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KEY EMPLOYMENT ISSUES IN THE UAE
SME Advisor Success Series EventRAK Free Zone
Gordon Barr Senior Associate
26 September 2012
4
PRACTICAL ISSUES
• Sources of law
• RAK Free Zone
• Formal Requirements
• Practicalities for Termination
5
SOURCES OF LAW
• Federal Laws including UAE Federal Law No. 8 of 1980 as amended (the “UAE Labour Law”)
– Applicable throughout the UAE, including free zones, other than the DIFC
– Applies to all workers, save for limited categories
– Expatriate employees, even those on short-term assignments in the UAE, will be covered by the UAE Labour Law
• RAK Free Zone Rules & Regulations
• Islamic Shariah, Civil Code, Penal Code, Laws of an Emirate
6
RAK FREE ZONE
• RAK Free Zone Rules & Regulations:
– UAE Labour Law prevails over the RAK free zone employment regulations, except where the free zone regulations are more favourable to the employee
• Administration of labour relations in RAK entails the following:
– Employment Rules & Regulations
– Template Employment Contract
– Personnel Secondment Agreement between the free zone and the employer
• RAK dispute management process.
7
RAK FREE ZONE (cont’d)
• Template Employment Contract:
– English/Arabic
– Salary in UAE Dirhams
– Complete Company Name & Stamp
• Very limited detail – requirement for a further ‘internal’ contract between parties.
8
FORMAL REQUIREMENTS
• An expatriate employee shall be sponsored via the RAK Free Zone Authority.
• The employer (the licensee) must agree to abide by certain terms (contained in a Personnel Secondment Agreement) and shall apply to the RAK Free Zone to obtain the employee’s visa/ID card.
• There are certain exceptions, where the licensee can employ non sponsored staff, namely:
– A female sponsored by her father or husband.
– Where the Authority grants dispensation for employees of a parent/group company to work in the Free Zone.
9
FORMAL REQUIREMENTS (Cont’d)
• Practical difficulties:
– Contractor/consultant arrangements
– It is not possible to use a RAK free zone visa to work onshore
– Company’s sphere of influence goes beyond RAK
– Short term international assignments
• Potential implications:
– It is illegal to commence or carry out work without the appropriate visa and work permit
– The RAK Free Zone and the Immigration Authority may impose a substantial fine on the company
– The employee could face fine/imprisonment/deportation
10
PRACTICALITIES FOR TERMINATING
• Employer must submit the cancellation of the work permit and residence visa within 30 days of the termination date.
• Passport of the employee must be obtained in order to cancel the visa.
• Employee then has a further 30 days from the cancellation of the visa in which to find alternative sponsorship or leave the country.
• Limited options in UAE:
– co-operate;
– abscond;
– bring claim.
12
KEY ISSUES
Limited or unlimited term contract?
• A limited contract is for a fixed duration
– Notice cannot be given during the fixed term.
– Early termination compensation payable by employer/employee.
– Unless the employee has more than 5 years’ service, no gratuity payable if the employee terminates the contract.
13
KEY ISSUES
Limited or unlimited term contract?
• An unlimited term contract
– May be validly terminated at any time with a minimum 30 day notice period.
– gratuity payable if the employee terminates the contract but on reduced basis.
– Risk of arbitrary dismissal compensation.
14
KEY ISSUES
• Hours of work
– Maximum of eight hours per day (+ national holidays)
– Ramadan reduction – 2 hours
• Overtime
– Overtime is payable unless the employee holds a senior managerial position
– 125% of the normal hourly rate
– 150% of the normal hourly rate - Friday, a public holiday, or between the hours of 9.00pm and 4.00am
• Probation
– Maximum of six (6) months during which time eligibility for paid sick leave and annual leave will not apply.
– Can terminate with immediate effect with no notice or end of service gratuity.
15
KEY ISSUES
• Annual Leave
– First year of service - leave accrues at two days per month after the first six months.
– Service exceeding one year - 30 calendar days’ leave each year.
• Sick Leave
– Maximum entitlement = 90 days (either consecutively or in aggregate) during each year of service.
– Sick leave pay entitlement:
• The first 15 days on full pay
• The next 30 days on half pay
• The remaining 45 days without pay
— An employer may dismiss once the employee has exhausted the 90 day entitlement.
16
KEY ISSUES
• Maternity Leave
– 45 days maternity leave entitlement
– One year or more service = full pay
– Less than one year = half pay
– A maximum of 100 (consecutive or non-consecutive) days‘ unpaid leave, if illness resulting from pregnancy or birth, which means inability to resume work.
• Notice
– Either party can terminate an unlimited term contract by giving a minimum of 30 days’ notice.
– If either party fails to serve adequate notice to the other party, compensation in lieu of notice is payable.
17
KEY ISSUES
• End of service gratuity
– Distinction between “basic salary” and “remuneration”
– Commission/bonus – guaranteed and regular?
• Bonus?
– Entitlement to bonus and the amount is purely discretionary
• Post termination restrictions?
– Must be reasonable, and limited in respect of geographical scope/duration
– No injunctive relief – consider liquidated damages clause
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