Sponsorship practices merit rethink: minister

The system is here to stay, according to the labour chief Saqr Ghobash, but analyst says concerns such as non-compete clauses, pay inequality and productivity stagnation should be addressed.

DUBAI // The legal system of sponsorship is here to stay, according to the Minister of Labour, but practices associated with it could do with reform.

Expatriates employed in the UAE must be sponsored by their company to work - apart from those working in free zones, who are sponsored by their respective authorities.  Speaking at a labour conference in Dubai yesterday, the minister Saqr Ghobash said the system needed to be examined.

"We have to distinguish between the sponsorship system as a legal system and the practices associated with it," he said. "We need to stop talking about abolishing the sponsorship system as a legal system and direct the discussions towards the practices associated with it."

Mr Ghobash also noted a relation between the existing practices of sponsorship and Emiratisation efforts. He said the sponsorship system might allow employers to keep salaries low, meaning Emiratis were not able to compete in the market.

The one-day workshop was organised by the Ministry of Labour in cooperation with the Dubai Economic Council to discuss wages and the cost of workers, including the bill for the Government, which is calculated to be about Dh50 billion per year in terms of infrastructure and other services provided.

The conference highlighted the importance of moving away from a labour market saturated by unskilled labour as part of a drive to create a knowledge economy reliant on skilled labour. Currently, 80 per cent of the workforce is unskilled.

Rosalia Vazquez-Alvarez, an economic adviser at the Dubai Economic Council, presented these findings and others from a survey conducted in 2009 to determine the salaries and education levels of various groups of workers in the country, including Emiratis.

Ms Vazquez-Alvarez said the sponsorship system was excellent for attracting talent to the country, but the policies that followed - including ones that discouraged worker mobility - led to stagnation and discouraged workers from learning or furthering their education.

Among practices associated with the sponsorship system is the No Objection Certificate (NOC). The NOC is required by the Ministry of Labour from any employee who seeks to move on to another job before completing three years with a firm.

The employee must get the sponsor's approval to do so in the form of a NOC. Some employers use the NOC as a bargaining tool to force the employee to give up their end-of-service benefits - a practice which is against UAE labour law.

Other companies continue to hold their employees' passports, despite clear messages from the Government that this is illegal. Apart from legal issues surrounding the system, Ms Vazquez-Alvarez said the sponsorship system might discourage expatriate workers from pursuing professional development.

"If you sponsor someone, their salary is tied to their contract," she said. "Why spend more money learning new skills? You end up going back home and remaining just as you were when you arrived."

The study also revealed huge gaps in earnings between Emirati men and women, even though Emirati women, on average, tended to have two years more education than their male colleagues.

Discrepancies also exist between the pay of workers from western countries as compared with those from the other parts of the Middle East and Asian countries, the survey found.

Emiratis who work in the same profession as workers from the GCC or the West with the same level of education earned slightly higher salaries, she said.

And while wages increased for workers from Asian countries and the Middle East and North Africa (Mena) region after secondary education, it did not peak as high as it did for those from western countries, GCC countries or Emiratis.

For example, she said, those with PhDs from the Mena region earned one-third less than their western expatriate counterparts. She attributed this to the seeming difficulty of Mena workers to move between companies.

"They are immobile or they don't have the information to be mobile," Ms Vazquez-Alvarez said. "The information channels are not there to increase mobility."