By Nathalie Matta
The UAE government has recently issued a new Ministerial Resolution (No. 279 of 2022) that came into effect on the 1st of January 2023 (the “New Law”) where companies registered with the Ministry of Human Resources and Emiratisation (“MOHRE”) shall have the obligation to get to the minimum emiratisation rate of 2 percent annually (the “Emiratisation Rate”). Incentives will be provided to companies who will reach the Emiratisation Rate whilst fines will be imposed on those who do not comply. This article will help you understand the key issues related to the Emiratisation Rate, the obligation to comply with such Emiratisation Rate and the fines that will be imposed for non-compliance.
Background on Emiratisation Law
Emiratisation law is the rule implemented by the UAE government that promotes the participation and employment of UAE nationals in the workforce. The Emiratisation Law applies to private sector companies registered with MOHRE (the “Target Companies”) and does not apply to free zone companies and MOHRE exempt companies. The law is also part of the NAFIS program which is a government program that makes Emirati human resources more competitive and provide them with the skills they need to work in the private sector.
The previous emiratisation quota was as follows:
- Banks: 4%
- Insurance: 5%;and
- Commercial entities with more than 50 employees: 2%
New Law
Starting January 2023, all Target Companies employing more than 50 employees shall have the obligation to increase their current Emiratisation Rate by 2 percent annually to be able to reach in 2026 10% Emiratisation rate( the “Emiratisation Target Rate”) . Based on the Emiratisation Rate, the MOHRE will categorize the Target Companies as follows:
- a) Category 1
Target Companies are required to achieve at least one of the following objectives to fall under this category:
- i. increase their Emiratisation Rate annually not less than 3%
- ii. hire and train at least 500 UAE nationals employed per year;
- iii. being a startup company owned by a young UAE national, or
- iv. being a qualifying training and employment center.
As a reward, the MOHRE will set work permit fees at a maximum of AED 250 for two years. Employees from the UAE and the GCC will be exempt from these fees.
- b) Category 2
Target Companies that do not achieve the objectives required for category 1 yet still meet the Emiratisation Rate will fall under category 2.
The MOHRE will set work permit fees for this category at AED 1,200 for two years. Employees from the UAE and the GCC will be exempt from these fees.
- c) Category 3
Includes the Target Companies that fail to comply with the Emiratisation Rate. The fines in below section (Fines for non-Compliance) will be imposed on the Target Companies under this category.
Calculation of the Emiratisation Rate Percentage
The Emiratisation Rate shall be calculated based on the total number of UAE nationals working in the Target Company compared to the total number of Skilled Employees (as defined below) employed in such company provided that at least one UAE national is employed against 50 Skilled Employee in the Target Company and such Emiratisation Rate shall be maintained for the whole year.
For the avoidance of doubt an employee is qualified as Skilled Employee if below conditions are fulfilled:
- a) The employee’s professional level is one of the following:
-
- i. Level 1: Legislators, managers, and business executives
- ii. Level 2: Professionals in scientific, technical and human fields
- iii. Level 3: Technicians in scientific, technical and humanitarian fields
- iv. Level 4: Writing professionals
- v. Level 5: Service and sales occupations
- b) The employee has obtained a certificate higher than the secondary certificate or an equivalent certificate;
- c) The certificate is attested by the competent authorities; and
- d) The monthly salary (excluding commission) of the employee is not less than AED 4,000.
Below table will clarify how the Emiratisation Rate shall be calculated based on the total number of skilled Employees in a Target Company:
|
Number of Skilled Employees in a Target Company that Employ more than 50 Employees |
Minimum number UAE Nationals employees |
|---|---|
| 0 to 50 Skilled Employees | One (1) UAE National |
| 51 to 100 Skilled Employees | Two (2) UAE National |
| 101 to 150 Skilled Employees | Three (3) UAE National |
| More than 151 Skilled Employees | One (1) UAE National for every 50 Skilled Employees |
It is imperative that the Target Companies ensure that UAE nationals employed are provided with all the necessary tools and training to perform their employment duties.
Target Companies need to ensure that each UAE national employed:
- a) holds a valid work permit and employment contract;
- b) is registered with the General Pensions and Social Security Authority;
- c) is paid through the Wages Protection System;
- d) the relationship between the UAE national and the Target Company is a contractual relationship satisfying all the terms and conditions of the UAE Labor Law.
Fines for Non-Compliance
A monthly fine of AED 6000 (the “Monthly Fine”) per UAE National employee falling short of the quota will be imposed on the Target Companies who fail to fulfil the minimum required Emiratisation Rate unless the minimum Emiratisation Rate is achieved within two months. The Monthly Fine will be increased progressively by AED 1000 per month each year.
If the Target Company fails to pay the Monthly Fine at the beginning of each year (the “Due Date”), its work permit applications may be suspended. In the event the Target Company continue to fail to pay the Monthly Fine after 2 months from the due date, the work permit and the renewal work permit applications of the Target Company and the companies owned by the owner of such Target Company may be suspended.
In addition, two consecutive years of violation can lead to the reclassification and downgrading of the Target Company to Category 3 (as mentioned in section New Law).
In the event, the Target Company commits any fraud or provide incorrect data documents or information, an administrative fine of not less than AED 20,000 and not more than AED 100,000 will be imposed per UAE national employed.
The Target Company may file an objection to the Grievance Committee regarding any decision or fine imposed on the Target Company.
Future Action
If you are a mainland company with more than 50 employees you should aim to meet the Emiratisation Target Rate or alternatively have made provision in your company’s account for the imposition of the fines mentioned above.
If you have any queries on this topic, please do not hesitate to reach out to us on the following email:
contact@legalboutique.ae