With the pace of change in the UAE continuing to accelerate, the UAE authorities announced in July 2023, via Twitter, an expansion to the categories of companies that are subject to the Emiratisation quota requirements. This latest development further evidences the country’s commitment to increasing the numbers of UAE national employees employed in the private sector.
The law supporting the announcement is not yet officially available so this article sets out what we understand to be the case so far. Accordingly, the requirements may be subject to change.
Currently, companies regulated by the Ministry of Human Resources and Emiratization (MOHRE) and employing at least 50 employees are obligated to increase the number of UAE nationals under their employment at the rate of 2% per year.
However, according to the announcement, companies that meet the following criteria will be required to hire one Emirati national before 31 December 2024, and an additional Emirati national before 31 December 2025:
- Companies that employ between 20-49 employees; and
- engage in any of the following activities:
- Information and Communications
- Financial and Insurance activities
- Property / Real Estate
- Scientific and Technical activities
- Administrative and Support Services activities
- Human and Health and Social Work
- Arts and Entertainment
- Mining and Quarrying
- Transformational industries
- Wholesale and retail trade
- Transportation and storage / warehousing
- Accommodation and Hospitality service activities
Failure to meet the requirements by the target deadlines will result in penalties of AED 96,000 for the year 2024, and AED 108,000 for the year 2025 being applied – clearly demonstrating that this is a law with teeth. Further, based on previous practice, it is to be expected that a block on a non-compliant company’s MOHRE portal would be imposed at the same time as the fine.
Although an employer may be tempted to take measures to avoid payment of the fines should they not fulfil the quota, employers should be mindful that any attempt to circumvent the Emiratisation requirements risks penalties being imposed. This would include “reducing the numbers” of employees under employment (e.g., by transferring a number of employees from one entity into another) or reclassifying workers from skilled to unskilled. Fines start at AED 100,000 increasing to AED 500,000 for a third offense.
Many details about the new requirements are currently unknown – including whether the new requirements apply to all companies operating in the above sectors or whether only certain companies in these industries will be targeted. However, in order to avoid fines and penalties, it is imperative that companies in the UAE monitor the situation and keep up to date with developments and new information as and when available. Companies need to determine whether they are caught (or are likely to be caught) by the new regime.
Companies should also consider registering with Nafis in order to facilitate recruitment efforts and benefit (and ensure any newly hired Emirati employee benefits) from the suite of government incentives on offer including salary top up payments, additional allowances and pension contribution assistance.
To speak with us in relation to Emiratisation or other employment law matters or issues more generally, please contact one of the team members.
We also take the opportunity to note that Baker McKenzie operates a regional employment law practice and is able to draw on experience of our specialist employment law practitioners across the Middle East and Africa.