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The UAE Has Been Using New Labor Law to its Advantage!

New Labor Law

The UAE has been implementing a new labor law that will provide greater protections for workers. The law will require companies to provide employees with contracts that specify their rights and duties, as well as their compensation. It will also allow workers to file complaints against their employers if they feel that their rights have been violated. The law is expected to improve working conditions in the UAE and help to prevent the exploitation of workers.

The New Law has a Big Influence on UAE Businesses

Companies must audit their contracts and other agreements to ensure they are in line with new rules. UAE businesses will have to make changes to their policies and practices in order to comply with the new law. This may include providing employees with contracts that specify their rights and duties, as well as their compensation. The law is expected to improve working conditions in the UAE and help to prevent the exploitation of workers.

According to the new labor law, the amount of gratuity to be paid to an employee’s salary is determined by the following factors:

If an employee has worked for one year but less than five years, he is entitled to full gratuity pay based on 21 days’ salary per year of service. An employee who has worked for more than five years is entitled to a full month’s pay for each year of service after the first five years.

Fixed-Term Contracts of Three Years

Employees may be required to agree to a maximum three-year fixed-term employment contract for the duration of their service. It may be renewed or extended for identical or lesser periods at the employer’s discretion, on several occasions (on numerous occasions).

If the contract isn’t renewed or extended, but the parties continue to operate as though it were, the contract is considered renewed on the same terms and conditions as previously agreed upon. An employee’s continuous service is taken into account if they are extended or renewed (for the purpose of end-of-service gratuity or otherwise).

According to the new labor law, following the Effective Date, all terms offered by employers to workers on unlimited term contracts will automatically be updated. Within one year after the Effective Date, employers must convert unlimited term contracts into fixed-term ones (i.e., by 1 February 2023).

Employees currently working under an unlimited duration contract may be dismissed for a just cause (see the “Contract Termination” section below on what constitutes a ‘legitimate reason’) and must give at least the following minimum notice periods:

  • 30 days if the employee’s period of service is less than 5 years
  • 60 days if the employee’s period of service is more than 5 years; and
  • 90 days if the period of service is more than 10 years

While the new labor laws may be in place to protect workers, companies must still abide by them. If you are found guilty of breaking these rules, there may be fines of up to 1 million dirhams or more! Make sure you are aware of the labor laws and what they entail so that you can stay compliant and avoid any costly fines.

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No termination benefits reduction rules exist for quitting employees, therefore they are entitled to a full end of service gratuity payment (as long as they have completed at least one complete year of service). Furthermore, criteria for other pensions/savings plans are not replicated, and it’s unclear if MOHRE will accept such arrangements – especially given that an arrangement is already in place at the Effective Date.

New labor law states, that except for the first week of service, all end-of-service benefits must be paid within 14 days after the termination date. A fine of between AED 5,000 and AED 1,000,000 may be imposed if you do not follow through (with a possible multiplier effect for the number of employees affected by the breach). However, if the employee does not fulfill the 90-day deadline, he or she is not entitled to any money.

Employees are protected from workplace discrimination and, in particular, from being treated differently because of their race, color, sex, religion, origin, national origin, or social origin. They are also prohibited from discriminating against employees who may be disadvantaged by such prejudices affecting equal chances for employment or the employee’s ability to obtain and maintain employment. While pregnancy and/or maternity leave aren’t explicitly mentioned, employers are not permitted to fire (or intimidate) a worker because she is pregnant or on maternity leave. There is also a requirement that workers be paid equally for the same work regardless of gender, as mandated by the New labor law.

Wrap Up: The new labor law in the UAE provides greater protection for workers, including those on fixed-term contracts. Companies must ensure that they are compliant with the law to avoid any costly fines. Employees are also protected from discrimination and pregnancy-related termination. Finally, all end-of-service benefits must be paid within 14 days of the termination date. Thank you for reading.

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