Labour law in EAU

Its deserved condition of hub in the Middle East makes the United Arab Emirates an attractive destination for companies that wish to set up a stable and fruitful presence in the region. While building up and consolidating a business in UAE, managers must consider several aspects to ensure the correct day-by-day functioning of their company. Among them, issues concerning human resources require to devote full consideration to make sure the company will comply with the particularities of UAE Law, without neglecting the actual practical relevance of the local uses and practices.

On the other hand, due to the rising numbers of companies benefiting from the advantages of the Free Zones, it may be useful to precise certain aspects to consider if considering to operate in some of the most notable among them. –

The following chart aims to offer a glance overview on the fundamental aspects to be considered:

FORMALITIES: EAU mainland: In writing; 2 copies; a copy either to the employer and the employee; It must be written in Arabic. A foreign language may additionally be used; Content: a) date of commencement of work; b) type of work; c) the location; c) the wage; and d) the duration

Notable free zones: JAFZA & DMCC Same requirements

DIFC The contract shall also include: a) terms and conditions regarding sick leave and vacation; b) the length of the notice to be given to the other party in order to terminate the contract; c) any disciplinary rules and/or grievance procedures applicable to the employee; d) any terms and conditions relating the hours or days of work; and e) the applicable pay period.

DETERMINED/NON DETERMINED TERM: EAU mainland: Determined Term Contract. The duration must not exceed: 2 years for the Contracts entered into after 1st January 2016 4 years for the Contracts entered into before 1st January 2016 Undetermined Term Contract if: It is not made in writing; It is not concluded for a determined term; Complying with the two previous requirements, the parties still apply it after the expiration of the term.

Notable free zones: Lack of specific provision

MINIMUM WAGE: EAU mainland: Not applicable, however, the wages shall include other rights such as medical insurance

Notable free zones: DMCC Not applicable DIFC Lack of specific provision on this aspect JAZFA Minimum monthly basic salary, in accordance with the job title, as acceptable to JAFZA

RECRUITMENT OF STAFF: EAU mainland: Companies need an establishment labor card, as a previous requirement to issue visas for its foreign employees.

Notable free zones: Lack of specific provision on this aspect

RECRUITMENT OF STAFF FROM ABROAD: EAU mainland: Companies need an establishment immigration card

Notable free zones: Lack of specific provision on this aspect

RECRUITMENT OF THE UAE NATIONALS: EAU mainland: UAE-based companies out of free zones, and of a certain size, must employ a minimum of 5-8% of UAE nationals in order to obtain the Trade License

Notable free zones: Lack of specific provision on this aspect

RECRUITMENT OF STAFF FROM ANOTHER COMPANY: EAU Mainland: For avoiding a 6 month or 1 year employment ban it is advisable to obtain a No Objection Certificate from the former employer. That is not applicable within the Free Zones

Notable free zones: JAFZA Employees other than GCC nationals who get an employment visa, will only be allowed to work in in this Free Zone The employees employed by a Company in JAFZA cannot work for another company in the same Free Zone. Exceptionally, the employee can be allowed by JAFZA DIFC & DMCC Lack of specific provision on this aspect

WORKING HOURS: EAU Mainland: Working week from Sunday to Thursday; Usually from 9 am to 6 pm; A break after 5 hours of continuous work; Maximum number of hours per week = 48h

Notable free zones: JAFZA Extra hours shall be paid at the rate of 125% or 150%. DIFC & DMCC Lack of specific provision on this aspecto

PROBATION PERIOD: EAU Mainland: Duration up to 6 months; No need of notification of termination; Workers are not entitled to end of service gratuity; Shall the workers be confirmed, the probation period will be considered as part of the service period

Notable free zones: Lack of specific provision on this aspect

REMUNERATION PACKAGE: EAU Mainland: Basic salary; Allowances; Annual leave; Leave ticket; Insurances; Sponsorship of residence; Compensation for accidents at work; Sick leave; Maternity leave for female employees; Al Uddah leave for Muslim employees; End of service benefits for non-UAE nationals; Government pensions schemes for UAE nations with valid ID card

Notable free zones: Lack of specific provision on this aspecto

PAID LEAVES (HOLIDAYS): EAU Mainland: The employees are entitled per every year of service an annual leave of no less than: Two days for each month worked in case the worker has performed his duties for more than 6 months, but without reaching the year of service In case the service exceeds the year, the worker will be entitles to a minimum of thirty days paid leave. ** Annual leave is used to be calculated by means of calendar days rather than working days.

Notable free zones: DMCC The Employee is entitled to an annual leave, if the service is one or more years. JAZFA Annual leaves as laid down in the UAE Labor Law. DIFC The employee shall be given a minimum paid vacation leave of 20 working days per annum to be accrued pro rata for employees who have been employed for at least 90 days

TERMINATION: EAU Mainland: Limited /Unlimited Term Contracts Upon agreement between both parties (employee must accept in writing) Unilaterally by the employer or the employer, and even without notice, if a legitimate reason is provided. Unlimited Term Contracts Either party can terminate contracts with a prior notice that can range from 1 to 3 months. If such duty is not fulfilled, the breaching party must pay to the other an indemnity (“Compensation in lieu of notice”) Limited Term Contracts On expiry of the period specified in the contract unless expressly or tacitly extended in accordance with the law

Notable free zones: DMCC The termination notice period is in any case 1 month JAFZA Notice before the termination of services as laid down in the UAE Labor Law. DIFC The termination notice period in case of employees who worked at least 1 month, shall not be less than: a) 7 days if the employment period was less than 3 months; b) 30 days if the period was more than 3 months but less than 5 years; and c) 90 days for more than 5 years of service. The employer may terminate the contract without prior notice in case of excessive sick leave (60 working days in any 12 months)

END OF SERVICE GRATUITY (UNLIMITED TERM): EAU Mainland: The employee who has completed at least one year of service shall be entitled to end of service gratuity. The remuneration shall be calculated as follows: 21 day’s pay for each year of the first 5 years of service; 30 day’s pay for each additional year Limit: two year’s pay

Notable free zones: DMCC If the Employee resigns the contract, he/she shall be: (a) Entitled to one third of the end of service if the service is more than 1 and less than 3 years; (b)Entitled to 2/3 of the said gratuity, if the period is more than 3 years and less than 5 years; (c)Entitled to entire gratuity, if service exceeds 5 years If the Employer terminates the contract, the Employee shall be entitle to: 21 day’s pay for each year of the first 5 years of service; 30 day’s pay for each additional year JAFZA &DIFC End of Service Gratuity on its main, as laid down in the UAE Labor Law

COMPENSATION FOR EARLY TERMINATION ( LIMITED TERM) : EAU Mainland: Where a Limited Term Contract is revoked by either the employee or the employer for di‑erent reasons of those within the article (120) of the UAE Labor Law, the other party is entitle to get a compensation; Employee: Contracts entered into from 1st January 2016 The amount agreed by the Parties or three month remuneration Contracts entered into before 1st January 2016 Compensation shall not exceed the aggregate worker’s remuneration for three months or the residual period of the contact; whichever is shorter Employer: Contracts entered into from 1st January 2016 The amount agreed by the Parties or one and a half month remuneration Contracts entered into before 1st January 2016 Compensation shall not exceed half the worker’s remuneration for three months remuneration or the residual period of the contact; whichever is shorter ** The Minister of Labor’s decree (765) of 2015 requires either party who wants to terminate the Contract to notify the other party no less than one month and not to exceed three months in advance, in accordance with the term agreed by the parties.

Notable free zones: DMCC Where a Limited Term Contract is revoked by either the employee or the employer for a non-legitimate reason, the other party is entitled to get a compensation: Employee: shall be entitled to receive 90 days’ pay Employer: shall be entitle to receive 45 days’ pay JAFZA Compensation as laid down in the UAE Labor Law DIFC No specific provision on this aspecto