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Changes in the labor law of the UAE 2023

Changes in the labor law of the UAE 2023

The Ministry of Human Resources and Emiratization has announced the revision of labor laws in the United Arab Emirates with the introduction of Federal Decree-Law No. 33 of 2021 Governing Labor Relations and its Executive Regulations, in accordance with Cabinet Order No. 1 of 2022, which dialed effective February 2, 2022. By Ministry Resolution No. 27 of 2023, the UAE government has extended the transition period for fixed-term contracts from February 1, 2023 to December 31, 2023.

Human resource management systems in Dubai must be able to adapt and incorporate any changes made by the UAE government. Below are some of the changes you should be aware of.

Term contracts only

The new law abolishes the idea of open-ended contracts and allows only fixed-term contracts (maximum duration of three years). By February 2, 2023, companies must transfer all current employees who have open-ended contracts to fixed-term contracts.

Notice for the probationary period

Although the new law retains the six-month limit for the probationary period, it now requires any party wishing to terminate employment during the probationary period to give at least 14 days’ notice, and if the employee joins another company based in UAE, at least 30 days in advance. In addition, employers have the right to require the new employer to pay the expenses incurred during the hiring of the employee.

Part-time and flexible working order

Several new, non-traditional and flexible employment arrangements are currently available in the UAE. These include job sharing, flexible working (where working hours and days can vary depending on the employer’s requirements), temporary work (for specific project-based work) and part-time (with benefits provided on a pro rata basis). The Ministry of Human Resources and Emiratization has yet to provide more details on the changes to these working arrangements.

Working days and hours

Employers must give their employees at least one day off on any day of the week, Fridays are no longer the only days that must be designated as mandatory days off. However, there may be potential exceptions to these requirements under executive regulations that limit working hours to no more than 56 hours per week. The maximum working hours remain at eight hours per day/48 hours per week (with a six-day working week), which must be communicated through company policy and the HR system.

Discrimination and equal pay

The law prohibits discrimination based on race, color, sex, religion, national origin, socioeconomic background, and any handicap that would prevent an employee from obtaining and retaining employment. Employees will now benefit from enhanced protection against discrimination in the workplace. Although maternity leave and/or pregnancy are not mentioned as protected characteristics, employers are not allowed to fire (or threaten to fire) an employee because she is pregnant or on maternity leave. The new law also stipulates that men and women receive equal pay for equal work. An effective HR system in Dubai can help companies track employee benefits, ensuring that employees are treated fairly.

Forced loss of job insurance program

According to Federal Decree No. 13 of 2022, all employees working in the public and private sectors of the UAE are required to subscribe to the compulsory Involuntary Loss of Employment (ILOE) insurance scheme.

From October 1, 2023, the UAE government will impose fines on workers who do not take out or fail to take out an unemployment insurance policy.

This term is defined in: Ministerial Decree No. 340 of 2023 amending the deadline for the imposition of fines related to the unemployment insurance system contained in Ministerial Decree No. 604 of 2022 on the unemployment insurance system.

The ILOE insurance program is a form of social security, the purpose of which is to provide temporary financial support in the event of unemployment of an employee due to dismissal by the employer.

The rules apply to all employees, with the exception of the following categories:

  a) Investors (business owners who own and manage the entire business);
  b) domestic staff;
  c) Contract workers on a temporary basis;
  d) minors under the age of 18;
  e) Working pensioners transferred to a new employer.

The insurance program distinguishes two categories of workers:

Category A

Category В

Applicable

For employees with a base salary not exceeding AED 16,000

For employees with a base salary exceeding AED 16,000

Calculation for compensation

60% from the average salary for the last 6 months

60% from the average salary for the last 6 months

Maximum amount of compensation

AED 10,000 for a month

AED 20,000 for a month

Restrictions

Up to 3 months (for each case of unemployment)

Up to 3 months (for each case of unemployment)

The minimum insurance period is 12 months; it is also possible to insure an employee for 24 months. Insurance premiums can be paid by the employee monthly, quarterly, semi-annually or annually

Conditions for receiving compensation

The employee must file a claim within 30 days of the date of unemployment. The insurance company has two weeks from the date of receipt of the claim to transfer compensation to the policyholder’s account.

Compensation is paid by Dubai Insurance Company, represented by a pool of nine insurance companies:

  • Dubai Insurance Company;
  • Abu Dhabi National Insurance Company;
  • Al Ain Ahlia Insurance Company;
  • Emirates Insurance Company;
  • National General Insurance Company;
  • Orient Insurance;
  • Oman Insurance Company;
  • Orient UNB Takaful Company

Termination of employment relations

Despite the term “fixed-term”, the new Law allows fixed-term contracts to be terminated at any time during the entire term for “good reason”, provided that written notice is required as provided in the employment contract.

It is now acceptable to dismiss an employee with notice for reasons other than those related to performance or conduct. Perhaps the most notable change is that the concept of redundancy is now specifically recognized as a legal basis for termination, as are bankruptcy and insolvency or other economic or emergency circumstances.

It should be noted that the compensation scheme for arbitrary dismissal (under the provisional law) was significantly reduced, and employees could potentially only be entitled to compensation in two specific dismissal scenarios.

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