UAE Labour Law changes effective 1 January 2016.
UAE Labour Law Three key changes
- New guidelines on issuing new work permits – removal of automatic ‘block’
- Introduction of a Mandatory Employment Offer letter
- Changes in terminating a limited and unlimited contract
The UAE Ministerial decree 766 of 2015
Issuing of new work permits UNLIMITED contract
The will no longer be the automatic labour ‘block’ for employees who have worked less than 2 years. Provided that:
- Six months minimum must have been served – (not required for employees with high school certificate or degree qualifications)
- Mutual consent given (NOC letter from Employer required)
- Sufficient notice is given and contract terms are honoured
If the employer has failed to meet their contractual obligations such as non-payment of wages for 60 days then the Employee is free to move.
Other rights apply in the case that the Employer ceases to operate or if there is a court case.
In summary this looks like a very positive move and should help significantly to retain workers and expatriates within the UAE rather than employees having an automatic block.
Issuing a new work permit LIMITED contract
As above on a fixed term contract there will also now be no automatic block where the following applies
- The fixed term has expired i.e. it is not renewed
- There is mutual consent between the parties provided six months has been served. NOC letter given (six months’ service is not required for employees with high school certificate or higher qualifications)
- One party gives at least 30 days’ notice, honours notice and pays agreed compensation. Compensation of no more than three months’ wages.
UAE Ministerial decree 764 of 2015
Introduction of a mandatory Employment Offer letter
The Company Offer letter must be lodged with Ministry of Labour (MOL) before an Entry Permit / Resident Visa will be issued
The Offer letter must set out the basic terms of employment – designation, notice period, basic salary and allowances (these terms must be reflected in employment contract)
The Offer letter terms must be same or better than the MOL Employment Contract
A common cause of complaint amongst expatriate workers is that the final terms set out in an official MOL contract are often less favourable than the terms set out in the initial offer letter. This Decree should therefore be welcomed and will increase transparency and fairness.
The UAE Ministerial decree 765 of 2015
Termination of a LIMITED contract
This decree clarifies that employees that are employed on a limited (fixed term) employment contract, can be only terminated within certain criteria.
- Expiration of the term – i.e. not renewed
- Termination by either party with a maximum of 3 month notice period – contract terms must be honoured
The term of a Limited contract cannot be extended over two years – this is in line with visa term and should bring more flexibility to employees who wish to leave their employer.
Termination of an UNLIMITED contract
Employees employed on an unlimited employment contract can be terminated as follows:
- By Mutual consent
- Notice between 1 – 3 months – capped duration of notice is now maximum of 3 months
- Parties to honour obligations throughout notice
It is a common feature in the UAE to have senior executives and teachers for example are often constrained to a 6 months’ notice period. This is now limited to 3 months’ maximum notice period.
This is a useful amendment and should improve fairness. Employers will have to think of other mechanisms of retaining staff such as long term incentive plans or deferred bonus schemes.
The above is a very brief summary of the new laws and is not intended to be a specific guide or legal advice. For more information and assistance with this including updating contracts and offer letters at Ministry of Labour please contact a member of the PRO Partner Group team on +971 (0)4 456 1761 or email us at firstname.lastname@example.org.