Rechtsanwalt, Partner, Head of Employment & Reward, Germany
Out-Law Analysis | 06 Feb 2017 | 5:16 pm | 4 min. read
It is important for senior managers, in-house lawyers and HR professionals who have responsibility for personnel management in the UAE to be aware of these developments and how they may affect the management of their workforce.
The payment of salary within the UAE has been regulated and monitored by the authorities for several years since the introduction of the Wage Protection System (WPS) in 2009.
The WPS is an electronic salary transfer system that requires all companies to pay employees via banks, UAE exchanges or registered financial institutions. Developed by the Central Bank of the UAE, the system allows the MOHRE to create a database that records wage payments in the private sector to guarantee the full and timely payment of agreed wages.
The WPS has improved the regularity and timing of salary payments within the UAE. However, there has been no financial penalty to date for employers who fail to comply with the WPS, and some companies have therefore failed to comply for long periods without accruing any monetary penalties.
The MOHRE has tried to tackle this by introducing a wage protection decree in October 2016 that reinforces the statutory obligation on employers to pay their employees on time and in full, and introduces potential financial penalties.
The decree applies to all organisations registered on the WPS. These companies must pay wages within ten days of the payday registered in the WPS.
If companies with over 100 employees fail to adhere to the ten day timeframe, the MOHRE will stop granting any additional work permits with effect from the 16th day of the delay.
If they fail to pay within one month of the registered payday, the MOHRE will inform the judicial authorities which will take "all necessary punitive measures against the company"; and if they do not pay within 60 days of the registered payday, the company will be fined AED 5,000 (£1,085) per employee, up to a maximum of AED 50,000 if the delay affects multiple workers.
Companies employing fewer than 100 employees will be treated in the same way as larger companies and subject to the same penalties if they breach the requirements of the decree twice in one year, or if they fail to pay within 60 days.
This decree adds further regulation to the provisions of the WPS and better protection to employees. It provides the MOHRE with greater authority to enforce its provisions.
Under UAE Labour Law employment is the primary right of UAE nationals and non-nationals should only be employed if there is no suitably qualified UAE national available. A number of ministerial decrees and resolutions set out and implement this Emiratisation strategy, which has been in place for over ten years.
Three new resolutions recently announced by the MOHRE confirm the ongoing commitment to Emiratisation within the private sector. UAE businesses must comply with new requirements on data process, health and safety and changes to company classifications from 1 January 2017.
All organisations employing 1,000 or more employees must register on the MOHRE's online platform, Tas'heel, to obtain work permits for employees. This platform can only be accessed by UAE nationals. Businesses must declare that they are an employer and register every staff member, and employers must engage two UAE nationals in the position of data process officers.
Organisations that fail to comply may lose their sponsorship privileges and be unable to obtain new work permits. The MOHRE may also apply additional administrative and financial penalties.
All companies that employ 500 or more employees in the construction or industrial sector must also employ a UAE national in the position of occupational health and safety officer. The employee should implement and monitor employee health and safety practices.
Organisations who do not comply will not be able to obtain new work permits until an Emirati is appointed to the role. Again, the MOHRE may also impose additional sanctions.
Changes to company classifications build on the existing Emiratisation framework in the UAE.
The present framework provides incentives for organisations to engage UAE nationals within their businesses and grades organisations into one of three categories depending on how effective their Emiratisation policies are. Organisations within a higher category gain a number of benefits including paying lower MOHRE and immigration fees, exemption from depositing bank guarantees for employees and finding it easier to obtain visas.
The new resolution introduced additional sub-categories to allow organisations to improve their rating.
The above requirements apply to all companies incorporated within the onshore, mainland area but do not currently apply to UAE free zones.
Businesses should assess their staff numbers and if necessary complete the registration and appoint or employ a UAE national to the required role.
Employers with more than 50 low income employees – defined as those earning less than AED 2,000 per month – must now provide them with accommodation at the employer's cost.
The resolution took full effect from 1 January 2017 and compliance is expected to be monitored closely by the MOHRE, so it is important for employers who engage low income employees to ensure they have suitable accommodation available.
The scope of the resolution may expand in future as local authorities have discretion to apply it to employers with fewer than 50 low income employees or to employees earning above the AED 2,000 threshold.
The introduction of the resolutions demonstrates the importance the UAE authorities place on Emiratisation and protection of benefits and salaries for all employees. Employers should be aware of this and understand whether and to what extent the resolutions may affect their business.
Dubai-based Luke Tapp is an employment expert with Pinsent Masons, the law firm behind Out-Law.com.
Rechtsanwalt, Partner, Head of Employment & Reward, Germany