to take examinations.
  • An employee must have completed at least two years of employment to use this leave.
  • Proof of dates of upcoming exams may be requested.

Bereavement leave:

  • Five days fully paid leave is granted for the death of a spouse.
  • Three days fully paid leave is granted for the death of a parent, child, sibling, grandchild or grandparent.
  • The leave must be taken from the date of the death and the employee is required to provide proof of the death upon their return.

Sabbatical or National Reserve leave:

  • Emirati workers are entitled to paid leave to perform national or reserve service.
  • The cost of this leave is divided between the employer and the Armed Services.

Unemployment insurance scheme

The unemployment insurance scheme became mandatory as of 1 January 2023. All employees working for onshore companies in the private sector are required to register into this scheme. In May 2023, the scope of the mandatory unemployment insurance scheme was extended to all employees employed by free zone companies. The onus is on the employees to register into this scheme and make monthly contributions.

Under this scheme if an employee's employment is terminated, they shall receive financial support. The financial support is provided in exchange of a monthly insurance premium paid by the employee during their employment.

PDPL

Federal Decree Law No. 45 of 2021 regarding personal data protection (the Personal Data Protection Law ((PDPL) was issued on 20 September 2021 as the first federal data protection law in the United Arab Emirates. The PDPL came into effect on 2 January 2022. However, a grace period during which the PDPL will not be enforced is currently in effect and will continue until a period of six months has elapsed from the date of publication of the PDPL's executive regulations, which have still not yet been published by the UAE legislature.

The law, which has extra-territorial effect and regulates entities operating in, or which conduct processing operations in, the United Arab Emirates (with the exclusion of financial free zones):

  • formalises the concepts of data processors and controller and introduces clear obligations on both parties when handling personal data;
  • enshrines many of the core principles and concepts found in the EU General Data Protection Regulation; and
  • introduces rights for data subjects in connection with their data (ie, right of access, erasure and portability).

According to article 4 of the PDPL, consent is the default legal basis to process personal data. The PDPL also outlines alternative legal basis specific to employment:

Article 4.4:

When the processing is necessary for the purposes of occupational or preventive medicine in order to assess the employees' ability to work, for medical diagnosis, for health or social care systems and services in accordance with the applicable legislation in the UAE.

Article 4.8:

When the processing is necessary for the purposes of the Controller or data subject carrying out its obligations and exercising its legally established rights in the field of employment, social security or under the laws of social protection, to the extent permitted by such laws.

For further information on this topic please contact Aqsa Khan-Sadiq or Lucrezia Lorenzini at Baker McKenzie by telephone (+61 2 9225 0200) or email ([email protected] or [email protected]). The Baker McKenzie website can be accessed at www.bakermckenzie.com.