The way things work in the job market have changed significantly after the UAE government has amended its labor law, removing the cap of three years on fixed-term employment contracts.
The UAE government has taken intense action in response to growing concerns from both employers and workers that the insecurity of a fixed-term contract makes it more challenging for UAE companies to attract and retain top personnel.
This contradicted the predictability of the UAE labor market that resulted from the introduction of long-term resident and work visa alternatives, says Ben Brown, Partner at Addleshaw Goddard law firm.
Updated UAE labor laws
The current status under UAE Labor Laws is as follows:
- The parties may agree upon the duration of employment.
- Either party must provide the other with written notice of termination between 30 and 90 days in length (as agreed in the contract).
To comply with the new UAE labor laws, many firms have already handed three-year fixed-term employment contracts to their employees.
The two main options for businesses are to terminate all current employment contracts and make new ones for a long time or wait until the current contracts expire and then renew them, mentioning a period.
At the same time, it should be noted that implementing the new UAE Labor Law requires all employees to be transferred to fixed-term contracts by February 2023.
Who benefits?
Both employers and employees stand to benefit from the UAE’s recent labor law amendments, according to Brown, as follows:
- Removal of cap on fixed-term employment contract – Employees will be more reassured that their employment contract will not expire after a short period, which will help employers recruit talent from abroad.
- Unemployment insurance scheme – Employees will have a financial safety net if they lose their job, giving them financial support while searching for new employment.
- Emiratization – The quotas will facilitate UAE nationals obtaining jobs in the private sector while encouraging employers to recruit from the local population, which should ultimately be cheaper than hiring and relocating talent abroad.
What’s still needed?
Despite the rising governmental efforts to develop laws supporting businesses and growing economies, much is still needed to achieve better results.
Brown explained: “The UAE needs to develop its existing unfunded cash end-of-service gratuity system to allow companies and their employees to accrue and invest end-of-service gratuity in a safer and more economically beneficial way.”
Labor laws across the GCC are very similar. That’s why firms and their employees can benefit from a safer and more financially stable end-of-service gratuity system if some laws can be developed.
Corresponding GCC labor laws with other regions of the world like the US or Europe, Brown sees that it is impossible to compare in terms of what’s positive or negative.
Brown ended the interview by clarifying: “This has advantages and disadvantages – it means that there are often laws and regulations to deal with all the many cases and scenarios that arise in an employment context.”
Yet, on the flip side, highly regulated labor markets make doing business more difficult and costly for most companies.