The UAE’s recent overhaul of its federal employment law and the Dubai International Financial Centre (DIFC)‘s various legislative changes cast a transformative light on the nation’s labour landscape.
I. Federal law
Amendments in employment dispute resolution
The UAE Labour Law amendments, effective from January 1, 2024, introduce a streamlined process for resolving individual labour disputes involving claims up to AED 50,000. The Ministry of Human Resources and Emiratisation (MOHRE) will now adjudicate these disputes, issuing decisions with the same enforceability as a first instance court judgment. While parties can appeal MOHRE’s decisions within a 15-day window, this mechanism primarily applies to onshore companies and employees, offering a more efficient dispute resolution pathway.
New Gratuity Scheme
The UAE has unveiled a progressive voluntary scheme designed to transform the traditional end-of-service gratuity system for employees. This initiative is a strategic move to safeguard employees’ end-of-service benefits against economic fluctuations such as inflation and the risks of employer insolvency and bankruptcy. It offers a structured investment plan for gratuities and provides employees with a viable savings mechanism. Under this innovative approach, private sector employers—excluding those in the DIFC and ADGM zones—are given an option to contribute monthly towards their employees’ end-of-service benefits through a licensed investment fund. This method departs from the conventional lump-sum payment. Employers are mandated to adhere to specific requirements concerning fund selection and the dissemination of information to both the participating fund and the employees covered by the scheme.
Unemployment Insurance Scheme
In a pioneering move demonstrating its forward-thinking welfare policies, the UAE has rolled out an unemployment insurance scheme. This initiative offers a safety net to employees, ensuring they receive up to 60% of their last drawn salary for three months in case of job loss. It’s a bold step towards providing financial security and peace of mind to the workforce, reinforcing the UAE’s position as a nurturing and employee-centric labour market.
Anti-discrimination law
The UAE Labour Law marks a significant advancement in the legal framework by criminalising discrimination, hatred, and extremism. This law enforces a zero-tolerance policy towards actions or speech that disrespects religions, promotes hate speech, or incites discrimination based on religion, belief, race, gender, or ethnic origin. Applicable across the UAE, including free zones, the law underscores the importance of maintaining a respectful and inclusive environment, with severe penalties for violations ranging from imprisonment to hefty fines.
II. DIFC employment law
Addressing imbalances in pension contributions
A crucial Amendment Law mandates DIFC employers to make “top-up” payments into a Qualifying Scheme for their GCC national employees. This additional contribution, alongside existing General Pension And Social Security Authority (GPSSA) contributions, is essential when GPSSA contributions fall below the monthly end-of-service contributions under the Employment Law for non-GCC national employees. This measure ensures parity in end-of-service benefits for GCC nationals.
Equalising pension contributions
Earlier, DIFC employers were not obligated to make monthly contributions into a Qualifying Scheme for UAE or GCC national employees registered with the GPSSA. This led to imbalances, with these employees receiving lower pension contributions due to statutory caps. The Amendment Law now mandates top-up payments for eligible UAE/GCC national employees, guaranteeing that they receive their full entitled benefits, with contributions set at a minimum of AED 1,000.
Gratuity payments for sanctioned individuals
The Amendment Law also addresses scenarios where employers are unable to contribute to a Qualifying Scheme for employees or where employees cannot receive contributions due to being designated as Sanctioned Persons. A ‘Sanctioned Person’ includes those listed on sanctions lists by the United Nations Security Council or the UAE Federal Cabinet. In such cases, employers must accrue end-of-service gratuity for affected employees until they are no longer designated as such or until their termination date. Employers must then transfer any accrued gratuity payment to a Qualifying Scheme or directly to the employee. Employers are not responsible for any profit or loss in the Qualifying Scheme due to this accrual.
Compliance and consequences
Employers must ensure timely payment of core benefits to a Qualifying Scheme on behalf of employees by the 21st day of the following calendar month. Failure to do so may result in a fine of USD 2,000 and a breach of the amended law.
Conclusion
These legislative advancements reflect the UAE’s commitment to enhancing its labour laws and societal norms. By fostering a more secure, flexible, and inclusive work environment, the UAE continues to position itself as a leading destination for global talent and investment. Employers and employees alike must acquaint themselves with these changes to leverage the benefits and ensure compliance with the new legal standards.
By Ahmad Al-Khalil, a partner at Crimson Legal.
