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UAE employers must comply with new Emiratisation rules to avoid hefty fines

Out-Law News | 18 Jul 2022 | 10:36 am | 2 min. read

Employers in the United Arab Emirates (UAE) have been urged to pay close attention to new rules designed to boost the private sector employment of UAE nationals – or face significant financial penalties.

Ruth Stephen, employment expert at Pinsent Masons, said a change to the government’s Emiratisation programme was “the first time that employers have faced the possibility of fines being levied against them for failure to comply.” She added: “Ministers have made it very clear that they intend to police Emiratisation much more stringently in sectors outside of banking and insurance from now on, so firms must take these changes into account.”

According to the rules of the Emiratisation programme, from January 2023 at least 2% of a private company’s workforce must be Emirati if they employ more than 50 members of staff. Separate employment quotas for banks and insurance firms are already in place, and currently stand at 4% and 5% respectively. The programme applies across all of mainland UAE but does not apply in the freezones including the DIFC and ADGM.

Ministers plan to increase the minimum quota annually, aiming to ensure that at least 10% of the UAE’s private sector workforce is Emirati by 2026. Earlier this year, the UAE cabinet approved a list of new financial incentives and penalties to help enforce the 2% Emiratisation quota as part of 'NAFIS’, a federal program to increase the number of Emirati workers in the private sector. The changes include monthly fines for non-compliant firms of AED 6,000 ($1,633) for each citizen they have not employed.

The Ministry of Human Resources and Emiratisation (MOHRE) now categorises companies into three tiers to incentivise compliance with the rules. To fall into ‘tier one’, employers need to be fully complaint with the labour law and the wages protection system as well as workers’ rights and the promotion of cultural and demographic diversity in the UAE.

‘Tier one’ firms must also satisfy one of several conditions, including raising its Emiratisation rate at least three times above the target, training at least 500 UAE nationals annually, being a business owned by a young UAE national, being a training center that promotes cultural diversity or being active in targeted sectors and activities determined by Emirati authorities.

Companies that do not meet any of the ‘tier one’ criteria, but which comply with the law and the policy of promoting cultural and demographic diversity in the UAE, will be automatically classified in ‘tier two’. Meanwhile, firms that show a lack of commitment to protecting workers’ rights or not which do not promote cultural and demographic diversity in the UAE labour market will be placed in ‘tier three’ – along with employers guilty of human trafficking, failure to obtain work permits and welfare safety breaches.

MOHRE set work permit fees for ‘tier one’ employers at a maximum of AED 250 for two years, while ‘tier two’ employers will be charged AED 1,200 for two years, and ‘tier three’ employers face payments of AED 1,200 for two years. Activities involving the employment of UAE and Gulf Cooperation Council citizens are exempt from these fees.

The changes come as the UAE government announced a new six-month unemployment benefit for Emiratis working in the private sector who lose their jobs in circumstances beyond their control. The NAFIS scheme also offers a raft of benefits to UAE citizens, including up to AED 8,000 of monthly salary support during training, and monthly payments of up to AED 5,000 for university graduates.