Increasing the number of UAE nationals in the private sector has long been a key objective for the government. In the past, the UAE government has launched a significant number of laws and initiatives to support the localisation of the workforce. The government has recently increased its efforts in this regard and introduced a suite of new laws, including an obligation to recruit Emirati employees at the rate of 2% per year, to drive forward its Emiratisation policy.
This client alert answers frequently asked questions on the key aspects of the new laws.
It is important that employers in the private sector are fully aware of the implications of the new legislation. Marking a shift in approach, these laws (particularly Ministerial Decision No. 279 of 2022) are expected to significantly impact businesses’ recruitment and organisational policies.
What has changed?
The following key legislation have been introduced:
- Ministerial Decision No. 279 of 2022 – Emiratisation in the private sector (2% Emiratisation Law);
- Cabinet Decision No. 18 of 2022 (Classification Law); and
- New rules governing benefits under the Nafis scheme.
Which businesses do these new laws apply to?
The new Emiratisation laws are only applicable to those companies registered with the Ministry of Human Resources and Emiratisation (MOHRE).
These laws do not apply to businesses based in free zones.
What are the requirements of the 2% Emiratisation Law?
All employers with more than 50 employees must recruit UAE nationals at the rate of 2% per year.
The Emiratisation rate is to be calculated as follows, with reference to the number of skilled workers in the company, and with one national employee to be hired for every 50 skilled workers:
- 0–50 skilled workers – minimum target is one national employee;
- 51–100 skilled workers – minimum target is two nationals;
- 101–150 skilled workers – minimum target is three nationals; and
- more than 151 workers – one national for every 50 workers (or less than 50).
The aim is to ensure that Emiratis make up 10% of the workforce by 2026.
As per MOHRE, skilled workers are defined as any employees that:
- fall into one of the following five categories of workers:
○ legislators, managers, and business executives;
○ professionals in scientific, technical and human fields;
○ technicians in scientific, technical and humanitarian fields;
○ writing professionals; and
○ service and sales occupations;
- have obtained a certificate higher than the secondary (high school) certificate or equivalent;
- have a worker’s certificate, which must be attested by the competent authorities; or
- have a worker’s monthly salary that is no less than AED 4,000.
What are the penalties for non-compliance?
Companies will be fined at least AED 6,000 per month in respect of each Emirati employee not hired. Fines will start to be issued from 1 January 2023 (with failure to pay likely to result in suspension of the company’s ability to apply for work permits). Fines will be increased on an annual basis.
Failure to comply with Emiratisation quotas for two consecutive years will result in the company being demoted to the third category under the Classification Law (for further details please see below). The added financial (and potential reputational) implications will likely discourage employers from being complacent with regards to hiring UAE national employees.
The authorities have been vocal about their intention to pursue those companies that do not comply. Therefore, all indications point to this law being actively enforced.
What does the Classification Law require?
No positive actions are required. However, businesses should be aware of the implications of their particular classification.
How is the Classification Law relevant to Emiratisation?
Companies that employ more local nationals are classified in the higher categories and are eligible for certain benefits.
How are companies classified?
Under the Classification Law, companies are classified into three key categories: first, second and third.
Classification of a particular company will depend on a number of different factors, including Emiratisation, general labour law compliance and promotion of workforce diversity.
What are the characteristics of companies that fall within each category?
Companies in the first category should demonstrate full compliance with:
- Decree Law No. 33 of 2021 (UAE Labour Law) and its executive implementing regulations;
- labour-related resolutions and decisions; and
- the wage protection system.
In addition, a company classified in the first category must meet one of a number of additional criteria. Such criteria includes (but is not limited to):
- recruiting national employees at a rate of at least three times the target Emiratisation quota;
- cooperating with Nafis (for further details please see below) to hire and train at least 500 citizens per year; or
- being a small or medium establishment that is run by young citizens.
Companies in the second category should demonstrate full compliance with the UAE Labour Law and its executive regulations together with supplementary resolutions and decisions, in addition to promoting a diverse cultural and demographic workforce.
Companies fall into the third category if they:
- are not compliant with the UAE Labour Law, its executive regulations or supplementary resolutions and decisions;
- do not promote demographic and cultural diversity; or
- commit certain violations, such as faking Emiratisation quotas or recruiting employee without the correct work permits in place.
Why do these categories matter?
The category into which a company is placed will significantly impact the fees payable to the MOHRE when applying for work permits. According to the MOHRE, fees for work permit applications shall range from AED 250 Emirati for first-category employers to AED 3,450 for third-category companies.
In addition to the financial considerations, there is some stigma attached to being placed in the third category, which may potentially impact a company’s reputation in the market, as it indicates that the company has not been compliant with its legal obligations.
Does the Classification Law raise any other points for consideration?
The Classification Law also requires a company to pay a bank guarantee of AED 3,000 for each worker or to insure each worker, in accordance with an insurance mechanism approved by the MOHRE.
What is Nafis?
The Nafis programme aims to support Emirati nationals in developing their professional careers in the private sector. Nafis offers a number of advantages to those employers and employees that register. These benefits include:
- reduced employer pension contributions for UAE nationals;
- career counselling and apprentice programmes;
- child support for UAE nationals of at least AED 800 per child per month;
- financial support for those UAE nationals participating in training programmes, with remuneration packages ranging from AED 4,000 to AED 8,000 per month;
- a salary support scheme for UAE nationals who work in the private sector, which ranges from AED 3,000 to AED 5,000 per month; and
- financial support for Emirati employees who lose their jobs.
Companies and employees can enrol with Nafis on the Nafis website.
Nafis also operates a recruitment portal with the objective of connecting job seekers with companies. However, unlike the previous MOHRE-operated Tawteen scheme, it is not mandatory for employers to use this portal.
What are the penalties for not registering with Nafis?
There are none. While participation is encouraged, it is a voluntary scheme.
To speak to us in relation to the new Emiratisation laws, employment and compensation related matters, or issues generally, please reach out to one of the Baker McKenzie contacts below.