Development of innovative employment structures in the UAE

Friday 7 October 2022

Charles Laubach
Afridi & Angell, Dubai, United Arab Emirates

Throughout 2010 to 2019, the United Arab Emirates edged towards a reform of its employment sector. The Covid-19 crisis presented an opportunity – indeed, a necessity – for accelerating the pace, with the introduction of new workplace rules in order for companies to retain talent in their workforce.

The stakes could not have been higher. The UAE’s airports closed to inbound passenger traffic (except for returning citizens) in March 2020. Revenue for most businesses dropped precipitously. Lockdowns were implemented, along with frequent testing, quarantining and social distancing. The duration was uncertain. Equally uncertain was whether the many expatriates living in the UAE, who make up 80 per cent of the workforce, would ride out the crisis in the UAE or would alternatively avail of the first chance to return to their home countries, which in turn would substantially delay and complicate any possible economic recovery.

Many of the UAE’s neighbouring countries saw a significant decrease in population during the Covid-19 crisis, largely due to the exodus of its foreign workforce. However, the UAE saw a modest increase in population. As a result, the UAE was able to rebound quickly from the crisis once the pandemic came under control.

Many actions taken by the UAE authorities contributed to this successful outcome, with the most important being the early and affordable availability of testing and vaccines. In the banking sector, significant easing of requirements for loan provisions averted mass defaults on debts. Many government fees were temporarily waived or reduced, easing the burden on residents.

In the employment sector, early measures enabled employers to maintain headcount while managing payroll obligations. Many business premises closed or were subject to occupancy restrictions, compelling employees to work from home. Restrictions on Voice over Internet Protocol applications and virtual private networks (VPNs) were relaxed, which facilitated remote working.

The scope and pace of change in the employment sector can be best illustrated by comparing 2019 with 2022. In 2019, the large foreign workforce in the UAE worked in a system that tied residence to employment. An employer would sponsor a labour permit and a residence visa for an employee, on the strength of which the employee could then sponsor residence visas for their dependent family members. There were very limited categories of visas that were independent of this arrangement, primarily for real estate and business owners.

Employees worked at their employer’s premises. With the exception of sales personnel, the vast majority of an employer’s workforce reported to work in the office in the morning, where they stayed until the end of working hours in the afternoon/evening. Working from home or working remotely was done only by senior executives, and then primarily after hours, on weekends or during business travel.

The use of data connections for voice and video conferences was largely prohibited, unless done via one of the two licensed telecoms providers in the UAE. The use of VPNs was likewise restricted. This hindered remote working on a large scale.

The pandemic meant that the old restrictions had to give way to more flexible arrangements. Employers not only permitted but encouraged employees to work from home, made possible by the newly flexible telecoms policies. Layoffs were avoided (or used as a last resort) in favour of temporary reductions in compensation or temporary unpaid leave. The Ministry of Human Resources & Emiratisation (MOHRE) introduced procedures for the proper implementation of these measures for the duration of the emergency situation.

In 2022, the labour market is fundamentally different from three years earlier. Many employees work from home. In fact, a growing number of employees do not even reside in the UAE, but instead work remotely from other locations. Even the reverse has occurred, whereby a person can work in the UAE for an employer that has no local presence. This new category of ‘remote work’ visa has been especially attractive for a globally mobile workforce.

More and more employees hold part-time or freelancer visas that allow them to work for multiple employers, either seriatim or simultaneously. The new law, which took effect in early 2022, permits these kinds of arrangements on a non-exceptional basis for the first time. The new law also contains specific rules governing the calculation of entitlements for part-time and temporary employees.

Finally, more and more individuals in the UAE are able to qualify for special categories of visas that do not require them to have employment in the UAE. In addition to visas for real estate and business owners, there are Golden visas (valid for ten years), Green visas (valid for five years) and several other types of visas that do not require sponsorship by an employer. An employee holding such a visa need not leave the country between jobs, and an employer seeking to hire in the local market may find that the onboarding of employees is significantly less burdensome than it was previously. New categories of work permits have been introduced to accommodate employees who hold these new categories of visas.

In a development unrelated to the pandemic, the UAE also changed the workweek. In 2019, the official workweek was Saturday through Thursday, with Friday designated as the mandatory weekly day of rest (nevertheless, many employers were closed on Saturday as well). The new law no longer mandates that Friday be the day of rest. Many employers have accordingly switched to the Saturday–Sunday weekend followed in the Western world, a change that has also been made by the UAE public sector.

Other features of the new law remain largely prescriptive. Employers and employees must use a standard form of employment contract promulgated by the MOHRE. Labour grievances are not dealt with by collective bargaining or concerted labour action; instead, they are handled by a labour grievances section in the MOHRE. MOHRE inspectors conduct frequent visits to employer premises to ensure compliance with the requirements of the new law, including the obligation to pay payroll on time. The next round of changes is expected to address termination benefits. Currently, the employer makes a lump sum payment to a departing employee, which could be replaced by savings, investment or stock plans. The new law enables these features to be addressed by Cabinet Resolution in lieu of legislation. The overall objective is to make the UAE an attractive destination for talent, therefore further action towards this purpose may be expected.