CBD Corporate Services explains the changes to the UAE’s new labour law

During the course of 2021, the UAE adopted major reforms in its legislative system across several sectors including employment.  At the end of last year, the Ministry of Human Resources and Emiratisation (MOHRE), the Government body that regulates employment in the UAE, announced Federal Decree Law No. 33 of 2021 concerning the regulation of labour relations (New Labour Law), which replaces the current Federal Law No. 8 of 1980.

The New Labour Law has been issued in response to the rapidly changing workplace environment amid technological advancements post COVID-19 and is applicable to onshore and Free Zone entities (excluding DIFC and ADGM).  The New Labour Law will come into force on 2 February 2022 and will be complemented by Executive Regulations which are currently being prepared by MOHRE.   Subject to this, UAE employers will have a year to review and update their employment documentation. Stay up to date with Labour Law updates.

The below summary addresses key changes that employers and employee should be aware of.

Defined terms: The New Labour contains more clearly defined terms, such as, ‘Basic Wage’ and ‘Working Day’ which have previously caused confusion when calculating end of service benefits.

Categories of employment: The New Labour Law offers part-time, flexible and temporary working.    The Executive Regulations will address this in more detail.

Limited term contracts only: Work contracts must now be for a fixed term not exceeding three years which, unless terminated earlier, are implicitly extended on the same terms.

Probation period: Probationary periods may not exceed 6 months and employment may be terminated during the probationary period.  However, an Employee must now give 14 days’ written notice to terminate an employee during the probationary period, and an employee must give one month’s written notice if remaining in the UAE for employment, or 14 days’ written notice if leaving the UAE.  The new UAE employer is also liable to compensate the former employer for their recruitment costs.

Workplace behaviours: The New Labour Law includes equal pay protections, protections against sexual harassment, bullying, use of verbal, physical or psychological violence by employers, superior or colleagues, and prohibition against discrimination on basis of race, colour, sex, religion, nationality or ethnic origin or disability to not only meet international standards but to have the most advanced and protective work environment in the world. The most notable change in this section is equality in pay regardless of gender.

Termination of employment: Employment may be terminated by mutual agreement, on expiry of the fixed term, with notice for legitimate reasons, without notice for reasons similar to those in Article 120 of the current Labour Law, in the event of death/permanent disability, if the employee is imprisoned for 3 months or more, the permanent closure of the business or discontinuance of business due to economic or other exceptional reasons.

Notice period: The notice period is to be stipulated in Employment Contracts and may be a minimum period of 30 days’ up to a maximum of 90 days’ notice  If Employments are not revised within one year of the New Labour Law becoming effective, statutory notice periods dependent upon length of service will be applied.

Resignation without notice: Employees may resign without notice if: (i) an employer breaches their obligations and fails to remedy such breach within 14 days of the employee notifying MOHRE of it and (ii) in case of harassment or violence, the employee notifies the MOHRE within 5 working days.

End of service gratuity: A significant change to the New Labour Law is the entitlement to, and calculation of, end of service benefit.  Employees are now entitled to receive a full 21 calendar days salary for the first five years of service, and 30 working days for each subsequent year of service thereafter (or part thereof).  The ‘sliding scale’ calculation which was applied to the first five years’ of service has been removed.  End of service gratuity must be paid within 14 days of termination of employment.  The Employer no longer has the right to withhold end of service gratuity as Employees are entitled to receive full compensation irrespective of whether their employment was terminated with or without notice or if they have resigned.

Non-Compete: Non-compete clauses are now permitted but must be clear and shall not exceed two years.

Maternity Leave: Employees are now allowed to 60days maternity leave (45 days’ on full pay and 15 days’ on half pay) with no qualifying service requirement.  This may be extended by another 45 unpaid days’ for post-maternity illness or if the infant is ill/has special needs.

Compassionate leave: Employees will now be entitled to five days’ paid compassionate leave on  the death of their spouse and three days’ paid leave on the death of a parent, child, sibling, grandchild or grandparent. There is no qualifying service requirement.

Study leave: Employees who have worked for two years may be entitled to ten working days’ study leave, although the New Labour Law is silent on whether this leave will be paid or unpaid.

Employee rights to search for new employment: Employees have the right to one day off per week to look for a new employment during their notice period in the event of termination by the Employer.

Penalties: Employers may face fines of up to AED1,000,000 for breaches of the New Labour Law. Such fines may be multiplied in cases where more than 1 employee is affected by such breach.

Other significant employment-related news: The UAE witnessed more cultural and legislative reform when the UAE Government announced a Monday to Friday working week to be adopted from the first week of January 2022 to bring the UAE into alignment with international working days.  While the private sector is not obliged to change their working systems, they are encouraged to do so.  It should be noted that Government sector employees are only required to work 4.5 days per week to enable them to attend prayers on a Friday.

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