Setting up and running a business in the UAE comes with all sorts of opportunities – the country is brimming with entrepreneurial activity with The Department of Economic Development in Dubai issuing 20,467 new licences in 2018.
However, with opportunity comes responsibility and as a business owner, you have a range of key obligations to your personnel, ranging from working hours, to safety, to meeting their end of service needs. The list of UAE employment laws is a long one, and while it shouldn’t stop a potential business in its tracks, understanding what UAE labour laws demand of you is essential.
In this quick guide we’ll give you a summary of the key areas to think about.
The UAE Labour Law
Federal Law No. 8 (1980), generally called ‘The Labour Law’, governs the labour rights of employees in the private sector. Despite the name, it’s a body of many regulations covering working hours, holidays, sick leave, maternity leave, health and safety, termination of employment and end of service payments. Article 3 sets out that these apply to all UAE employees, whether nationals or expats.
Health and safety
Along with other Ministerial Decisions in the 1980s, The Labour Law covers health and safety and while the regulations are traditionally ‘light-touch’, they are tightening up.
The government is working to establish a standardised approach through the Occupational Health and Safety Management System (OHSMS) National Standard, with the intention of establishing guidelines for all organisations in the UAE.
The important thing to be aware of is that the law expects directors to set out their own approach and holds them responsible for health and safety breaches, which are punishable by a fine and/or imprisonment for up to six months.
Next steps – You can find a helpful series of guides on the government portal, but working with experienced professionals in UAE employment law when you start your business will help you to get off on a sound legal footing.
Working hours, holiday and sick pay
Article 65 of the UAE Labour Law sets normal working hours for the private sector as eight hours per day or 48 hours per week, reduced by two hours per day during Ramadan. Naturally, if you want to reduce hours you can, but the basic hours can only increase to nine for businesses, hotels and cafes after approval from the Ministry of Human Resources and Emiratisation. Note however, that working more than seven hours a day is prohibited in physically demanding industries.
With holiday entitlement, you’re free to be generous, but the Labour Law deals in minimums. For the private sector it’s 30 days per year once an employee is more than a year into a role. If they’re in their first six months, there’s no entitlement, but between six months and a year, holiday is accrued at two days per month. For sick pay, once a six-month probation is done, plus a further six months, they’re entitled to 15 days on full pay with an additional 30 on half pay.
Next steps – Unlike health and safety, holiday and sickness is more a case of knowing the rules, but working with professional UAE employment experts will help you to keep abreast of any changes in the law.
Think about health insurance
The way health insurance for employees is handled differs between the Emirates, but at present only Abu Dhabi and Dubai-based employers are required to provide medical insurance. In Dubai, the provision has been in force since 2014, but has only applied to companies with fewer than 100 workers (and the employer’s dependents) since June 2016. In Abu Dhabi, it goes further, as employers are required to provide health insurance coverage to all their employees and to their dependents too.
Next steps – while healthcare isn’t obligatory, the tide may turn, for example workers in Sharjah’s free zones will soon benefit from an employer-sponsored scheme. However, it’s worth considering the value of providing health care regardless of the rules. Employer healthcare, particularly for expats, can be an attractive part of a work package.
Understand the Wages Protection System
The Wages Protection System (WPS) is designed to protect workers’ rights and establish trust between organisations and their employees. WPS acts as a security measure making sure that every employee is paid in full and on time. Its important to know about it because if your business doesn’t follow the rules your account with the Ministry of Labour will be suspended, meaning you won’t be able to hire staff or issue visas.
Next steps – the practicalities of adhering to WPS mean that when a business is formed, it must create an account with the Ministry of Labour that records and regulates contracts and visas.
End-of-service benefits (ESB) entitle workers who complete one or more years of continuous service to severance pay – 21 days for each of the first five years, plus 30 days for each year thereafter. There are two important points – first, it’s often misunderstood by businesses, leading to costly liabilities. One report found that up to 88% of organisations had no plan beyond ad-hoc settlements. The other point relates to the UAE’s problem with short-term jobholders, attracting talent and then keeping it.
Next steps – While there’s no provision for retirement plans as such, that doesn’t mean you can’t offer one. A trust paid into by both employer and employee, as with the current UK model, gives workers the option of saving more for their future.
The same report found 40% of organisations now provide this kind of enhanced ESB, for at least some employees, to target and keep talent.
Think about more than the bottom line
Setting up a business anywhere in the world requires getting to grips with regulations. UAE employment law is no different. However, a key takeaway should be that adhering to the labour laws is more than a box-ticking exercise – while in many cases you’ll simply need to comply with regulations, in other areas, there’s the freedom to build your own plan, and it’s worth considering more than your ledger.
Businesses need to keep the purse strings tight in their formative years, but employee attraction and retention are important. Loyalty and consistency are worth a lot in a country whose workforce lends itself to job-hopping, and holding onto key talent can be vital for the future of a growing business.
Bringing on board seasoned experts as you draw your business plan together will help you to make sure that you’re considering the letter of the law – both its absolute requirements and its hidden opportunities.
Setting up your own business has never been easier. Virtuzone takes care of it all so you can focus on what matters – building your business. For more information about company formation in the UAE mainland or free zones, please call us on +971 4 457 8200, send an email to email@example.com.