Following a public consultation earlier this year, the Abu Dhabi Global Market (ADGM) has issued new Employment Regulations 2019 (the New Regulations) and new Compensation Awards and Limits Rules 2019 (the New Rules) to replace the Employment Regulations 2015 (the Current Regulations) and the Compensation Awards and Limits Rules 2016 (the Current Rules), respectively. The New Regulations and Rules became effective from 1 January 2020 closely following the introduction of the new employment regulations in the DIFC last year.

The New Regulations and Rules introduce several changes, with the aim of strengthening the ADGM’s employment framework. We welcome many of the changes for our Employer clients which seem appropriate for what is a “white collar” freezone:

  • The introduction of an overtime scheme that includes sensible exclusions for managerial employees and which should carve out most ‘white collar’ junior workers;
  • Sensible changes to the penalty payments for late payment of employment dues – introducing Court discretion to prevent “windfalls”; and
  • Changes to sick pay and discrimination rules;
  • Removal of increased notice with 5 years’ service – employers are left open to agree longer notice as appropriate;
  • Harmonisation of Ramadan hours rules with onshore practices;
  • Repatriation flights – again harmonising with onshore rules;
  • Regulations for the employment of 15 to 18 year olds.

Employers will need to take action now to ensure consistency with the New Regulations and Rules and should ensure that employment contracts, handbooks and any other employment policies and procedures are compliant.

We have summarised the key changes below.

Overtime

A key change is the introduction of overtime provisions. Under the Current Regulations, employees may not work in excess of 48 hours per each seven day period unless they have given prior written consent.

The New Regulations maintain that working time shall not exceed 48 hours per each seven day period; however an employee may no longer agree to opt out through written consent. Instead, the New Regulations stipulate that employees will be entitled to overtime compensation (or time in lieu) where they are required to work in excess of 832 hours over a period of four months (the reference period used to determine overtime compensation eligibility may be shortened and the limit of 832 hours will need to be pro-rated accordingly). Employers will be required to keep time records for employees who are likely to work hours close to or in excess of the aforementioned limits.

The New Regulations outline overtime compensation as follows:

  • A supplement of 25% of total salary (or time in lieu); and
  • a supplement of 50% of total salary where the overtime hours worked fall between 21:00 and 04:00 (or time in lieu).

An employer can elect to pay overtime or offer time in lieu (or a combination of both) at its discretion. Monetary overtime payments must be paid no later than one month following the expiration of the reference period used by the employer to determine the employee’s overtime eligibility.

Most importantly, employees in managerial or supervisory positions, as well as those where it is reasonably expected within their international industry that they are not entitled to overtime, are exempted from the overtime provisions in the New Regulations. This should prevent a large raft of white collar workers working for multinationals from being eligible for overtime irrespective of their not occupying management roles. It is custom and practice for white collar workers in many international businesses to work e.g. from 9 am to 5.30 pm and such additional hours that may be required in order to complete their duties without additional payment. The introduction of an overtime scheme with sensible exclusions for many junior white collar employees in the ADGM should remove the difficulties that face employers in complying with the overtime laws in onshore UAE. Further the wide reference period to calculate overtime allows employers some flexibility in work patterns. The ADGM is to be applauded for recognising the reality of the working and salary model that applies in many white collar businesses

Employers in the ADGM will need to assess whether any employees will be subject to the statutory overtime and consider the applicability of the exclusions.

Ramadan hours

Under the New Regulations, a fasting Muslim employee’s working hours during the month of Ramadan shall be reduced by 2 hours per day, aligning with the UAE ‘onshore’ position.

Sick pay

The current statutory sick pay entitlement of 60 days on full salary will be reduced. Sick leave remains at 60 working days per year but as per the New Regulations the following staggered pay system will be implemented:

  • 100% of the employee’s daily wage for the first 10 working days of sickness absence;
  • 50% of the employee’s daily wage for the following 20 working days of sickness absence and
  • unpaid for the remaining 30 working days of absence.

The reduced entitlement is more in line with the ‘onshore’ labour laws in the UAE and the position under DIFC Law No. 2 of 2019, which came into force on 28 August 2019. Employers in the ADGM will need to consider whether they wish to reduce sick pay to the statutory minimum. Consent may be required required from employees dependant on the current wording in contracts.

Discrimination

Under the Current Regulations, an employer may terminate an employee without notice where they take more than 60 working days of sick leave in any 12 month period. The New Regulations introduce additional protection for disabled employees and stipulate that this shall not apply where the sick leave taken is on account of a disability. ‘Colour’ has also been added to the list of protected characteristics by the New Regulations. Unlike the DIFC, 'pregnancy' has not been added to the list of protected characteristics.

The remedies for breach of the discrimination provisions remain as per the Current Rules (damages can be awarded of up to three years' basic wages).

Notice periods for termination

The New Regulations scrap the 90 day minimum notice period where an employee has five years or more of continuous service. On this basis the minimum statutory notice required to be given by either party for termination is as follows:

  • 7 days if the period of continuous employment is less than three months; and
  • 30 days if the period of continuous employment is three months or more.

In accordance Current Regulations, the parties may still agree to a longer contractual period of notice, and waive or accept payment in lieu as appropriate.

Repatriation flight

The New Regulations introduce a requirement for employers to provide a one-way repatriation flight to the employee’s country of origin on termination of employment unless (i) the employee obtains alternative employment or visa sponsorship in the UAE within 30 days of the termination date; or (ii) the employee has been dismissed for ‘cause’ (typically gross misconduct or negligence).

Financial penalties for late termination payments

A welcome amendment for employers is the introduction of changes to the late penalty payment compensation. Under the Current Rules, where an employer fails to pay an employee’s termination payments within 14 days of the termination date, the Court may award compensation equal to the employee’s most recent daily wage for each day during which the employer failed to comply. This had the potential to create “windfall payments” where small amounts of money remained unpaid over long periods of time. Under the New Rules, the Court may still award compensation based on a maximum of a day’s pay for the period of non-payment, however the amount of the penalty should also be ‘just and equitable’. While no qualifying amount or overall cap exists as they do in the similar DIFC rules our expectation is that Employers will be able to argue that the Court should limit the penalty by reference to the sum actually due to avoid onerous awards.

Protection for employees between the age of 15 and 18

The New Regulations allow the Registrar to impose conditions on the hiring of employees between the age of 15 and 18. In addition, an employer must take all appropriate measures to ensure that conditions for the individual’s employment are safe, reasonable and appropriate for their age and wellbeing. We expect guidance to follow.