UAE's new labour law explained: all you need to know about the 2022 changes

Changes to the way employment in the private sector operates, such as flexible working and shared jobs, were introduced on Wednesday, February 2, 2022.

The amended labour laws, which were first outlined by the government in November last year, provide options that were not available before and strengthens employees' rights.

Among the headline changes are shorter, fixed-term contracts for most private sector employees, the ability to stay in the country for 180 days after leaving your job, and the introduction of job shares, which may suit students and people returning to the workplace. And there are significant changes to maternity leave.

UAE officials recently told private sector bosses that they have to strictly follow these new laws, and warned that a lack of knowledge could not be an excuse to break the law.

The National explains what's new.

The new employer will have to compensate the old employer for the visa costs and expenses for the hiring of the ex-employee. It’s like compensation

Mohamed Rouchdi,
ICLO

What new work options are now available?

Under condensed hours options, if an employee works 40 hours a week in line with their contract, they can now work those hours over three days, according to Abdulrahman Al Awar, Minister of Human Resources and Emiratisation.

Other flexible working options include shared jobs, when two people do one job and split the hours after agreeing to the arrangement with their employer.

People can now work for more than one employer for a specified number of working hours or days.

They can also take on work for a temporary period to complete a specific task.

Working hours or days can also be changed, depending on the workload and an employer’s needs. Employers may also allow people to choose the times they work.

Dr Hassan Elhais, a legal consultant with Al Rowaad Advocates, said the abolition of unlimited contracts, anti-discrimination protection and the new work models such as flexi-time, part-time work and supplementary leave are the headline changes.

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UAE salary guide 2022

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"For flexible work, this is a new thing,” said Mohamed Rouchdi, partner at ICLO law firm.

“There is something very good here for employed students, who can freely work and have their own arrangements with mutual consent from their employer.”

What other changes have been made to contracts?

Employment contracts must now be limited.

This means people on indefinite, or permanent, contracts will be switched to fixed-term contracts of up to three years, which can be renewed.

Probation periods cannot be more than six months, and a notice of two weeks must be given to terminate them during this time. Employees who want to change jobs during the probation period must give a month’s notice, or 14 days if they want to leave the country.

“In case the employee wishes to join another employer during of course the probationary period the employee will have to serve 30 days’ notice,” Mr Rouchdi said.

“And in this case, also, the new employer will have to compensate the old employer for the visa costs and expenses for the hiring of the ex-employee. It’s like compensation.”

If an employee leaves the country then returns to take up a new job within three months, the new employer would have to pay the former employer for the visa costs and the labour expenses incurred, he said.

Employers cannot force workers to leave the country after they leave their job or their employment is terminated. Instead, the former employee will be allowed up to 180 days to find a job without overstaying their visa.

Under the previous law, someone who had their residency visa cancelled had just 30 days to find new work or leave the country without incurring fines for overstaying, making this one of the most significant changes.

How has protection for employees been strengthened?

Mohamed Rouchdi, partner at ICLO, says flexible work will benefit employed students. Ruel Pableo for The National

Discrimination is prohibited in any form, be it race, colour, gender, religion, nationality, social origin or disability. A new minimum wage will be set.

“Article 27 of the new law will set a minimum wage, which is a new thing for the UAE to do,” Dr Elhais said.

“A proposal from the Minister of Human Resources and Emiratisation, in collaboration with other authorities, will set the minimum wage in the United Arab Emirates."

The new laws also provide more protection against harassment.

Employees cannot be forced to work any more than two hours of overtime a day. And if their job requires it, they must be paid 25 per cent more than their regular hourly rate.

In addition, employers cannot withhold employees’ documents, such as passports, and they cannot charge workers recruitment fees.

Employees will not have to pay legal fees when filing labour cases against employers for compensation of less than Dh100,000. If the amount is more than Dh100,000, there will be legal fees to pay.

End of service gratuity payments can now be paid in either UAE dirhams, or an employee’s chosen currency, as agreed upon in the employment contract.

All end-of-service entitlements must be paid within 14 days to avoid a penalty, Dr Elhais said.

Employees must also be given one month from the end of the contract to leave accommodation that might be paid for by their employer.

Employers must pay any end of service benefits due to the employee’s family in the event of their death. The employer must cover the cost of repatriating their body.

Employees can now be served notice during their period of leave, but the notice period will not begin until the first day they return to work, Mr Rouchdi said.

In addition, notice periods can be no longer than three months.

Employment can be terminated without notice for 10 specific reasons, including in the case of misuse of power by the employee, or if the employee gains personal benefits from their position.

Rights have also been strengthened for employees in terms of termination, giving them the power to leave their job without serving a notice period.

“Article 45 has increased the reasons for termination by the employee without notice,” Dr Elhais said.

“Under paragraph four of Article 45 under the new law, which permits the employee to terminate the contract in case of significant change of his tasks or work. And without a written consent of the employee. This should be, of course, to the employee’s favour.”

Many of the workplace changes improve flexibility for the employer and employee. Silvia Razgova / The National

What about paid leave?

Everyone must have at least one rest day, with the option of more depending on their contract.

Employees must receive paid mourning leave of between three and five days, depending on their relationship to the deceased.

“They will be able to ask for bereavement leave of five days after the death of a spouse and three days after the death of a close family member; parental leave of five days within six months of the birth of a child, and study leave of 10 days for employees who need to take exams if they have worked for two years for the same employer,” Dr Elhais said.

“Mothers will also get more time off, with 45 days of full pay and 15 days of half pay.”

Fathers are permitted five days’ paid leave across all emirates.

Is there anything else you need to be aware of?

Non-compete clauses can now be written into a contract, allowing an employer to prevent a former employee from competing against them or participating in a competing project in the same sector.

In another change, teenagers aged 15 and above can now work after obtaining written approval from their parents and a medical fitness report. They should not, however, be hired to do risky jobs or work later than 7pm. They must also work no longer than six hours each day, inclusive of a one-hour break.

The changes, introduced by Federal Decree-Law No 33 of 2021, were issued by President Sheikh Khalifa in November.

Who do these new laws apply to?

Those working in the private sector only but not including domestic workers.

“All private sector employees and employers in the UAE, onshore and in the free zones, are subject to the new law, except for those in the DIFC and ADGM, which have their own employment legislation,” Dr Elhais said.

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”