Fundamental Changes in UAE Labour Law

UAE is continuously striving to adopt the latest HR practices to create a cohesive working environment that benefits both organizations and employees. On 15th November 2021 government announced Federal Decree-Law No. 33 of 2021, which will replace Federal Law No. (8) of 1980. Under the Federal Decree-Law no. 47 of 2021, the new provisions aim to unify General work labour rules. The government has introduced the same rules for the public and private sectors to build a sustainable and competitive labor market. It grants the same rights to employees across the country.

The new law came into effect on 2nd February 2022. Under this law, the government has also announced a new framework for the private sector. These are the first significant reforms in labour law in the past 40 years. The new labour law 2021 is not exhaustive and can be easily understood by all. Some of the key highlights of this law are as follow:

1. Elimination of Unlimited Contracts

Under Article 8 of Federal Decree-Law No. 33, unlimited contracts need to be abolished and replaced with a fix-term contract or a contract not exceeding 3 years. The new update removes the earlier distinction between fixed and unlimited contracts. The fixed-term doesn’t bring any threat to employees or the continuity of employment. For example, the benefits that accrue during the fixed term, such as service gratuity, will not be affected. The renewal will be based on conditions agreed by both parties.

2. Deadline for drafting a new contract

All employers have a deadline to adopt a new employment contract template for a fixed term. The deadline for drafting a new employment contract is 1st February 2023.

3. Minimum Wage

Article 27 of the New Law paves the way for a new national minimum wage. It is regarded as an unprecedented move for the UAE government. There was no national minimum wage policy earlier. Instead, guidelines on minimum salary are based on sponsor spouses or dependents in the UAE. The minimum wage shall be determined and announced by the UAE cabinet, which shall be proposed by the Ministry of Human Resources and Emiratisation (MOHRE) in collaboration with revenue authorities.

4. Equal Pay for Equal Work

A welcoming decision by the government acknowledging the efforts of the female workforce. This new law explicitly affirms that female workers must receive the same salary as their male colleagues for the same or equivalent role. Moreover, discrimination in pay based on colour, sex, race, religion, nationality, social origin, or disability is now illegal. However, this law doesn’t disqualify any earlier policies intended to promote Emirati participation in the workforce.

5. New pattern of work

With the intention to enhance flexibility and productivity, the new law now recognizes part-time, temporary, and flexible work along with full-time work. The acceptance of new models gives employees the freedom to get employed by two or more employers. The part-time worker can now enjoy a sense of protection as employers must adhere to agreed hours and allow the employee to maintain more than one job.

6. Non-competition clause

The new law further strengthens the existing non-compete protections given to the employers. The government introduced a new statutory requirement of a non-compete agreement between employer and employee that applies to the termination of employment. The enforcement can be applicable only if the following conditions are fulfilled:

  • It must mention the specific time, geographical area, and nature of work to protect the employer’s interest.
  • The duration must not exceed more than two years.

The new law also dictates that if the termination of the employment contract is in breach of the new law, the non-compete contract is not enforceable. Once the employer becomes aware of the breach, the court can enforce a non-compete obligation within 12 months of the employer becoming aware. It is essential that employers properly draft such contracts and all the clauses.

7. Probation period

Once this new law comes into force, the employer cannot extend the probation period more than 6 months. Once the probation is over, the employees can continue working for the organization as per the employment contract. The probation period is also included as a part of the overall service.

During this probationary period, if either of the parties (employee and employer) wish to terminate the job, they must provide written notice of termination to the other party. Earlier it was possible on a one-day notice, which is now increased to 14 days for the employer and 30 days for the employee. If the employee wants to leave the country, they must provide a written 14-day notice. Leaving the country without notice during probation, may bring a one-year ban on employee from obtaining a work permit.

Any party fails to adhere to the rules, the one in breach must compensate the other financially by paying for the remaining workdays before the competition of probation period.

8. Maternity and paternity leave

Pregnant working women are now entitled to a minimum of 45 days of fully paid leave. Additionally, they can also apply for 15 days’ leave at 50% pay. New mothers with a child that needs extra care can apply for 30 days of full paid additional leave and 30 days unpaid leave. The mothers need to provide the documents to support their claim for additional leave.

The fathers also get full paid 5 days paternal leave, which they can take any time in the first 6-months after childbirth.

9. End of Service Gratuity

Some of the highlight changes in the end-of-service benefits are:

  • The service gratuity shall be payable even if the employment contract is terminated without notice.
  • If the employee resigns, there shall be no adjustments in the end-of-service gratuity.
  • The gratuity calculation is now based on the total number of “Working days” in service, not on total days of employment or calendar year.

10. Dispute resolution

Employment disputes of value less than AED 100,000 are now exempt from court fees. This is a significant relief for employees who earlier resisted initiating the claim because of high expenses. A group of employees can collectively initiate to raise complaints through MOHRE.

11. New UAE standard rules of work law

Employees both in public and private sectors will now have similar working environment and facilities.

Final Thoughts

There are several other updates in the New Labour Law of 2021; we have tried to highlight some of the rules that directly impact employers and employees. The new law also introduces several fines for employers if they breach employment regulations. If you are an employer who wants to draft their contracts and other legal documents according to the new law, you can consult our labour lawyers in UAE. We can provide complete assistance in the drafting of contracts and dispute resolutions.

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