The UAE government has recently introduced a significant number of laws (particularly Ministerial Decision No. 279 of 2022) and measures to support the localization of the workforce and to ensure a labour market in the UAE that empowers Emiratis (nationals) and attracts talents from around the world through increasing the Emiratisation rate in the private sector by 2% annually, in respect of skilled jobs within private sector companies. These measures aims to reach a rate of 10% by 2026.
The new Emiratisation Laws are only applicable to (i) UAE nationals employed from September 2021 (ii) employers with more than 50 employees, and (iii) companies registered with the Ministry of Human Resources and Emiratisation (MOHRE). Therefore companies established and operating within free zones are exempted from this requirement
The deadline for compliance with the new Emiratisation Resolution is 1 January 2023.
Penalties for non- compliance:
From January 2023 non-compliant companies will be fined AED 6,000 per month in respect of each Emirati employee not hired.
Fines will be increased annually by AED 1,000 per month.
MOHRE may suspend the issuance and renewal of work permits for employers who do not pay prescribed fines.
Non-payment of the penalty for two months after the due date would result in suspension of the labour file for the offending employer and for all other entities wholly owned by the same proprietors.
Classification of Companies
According to the Cabinet Resolution 18 of 2022 on the classification of Private Sector Establishments (Classification Resolution) issued in March 2022, the companies are classified into three categories: first, second and third.
The first category will cover companies and establishments that commit to the laws and decisions that regulate the labour market, while fulfilling all required general obligations. They must also meet at least one of the following criteria: (i) raising their Emiratisation rate at least three times above the target, (ii) cooperating with the ‘Nafis’ program to train at least 500 citizens annually, (iii) being a venture owned by a young citizen according to approved standards, or (iv) being one of the training and employment centres that support implementing the Workforce Planning Policy by promoting cultural diversity in the UAE.
The second category will cover companies that commit to general standards, laws and regulations, and to the UAE’s policy on promoting cultural and demographic diversity, or operating within the targeted sectors and activities determined by the Council of Ministers based on the Minister of Human Resources and Emiratisation’s proposal. Companies that do not meet any of these criteria, while complying with the laws and the UAE’s policy on promoting cultural and demographic diversity, will be automatically classified in the second category.
The third category will cover companies that are not compliant with the Labour Law and its implementing regulations.
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, an employer in the first category is charged a fee of AED 150 for the issuance or renewal of a labour permit.
The fees for work permit applications shall range from AED 250 to AED 1,000 for second-category companies, while the fee increases to AED 2,500 for the third-category companies.
As a result, all companies should have now a vision and a plan to organise its structure in a way that complies with the Emiratisation rate increase and the new classification system in order to avoid any penalties or downgrading of category status.
Should you have any question regarding the mentioned above, please do not hesitate to contact us at [email protected].
Disclaimer: This publication is for informational purposes only and does not provide any legal advice.