‘Can my employer force me to pay for recruitment costs when I resign?’

Under UAE Labour Law, it is illegal for employers to ask staff to pay for their hiring expenses

DUBAI, UNITED ARAB EMIRATES , July 21 – 2020 :- People wearing protective face mask and waiting for their turn for the medical test for the visa renewal at the Medical Examination Center for Residency at Ibn Battuta Mall in Dubai.  (Pawan Singh / The National) For News/Standalone/Online/Stock
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I am an unlimited contract with a hotel but resigned after three months. My employer now wants me to pay Dh3,700 and my basic salary is only Dh1,300 a month.

When I asked why I need to pay this amount, human resources said it is to cover the cost of arranging my visa and cancelling it, as well as paying for my medical test and Emirates ID card. Am I legally obliged to pay for these expenses? IM, Dubai

I have received a number of queries from readers who work in hotels and have problems with employers not acting legally. UAE Labour Law applies in full to all mainland employers and that includes hotels.

As IM is on an unlimited contract, he can resign at any time, provided he gives notice under the terms of his employment contract, which is usually 30 days. He is not liable to pay any penalty on this type of contract.

It is not legal for an employer to pass on the cost of employment to an employee whatever the period of service may be. The same rule applies if someone resigns during their probationary period and, again, no employer can ask for compensation for costs incurred.

UAE Labour Law states that all employees should have a proper contract of employment that follows the provisions of law. Article 7 states: “Every provision contradicting the provisions hereof, even if precedent to the effective date thereof, shall be deemed void unless it is more advantageous to the worker.”

This means that no employer can enforce terms different to those set out in the law unless they benefit the employee. That is not the case here and, therefore, the employer’s request is invalid and illegal.

This is covered in Ministerial Order 52 of 1989, Article 6a, which states that an employer should sign official documents undertaking to "sponsor and be responsible for the recruited labourer, the bearing of his recruitment expenses and his employment in accordance with the employment contract in a way not prejudicing the provision of the Federal Law No (8)/1980 referred to herein”.

As he is on an unlimited contract, he can resign at any time provided he gives notice under the terms of his employment contract, which is usually 30 days

If any employee is asked to pay hiring fees, I recommend they register a case with the Ministry of Human Resources and Emiratisation.

It is also important to note that IM has only been with his employer for three months and could be subject to an employment ban of six months.

I have a query regarding how a sale of goods from a company in a free zone to a company on the UAE mainland is recorded. I have seen guides, especially about designated zones, on the Federal Tax Authority website but they are confusing.

When a company in a designated zone, known as a free-zone company, makes sells goods to a mainland company, how is the sale of goods shown in its VAT return? Is it a zero-rated supply or an out-of-scope sale?

I know that mainland limited liability companies must record the purchase in their VAT return using the reverse-charge mechanism and pay 5 per cent levy on it. But the guide does not say how a free-zone company needs to record the sale in its VAT return. MB, Dubai

This is a technical query, so I sought expert advice from Gemma Nye, manager of Go Figure Accountancy. She says: “The supply of goods from a designated zone to a supplier located on the mainland will be considered an import and therefore classed as a zero-rated sale in a free-zone company’s VAT return.”

The supply of goods or services can be treated slightly differently, Ms Nye says.

“If the place of supply of services is in a designated zone, it is treated as if the supply was made in the mainland and will be subject to the normal UAE VAT rules – unless providing a service to a non-resident party located outside the GCC. In this case, the service can be zero-rated.

“A supply of goods within the designated zone is not subject to VAT as it is classified outside the UAE. The exception to this rule is when the supply is made to someone who intends to utilise the goods in any way for private purposes,” she says.

“In this case, place of supply is classed as the UAE and UAE VAT must be applied. If the free-zone buyer purchases goods from a free-zone supplier to be used in the manufacturing process and they form part of the final product, then [the sale] is outside the scope of VAT.”

Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with more than 25 years’ experience. Contact her at keren@holbornassets.com. Follow her on Twitter at @FinancialUAE

The advice provided in our columns does not constitute legal advice and is provided for information only