Published: October 2022
On the 2nd February 2022, Federal Decree-Law No. 33 of 2021 (the “Labour Law”) was brought into force replacing in its entirety Federal Decree Law No. 8 of 1980 (the “Old Law”). The Labour Law implemented a number of changes from the Old Law including the abolition of unlimited term contracts and replacement with fixed-term contracts of a maximum period of three years, which may be renewed for a similar or shorter duration. Seven months later, the Ministry of Human Resources and Emiritisation (“MOHRE”) has announced an amendment to the Labour Law with the issuance of Federal Decree-Law No. 14 of 2022 (the “Labour Law Amendment”), removing the three-year cap on fixed- term contracts.
While strictly speaking this is not a return to unlimited contracts, companies may choose the term of employment contracts at their discretion (e.g. 5 or 10 year terms). The Labour Law stipulates that all companies must transition their employees onto fixed term contracts by the 1 February 2023.
Many companies who have already transitioned their contracts to three year fixed terms have opted to include an auto-renewal clause ensuring that their employment contracts do not expire upon the end of the term. Given that the notice periods remain the same (between 30-90 days as per the Labour Law) companies may therefore choose to maintain a renewable three year term, or increase the terms of their employment contracts at their discretion.
Unemployment Insurance
In addition to the Labour Law Amendment, the UAE government recently issued Federal Decree Law No. 13 of 2022 Concerning Unemployment Insurance Scheme (the “Scheme”). The Scheme will apply to all employees in the private sector and public sector including UAE nationals, with the exception of (i) investors; (ii) domestic workers; (iii) contractual working or temporary workers; (iv) juveniles under the age of 18; (v) pension receiving retirees who have joined a new employer. The objective of the scheme is to provide the insured with income for a period of time during unemployment.
As part of the scheme, employees will be eligible to receive compensation upon becoming unemployed, subject to having been insured for 12 consecutive months under the scheme. The amount of compensation will be up to 60% of the employee’s basic salary or a maximum of AED 20,000 per month. Eligible employees will receive this compensation for a maximum period of three months or until they find alternative employment (whichever is earliest). In addition, the Scheme stipulates that the insured may opt into additional benefits with the service provider.
The Scheme stipulates that compensation will not be applicable if an employee was dismissed for disciplinary reasons under the Labour Law. In addition, compensation will not be provided to the employee if there has been fraud or deceit involved in the insurance claim (fines and penalties will be issued accordingly).
We are awaiting the specific details which will be issued separately by the Cabinet but understand that the Scheme will commence in 2023 and the insurance premium, which is speculated to be small, will be paid by the employee (but presumably via the employer who will be registered with the Scheme).
If you have any queries on this topic please do not hesitate to reach out to us.
Key Contacts
Samir Kantaria
Partner, Head of Employment & Incentives
s.kantaria@tamimi.com
Ivor McGettigan
Partner
i.mcgettigan@tamimi.com
Gordon Barr
Partner
g.barr@tamimi.com
Melissa Hartley
Associate
m.hartley@tamimi.com