In the UAE, one of the human resource challenges of managing a business is your statutory duty to meet your sponsorship requirements in the UAE to ensure your organization complies with UAE Labour Law.
Whether you are sponsoring an individual or a team of people, you have certain legal requirements as a sponsor in the UAE to which you must adhere to. Learn what they are, so you and your company are not exposed.
Legal Responsibilities As A Sponsor In The UAE
As an employee's sponsor, your company is responsible for all its employees and is liable if an employee contravenes any UAE regulations. Employers can be prosecuted and fined by the Ministry of Labour for breaches of the Labour Law.
In Abu Dhabi, huge fines may be imposed on the employer for employing unregistered staff, failing to provide them with a job after registration, or outsource workers to other companies without obtaining the necessary permission.
In addition to fines, the Ministry may refuse to issue new work permits or registration of any new facility for a period of time after an offence is verified by the Ministry.
How Does The UAE's Sponsorship System Work?
An employee's sponsor for his/her residency visa is his/her employer, whether the company is operating within or outside of a Free Zone. Dubai or UAE residency is temporary and usually valid for two (2) or three (3) years depending on whether the applicable visa sponsorship is onshore or free zone-based.
Residency visas and permits are renewable, and both the company and the employee are required to sign a standard Ministry of Human Resources and Emiratisation’ employment contract during the renewal process. It is at the end of the application process that an employee receives an Emirates identity card.
UAE Federal Law No 8 of 1980, as amended (UAE Labour Law)
The UAE Labour Law covers all aspects of the employer-employee relationship, including employment contracts, restrictions on employing women and juveniles, leave provisions, working hours, medical and social care, workplace safety, discipline codes, termination and end-of-service benefits, and the mandated maintenance of records and files.
The UAE Labour Law contains minimum standards for employing staff in the UAE, which employers are bound by, and cannot contract out of, even if the employee agrees to the changed employment conditions.
Prior to starting work in the UAE, all non-UAE nationals must obtain a work permit and residency visa. These enable the employee to live and work in the UAE. One receives these documents via sponsorship with an employer licensed and registered with the Federal Ministry of Human Resources and Emiratisation.
Labour Law Implications
Without an employer sponsored residency visa, an employee cannot obtain a driving license, open a bank account, rent property, apply for a utility connection, or register a vehicle.
How Are International Secondees Classified?
Under the provisions of the UAE's employment and immigration regime, all employees require local sponsorship through a UAE licensed and registered entity. Employment sponsorship is both employer and location-specific, allowing the employee to work only on the employer's premises. Hence, secondees are deemed to be employees of the local UAE entity, regardless of their home country employment.
What Are The Legal Requirements As A Sponsor In the UAE For A Company to Sponsor Employees?
Before sponsoring an employee and obtaining a UAE residency visa, the Company must hold a valid business license and registration with the Ministry of Interior (‘Immigration') and Ministry of Human Resources and Emiratisation.
If you are planning to set up a new company in the UAE, MIO can arrange for your company's registration with the Ministry of Interior and Ministry of Human Resources and Emiratisation to ensure you meet all the legal requirements as a sponsor in the UAE and start to engage staff without any issue.
Is There A Standard Employment Contract?
As part of the work permit and residency visa application process, non-UAE nationals are required to enter into a short, standard-form employment contract provided by the Ministry of Human Resources and Emiratisation. All employees are entitled to a written contract of employment, and it is an offence not to provide employees with a copy of their labour contract.
To simplify and standardize the process, the Ministry of Human Resources and Emiratisation has a prescribed form of employment contract. Employers are free to complement this with their own employment contract provided it complies with the provisions of the Labour Law. Registration of all employment contracts must be with the Ministry of Human Resources and Emiratisation.
The Labour Law includes provision for two types of employment contracts:
- Limited term contracts (which are contracts of a term of no more than 2 years approved by the Ministry)
- Unlimited term contracts (Without any limitation to the term of the contract).
Furthermore, with effect from 1st of January 2016, a new Ministerial RESOLUTION NO. (764) OF 2015 concerning the MINISTRY OF LABOUR-APPROVED STANDARD CONTRACTS as issued by the Ministry of Human Resources and Emiratisation is in force. Accordingly, Ministerial Decision No.764 mandates the use of standard employment contracts adopted by the Ministry of Human Resources and Emiratisation.
This decision provides that initial approval to admit a foreign employee for employment in the UAE may not be issued unless an employment offer letter presented to the employee is submitted. The employer shall extract from the Ministry's system the standard contract that fully conforms to the offer signed by the employee and to submit such contract to the Ministry signed by the employee.
Amendments may be made to the contract signed by the employee in accordance with this Resolution after obtaining the employee’s approval and provided that such amendment does not violate the employee’s rights and after obtaining the Ministry's approval on such amendment.
The new resolution not only ensures that the employment contract will be consistent with the original offer letter, but also that the employment contract must be followed in all respects.
In regards to employers that maintain collateral agreements, the resolution provides that,
“No new clauses may be added to the stated contract unless they are consistent and comply with the Ministry’s legal requirements, do not conflict with other clauses of the standard contract and are approved by the Ministry.”
What Must A Labour Contract Include?
The Labour Law specifies the following information must be in an employment contract:
- Allowances (if any)
- Probation period (if any)
- Working hours
- Date of employment contract
- Commencement date of employment term
- Nature of the employment contract (whether limited or unlimited)
- Job description
- End of contract (for limited term contracts)
- Location of employment
Restrictive Post-Termination Covenants
Post-termination restrictions are common in the UAE. These clauses are designed to protect the business interests of the employer by restricting a departing employee's activities.
Restrictive Covenants are recognized and permitted under Article 127 of the Federal Law No 8 of 1980 as amended. Articles 909 and 910 of the Civil Code go beyond the UAE Labour Law. Article 127 permits restrictive covenants (non-compete) clauses in employment contracts. However, for these covenants to be enforceable, any restrictions regarding duration, geography, and business activity must be limited.
Any broad restriction designed to stop the employee from working in an industry or geographical area is unlikely to be enforceable, as the covenant must demonstrate it intends only to safeguard the Company's legitimate interests.
It is essential to stay abreast of the UAE Labour Law when recruiting new hires or renewing current employee contracts and residency visas. Your company is responsible for complying with sponsorship requirements in the UAE and ensuring your employees abide by the terms of their employment contracts. Failure to live up to your legal responsibilities as a sponsor in the UAE can leave your organization open to a range of penalties spanning fines, to the refusal of new work permits, or registration of any new facility for a period of time after an offence in verified by the Ministry.
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