As the construction and services sectors seek to expand to meet the increase in demand anticipated for Expo 2020, recruiting and retaining the best staff will become more important (and more challenging) for businesses in the UAE. This article sets out an overview of the ways companies can increase the size of their workforce when immigration and labour constraints may otherwise apply, and improve the quality, effectiveness and length of service of their employees.
Employers in the UAE are required to sponsor non Gulf Cooperation Council national employees for UAE residence visas and labour cards. Such sponsorship is specific to the sponsoring company, with the result that an employee sponsored by one company must work only for that company and not provide services to another, with limited exceptions. The number of residence visas that employers can obtain is generally linked to the size of their office premises and the activities set out in the commercial trade licence. From time to time, there may also be visa limitations on certain nationalities as the Government monitors the make up of the foreign workforce. It is important to note that any individual working in the UAE must have a local employment contract with the UAE sponsoring entity, and UAE labour law will have mandatory application. This principle applies equally to international secondments and assignments. As demand for staff grows, employers will have difficulty recruiting the required number of staff with specialist skills.
Another issue likely to affect businesses seeking to exploit the opportunities of Expo 2020 is the Emiratisation regime. Very broadly, this is a Federal Government initiative that seeks to ensure that a minimum percentage of employees in a company are Emirati nationals. It does not (currently) apply to companies established in a free zone, and enforcement in the rest of the UAE is largely sector specific (insurance, banking and retail being the key sectors subject to Emiratisation) and certain roles are reserved for UAE nationals. As employers look to bring on more staff in the run up to 2020, it is likely that the UAE Government will seek to enforce the Emiratisation requirements more strictly than they do currently. Employers may wish to consider focusing more closely on UAE university and school leavers to attract the best talent, and consider training or apprenticeship contracts to entice more UAE nationals into certain sectors at the start of their careers.
Alternative employment eelationships
An increasingly common method for increasing the size of the workforce in spite of the constraints of the UAE employment sponsorship regime is to secure manpower supply from agencies, or the provision of secondments or consultants from third party service providers.
Companies which supply manpower must have been granted special licences by the UAE Ministry of Labour (MOL) and Department for Economic Development (DED). Generally, commercial licences permitting manpower supply have been frozen and no new licences have been granted recently . Under MOL regulations, such a licence can only be held by a UAE national and the business must be managed by a UAE national General Manager (holding a university degree). Very few free zones grant such licences
Many companies seek to obtain staff on secondment from local partners. Such relationships should be notified to the MOL which will issue the employee with a temporary work permit, which can last up to a year. If services are being provided by consultants or contractors, companies should ensure that the companies they are contracting with are licensed to perform consultancy activities or subcontractor services and to base employees at sites other than their premises. The MOL has been known to conduct unannounced inspections of a company’s premises, and if workers are found to be working there without being sponsored by that company for UAE labour and residency purposes, or who do not work for a properly licensed manpower supply or consultancy service company, then the company and the workers can face fines of up to AED 20,000 and the senior management of the host company can face criminal sanctions including imprisonment and deportation.
With respect to agency workers, secondments and consultancy arrangements, it is vitally important that the hiring company benefits from adequate contractual protections. The services agreement should specify that the agency or services company bears all responsibility for payment of staff salaries, benefits and statutory entitlements such as end of service gratuity or state pension contributions (if relevant).
Generally, employees supplied by a third party to perform services for a company remain employees of that Agency. They are instructed by the company for which they perform services, but their contractual salary and benefits, as well as their statutory rights such as holiday and sick pay, end of service gratuity and any applicable pension rights, remain the responsibility of the Agency. The hiring company’s liabilities, as long as the services agreement provides adequate protection, will be limited to payment of the services fee. This is usually paid monthly in arrears based on the number of workers supplied and the number of days worked by them.
There is no special treatment required for agency workers in the UAE, nor specific legislation that must be complied with. They are entitled to the same minimum statutory benefits and treatment as ordinary workers. However, the Agency will be the employer and therefore responsible for payment of salaries and providing the required benefits.
A high turnover of staff can be as disruptive to a company’s operations as limitations on the ability to recruit. Common methods of incentivising staff can include a performance or length of service bonus, lock step salary options, variable bonuses based on performance, or commission based on a percentage of sales made. Any contractual clauses offering such entitlements need to be carefully drafted to ensure that amounts are not payable in the event that the employee has served or been served with notice of termination or has been placed on performance improvement measures. It should also be possible to allow for claw-back of payments in the event of corrections in sales or performance indicators after the payment has been made.
Along with the carrot, the stick can be equally persuasive in keeping employees from joining competitors. Posttermination restrictions on joining competitors in the same Emirate of the UAE in which they were employed are potentially enforceable, as long as the employee had access to a sufficient level of confidential information within the business, and the restriction does not last for longer than is strictly necessary, or generally longer than 6 months. Outside the Dubai International Financial Centre, it is not possible to obtain a prohibitory injunction from the UAE Courts to prevent a former employee from joining a competitor, and thereby immediately causing damage to the former employer’s legitimate business interests. Instead, a company’s recourse will be in a claim for damages based on the economic harm caused by the employee’s actions.
In addition, Article 379 of the UAE Penal Code (Federal Law No. 3 of 1987, as amended), makes it an offence for a person to reveal a secret which he gained knowledge of “by reason of his profession, craft, situation or art” without the permission of the person to whom the secret pertains, or more generally for his own advantage. The Penal Code does not define what is meant by “secret”, but it is likely that it will include an employer’s confidential information on pricing, strategy and client lists that former employees may share or take advantage of with their new employers. Breaches of Article 379 are punishable by a fine of up to AED 20,000 per breach and up to 12 months’ imprisonment.
Another method of preventing employees who are needed for short, defined tasks from leaving once they are recruited to the UAE is to place them on fixed term employment contracts, of perhaps one or two years’ duration. Should an employee seek to leave employment ahead of the end of the defined termination date, they will be liable to pay the employer half of their contractual salary for three months, or the remainder of the contract period – whichever is the shorter. Fixed term employment contracts therefore give employers greater certainty that the employee will not leave to join a competitor before the end of the contract period, but at the expense of sacrificing the ability to terminate employment by serving notice. If employers do terminate employment before the end of the fixed term, they are liable to pay the employee compensation equivalent to 3 months’ salary, or pay the remainder of the contract period, if shorter.
What does this mean for businesses?
Expo 2020 will mean that businesses, particularly in the construction and hospitality sectors, will need to increase the size and specialisms of their workforce. Nationalisation programmes may increasingly become an enforcement priority of the UAE authorities, as the country seeks to build a lasting legacy for the event. Businesses should be prepared for the hurdles of recruiting and retaining staff, to ensure that they can take full advantage of the opportunities the Expo offers.