As different labour markets across the World grapple with the collapse of certain parts of their economies and the inevitable need to review employee headcount and salary costs, the UAE has put in place special measures to stabilise its pre-dominant expatriate labour market.
On the 26th March 2020, the UAE's Ministry of Human Resources and Emiratisation (the "Labour Ministry") announced measures to introduce flexibility to the UAE labour market for expatriate employees in light of the impact of the COVID-19 pandemic and to put into law the requirements for home-working.
The announcements made in the form of Ministerial Resolution No. (279) of 2020 on Employment Stability in the Private Sector during the Period of Application of Precautionary Measures to Curb the Spread of the Novel Coronavirus (the "Resolution") apply only to on-shore employers (being companies registered outside of the UAE's free-zones) and those who maintain Establishment Cards (i.e. labour permits) from the Labour Ministry. The Resolution is also only applicable to labour relations with expatriate employees.
1. Precautionary Measures
On-shore employers are encouraged to implement remote working systems, essentially bringing into law the concept of "working from home" that is required for social distancing. In addition, employers may also manage the workforce (and labour costs) in light of the inevitable contraction in the UAE economy by:
- Granting paid leave;
- Granting unpaid leave;
- Introducing a temporary salary reduction for a limited period; and
- Introducing a permanent salary reduction.
In all cases, such measures do require the agreement of the employee, although home working is mandatory with the exception of certain categories of employees who need to be located outside the home environment.
2. Virtual Labour Market
The Resolution introduces the concept of a "Virtual Labour Market". The purpose of this is to allow employers to register the details of employees who are under their employment/sponsorship but who may otherwise be at risk of losing their jobs. Such employees are able to work for other employers on the condition that, despite the deployment to a third party, their housing allowance and other benefits (excluding salary) continues to be paid by the original employer. This is a temporary measure (almost akin to a secondment), where an employee can provide his/her services to a third party without terminating their employment with their sponsor.
Any vacancies available in the UAE shall be satisfied from the Virtual Labour Market, which is intended to create an electronic database where employers can search for available candidates and subsequently apply for work permits, which may be full transfers, temporary or part time. The measures will enable greater flexibility in the internal UAE job market and eliminate any need to recruit from overseas. This is crucial to support the internal labour market now that the UAE has announced a ban on any visas/entry permits being issued for non-residents wishing to enter the UAE.
The Virtual Market is already online, please see: https://mohre.hyrdd.com/.
3. Salary Reductions
The Resolution provides a framework in which to agree a salary reduction with employees that can either be:
- A temporary supplement agreed in the form of a template agreement (intended to be a variation to the employee's contract) and on the basis that the temporary cut in salary shall only apply for a pre-agreed period of time, or for so long as the Resolution is effective (whichever period is shorter). At this stage, there is no indication as to how long the Resolution shall be effective and therefore employers will need to be alert to further announcements by the Labour Ministry;
- The temporary reduction in salary is capable of being renewed if the Resolution remains effective on such renewal, therefore there is some flexibility around fixing the salary reduction for the period of time the Labour Ministry deems necessary.
A copy of the temporary supplement (most likely prepared in English and Arabic) is to be filed with the Labour Ministry. The Resolution does not provide the template supplement, and we await its publication by the Labour Ministry.
A permanent salary reduction is also subject to agreement with the employee and appears to require the Labour Ministry's approval. To date, the process for amending labour contracts for on-shore companies has always been to file a copy of the amended labour contract with the Labour Ministry. Specific approval is not necessary and it is unclear if this provision is a temporary measure to allow the Labour Ministry to police any drastic cuts in salary that it deems unacceptable.
4. Validity of the Resolution and Future Initiatives
The Resolution is effective from the date published in the Official Gazette, albeit it was approved by the UAE Cabinet of Ministers on 26 March 2020. We anticipate further announcements on its implementation and, in particular, details relating to the operation of the Virtual Labour Market.
The Resolution also complements the UAE's Wages Protection System insofar that once a reduction in salary is agreed, the employer's on-going payroll duties under the Wages Protection System will also be adjusted. Furthermore, we also await the form of supplemental agreement and guidance from the Labour Ministry on the conditions to its consent to reducing salaries (if any).
We anticipate that the UAE's free-zones will adopt similar initiatives for there to be freedom of movement of employees from on-shore employers to free-zone employers. We will share further details once announced.
The COVID-19 outbreak is rapidly evolving day-by-day and it is likely to continue to do so for a protracted timeframe. The issues discussed in this briefing therefore reflect what we consider to be key legal issues for businesses and organisations in the Middle East and those operating with businesses in the region and worldwide. If any of these issues apply to you, please do not hesitate to reach out to us for a discussion on how we can help you to resolve them and keep your business or organisation running smoothly.