Employment LawEssentials

’HR PractitionerPerspective’

Saliha LatifHead of HR

CONTENTS:Legal Set-up UAE License

3Legal Set-up UAE License

3Employment Contracts

9Employment Contracts

9Termination of Employment & Gratuity

13Termination of Employment & Gratuity

13Employee Relations

25Employee Relations

25Questions

39Questions

39

LEGAL SET-UP UAE

• Licenses

• Partnership Ownership• Sole Ownership

• Visa Regulations• Fines

Commercial License• Issued to a company that will engage in any

kind of trading activity

Industrial License• Issued to a company that will engage in

manufacturing or any industrial activity

Professional License• Issued to service providers, professionals,

artisans, and craftsmen

LICENSES

PARTNER OWNERSHIP1. Public and Private Shareholding Companies• Banking, insurance, and financial activities• Must have chairman and majority of directors UAE

nationals

2. Joint Venture• A contract agreement between a UAE party and a

foreign party for the engagement in a desiredbusiness

3. Limited Liability Companies (LLC)• 2 – 50+ employees

SOLE OWNERSHIP

• FZCO start up or establish branch / representativeoffice

• Example IT – Dubai Internet City, DMC• DIFC minimum capital requirement ranging from

AED 50,000 to AED 1,000,000 depending upon theselected Free Zone

Or:• Can have company set-up and power of attorney

to state sole ownership with you and local –sleeping/ silent partner

VISA REGULATIONS

• To work in the UAE, all employees must havevalid visa before commencing employment

• An employee must be medically fit to acquireemployment visa / residency visa

• All visa cost must be shouldered by the employer• Emirates ID needs to be arranged through EIA

and paid by the employee• Certain professions require attested documents

such as degree/ diploma

FINES – MINISTRY OF LABOUR(MOL)

Description Penalty / FineLabour card delays pre- 60 days AED, 1,000Mission Labour card (temporary assigneesmaximum 3 months)

AED 100 daily

Fake Emiratisation targets AED 20,000Incorrect information entered into wageprotection system (WPS)

AED 20,000

Delay of employee salary pre 60 days AED 5,000 per employeemultiple workers AED 50,000

Fake signed receipts slips AED 5,000maximum limit multipleworkers AED 50,000

Poor Labour accommodation not in linewith MOL standards

AED 20,000

Mis-use of company visa and no salary fortwo months

AED 20,000 (in cases whereemployee not working)

THE EMPLOYMENT CONTRACT:

• Limited• Un-limited• Internal

Limited VS Un-limited?

Limited Contract Unlimited Contract

• Has commencementand expiry date set

• Term cannot exceed 4years

• Can be renewed onmutual consent for asimilar or reducedperiod

• Employment willterminate at end ofperiod

• Penalty for bothparties if contractterminated early

• Contract will statecommencement date but noexpiry

• Contract will be considered"unlimited" if verballyconfirmed or if it is not for aspecified period or it hadbeen for a specified periodand the parties continue toact on terms & conditionsafter expiry

• Contract may be terminatedby mutual agreementproviding 30 days notice

Internal Employment Contract

• A much more detailed internal contract (tocover policies and procedures, code ofconduct, ethics benefits etc)

Points to Cover:

• Date, title, type of contract,• Compensation package & Benefits• Company conduct, ethical standards• Summary of key policies and procedures (or add

paragraph to refer to such)• Non-Competition/ solicitation clause• Termination covenants• Role profile and other relevant documents can be

included as appendix

INTERNAL EMPLOYMENTCONTRACT

WHEN TO TERMINATE?

Both can decide mutually to move ahead – inwriting providing notice

Un-limited contract notice from either party Expiry of fixed term (limited) contract If probation extended and not satisfactory – not

exceeding six months Sickness, disciplinary or other employee relation

matters (following UAE Law and procedures)

TERMINATION OF LIMITEDCONTRACT

• Provide notice in advance to inform employee ofexpiry – either extend or terminate

• If decide to terminate in advance must providenotice and valid reason

• 3 months notice pay or remainder of contractperiod to be paid (whichever lower)

• Employee entitled to gratuity• If employee resigns before expiry, liable to pay

employer 45 days salary – no gratuity

TERMINATION OF UN- LIMITEDCONTRACT

In accordance with UAE Labour Law:

• 30 days notice must be provided in writing• Notice can be waived if both agree or paid in lieu• If employee has more than one year service

entitled to end of service gratuity• Annual Leave until last day must be calculated in

settlement and any expenses

ARTICLE 120 GROSSMISCONDUCT

• An employee can be terminated without notice ifan act of Gross Misconducted is committed

• No notice or gratuityExamples: Fraud, theft, bribery or financial loss Drunk, physical assault, abusive Absent without legitimate reason Fails to adhere to management instructions

despite previous warnings

EMPLOYEE’s RIGHT

• Employees may terminate the employmentcontact without notice in accordance with Article121

• The employee will be entitled to compensation ifthe termination of the contract had been for anunjustified cause

• Court may award employee damages, against theemployer, not to exceed three months wages

• The compensation for damages awarded to theemployee for unreasonable dismissal, will bewithout prejudice to the employee's entitlementof gratuity and payments in lieu of notice, ifnotice had not been provided

END OF SERVICE - GRATUITY

• Statutory right of employee after completing oneyear service

• Calculated on last basic salary only• Free zone and LLC Contracts differ in calculation

UN-LIMITED CONTRACT -Gratuity

Resignation : 1-3 years = entitled to one third of the

severance pay 3-5 years = two thirds of the severance pay if

continuous service exceeds three years up to fiveyears

5+ years = full severance payTermination:• 21 days' wage for each of the first five years of

service• 30 days’ wage for each additional year of service

provided severance pay should not exceed twoyear's wage

UN-LIMITED CONTRACT-GRATUITY

Resignation Termination

Service range Service range

Serviceyears

< 1 and< 3

> 3 and< 5

> 5< 1 and

> 3

> 3and< 5

> 5

1 7 14 21 21 21 212 7 14 21 21 21 213 7 14 21 21 21 214 14 21 21 215 14 21 21 30

6 & up 21 21 30 21 21 30

LIMITED CONTRACT GRATUITY

• 21 Days multiplied by the number of service years• Same applies to most FZCO companies and both pay

21 days irrelevant of resignation of termination

REPATRIATION

• If employment contract terminated companymust provide one-way return air-fare

• If employee finds suitable work elsewhere thenrepatriation cost not included and employeeshould provide company new labour approval(after visa cancelled)

• Applicable only if included in contract forresignation –otherwise not applicable

LABOUR CLAIMS

• Employees can raise complaint with MOL who willmediate between both parties

• If no amicable settlement then can be timely andcostly court case

• Company liable to pay court fees• Written evidence will be considered• Appoint Arabic speaking legal advocate

• Sickness• Performance management• Handling Grievance• Dealing with Bullying at

work• Disciplinary

EMPLOYEE RELATIONS

SICKNESS

• As per UAE Law employees entitled to 15 daysper year

• No sick pay during probation• Create internal sickness policy and ensure all

employees are aware of such• Two days absence request medical certificate• Consistent absence /pattern – follow informal

route then formal, ensure confirmed in writing• If no improvement's despite previous

adjustment's/ warnings issue notice to terminate

PERFORMANCE MANAGEMENT

• Job profile provided at onset, bi- yearlyperformance reviews with clear measurabletargets (SMART)

• Hold regular 1:1 meetings• Where feel employee not meeting target do not

wait until formal review hold discussion and lookat way forward together

• Hold two way- feedback• Be clear what outcome is if performance does not

meet company objectives

PERFORMANCEMANAGEMENTPERFORMANCEMANAGEMENT

PLANPLAN

ASSESSASSESS

RECOGNIZERECOGNIZE

DEVELOPDEVELOP

• Identify+ agree upon expectations• Clarify how results will be evaluated• Document Plan

• Assess + Evaluate progress• On-going feedback• Talent Discussion

• Bi-annual performance review• Promotions/ Bonus

• Assess + Evaluate progress• On-going feedback• Talent Discussion

PERFORMANCE MANAGEMENTPROCESS

PerformancePlan

PerformanceSupport

PerformanceReview

PerformanceRecognition

HANDLING AN EMPLOYEEGRIEVANCE

• If employee has concern first step toresolve informally;

• At times may be of a serious nature or employeemay want to make formal grievance

• Companies should have written grievanceprocedure explaining timescale and process

• Carry out formal investigation• Witnesses should be interviewed (confidentially)• Outcome / decision explained to employee• Next steps/ action plan

BULLYING AT WORK?

Examples:• Shouting/ belittling and making someone feel

unimportant/ disrespected• Excessive monitoring/ constant criticizing / deliberate

over-load of work• Regular undermining of a competent worker/ setting

them up to fail• Denying someone’s training or promotion

opportunities• Excluding someone from normal workplace/staff

conversations and making someone feel unwelcome

BULLYING AT WORK? CONT…

Employers are responsible for preventing bullyingand harassment• Un-acceptable and can cause serious problems

for company• Can lead to poor performance, loss of respect

for managers, high turnover, damage companyreputation

• Having anti-bullying and harassment policiescan help prevent problems

Informal Approach

Counseling

Mediation

Formal Approach

DISCIPLINARY• Set clear disciplinary policy highlighting

procedure and process for any misconduct• Try to nip matter in the bud – informal

process• Where Misconduct arises investigate matters,

speak to potential witnesses confidentially• Issue warning – oral, first or final dependant

on seriousness• Retain on file for period of 6 -18 months

EXAMPLES OF MISCONDUCTOral First Warning Final Warning Dismissal• First Offence• Punctuality

• Where previouslybeen warnedverbally andrepeated error

• Performance orsicknessmanagementprocess –stage 1

• Bringing theemployer intoserious dishonor

• Act serious butdoes not warrantimmediatedismissal

• Performance orsicknessmanagementprocess –stage 2

• Fighting resulting inphysicalviolence/trauma

• Deliberatelydamaging companyproperty

• Serious bullying orharassment

• Serious infringementof health and safetyrules

• Fraud or falsifyingwork documents

Failure to Follow Management Instruction

BEST PRACTICE FOR HRPROFESSIONALS

• Be a good listener• Ask open questions• Do not argue - present in persuasive manner rather than

argumentative one• Make sure you understand all views – some people have

difficulty expressing themselves• Treat all with dignity & respect – do not ridicule or

criticize• Gather all facts• Make a decision and explain to employee (you may want

to consult higher management before making decision)• Thank employee / explain confidentiality aspect

Questions ?