UAE Labour Market Reform: A New Platform for 2016

- Written by Ivor McGettigan, Partner at Al Tamimi & Co.

The Minister of Labour introduced some important changes to the UAE labour regulations by means of three decrees issued on 27 September 2015. The thrust of the changes, which come into effect on 1^st January 2016, is to provide for a more flexible work environment for employees.

This article examines the main aspects of the new regulations.

Introduction of Offer Letter

Ministerial Decree 764 of 2015 provides that Ministry of Labour (“MOL”) approval to admit a non-national employee (i.e. the first step in obtaining an entry permit to enter the UAE and obtain a residency visa) will not be granted until an employment offer is signed by the employee and lodged with the MOL prior to arrival/commencement.

It is our understanding that the MOL will issue a template offer letter (“Offer Letter”) to be used for these purposes and that the existing standard MOL labour contract (“MOL Contract”) will not be modified.

The entry visa will not be issued to the employee until the Offer Letter is signed by the employee and submitted to the MOL and thereafter the MOL Contract will have to match the Offer Letter.

Termination

The second decree (765 of 2015) deals with termination of employment.

The main points to note are as follows with the existing position in brackets for comparison purposes:

Item	Fixed term contract	Unlimited term contract
Maximum duration	2 years (4 years)	N/A
Notice period	1-3 months (none required)	1-3 months (1 month minimum, no maximum)
Compensation for early termination of fixed term contract	As agreed between the parties but not more than 3 months’ salary where employer terminates, 1.5 months where employee terminates.   (Employer is liable to pay compensation to employee equal to three months salary or for the remaining period of contract whichever is shorter; employee is liable to pay half the amount that employer would have to pay)	N/A

In all cases termination is allowed by mutual consent, where the contract period expires or where one party fundamentally breaches the contract.

Work Permits/Labour bans

Ministerial Decree 766 of 2015 sets out new rules on work permits with resultant easing of labour bans. A new work permit will be issued (and hence no labour ban arises) in various circumstances of termination. The changes provide for a more fluid labour market and greater employee mobility.