The UAE offers businesses a powerful enabling environment: stable political and macroeconomic conditions, a future-oriented government, good general infrastructure, and ICT infrastructure. Moreover, the country has made continuous and convincing improvements to its regulatory environment and is usually a top country for doing business.
From the 2018 Arab Youth Survey the UAE emerges as the top Arab country in areas like living, safety and security, economic opportunities, and starting a business, and as an example for other states to emulate.
For those who want to expand their business to Western Asia, hiring employees in UAE might be your first choice to test and start with fewer risks, but what are some must-knows to avoid risk and to reduce cost?
After setting up your business and acquiring your license, you need to sponsor your employees. According to Article 13 of the UAE Labour Law, companies cannot employ non-nationals without taking prior consent of the Department of Labour and obtaining a work permit.
When giving a work permit, the Ministry of Human Resources and Emiratisation considers the following:
- The worker must possess the professional competence or academic qualifications needed in the country.
- The worker has lawfully entered the country and satisfied the conditions of residency in the UAE.
- The Department of Labour may not consent to the employment of non-nationals unless it examines its records and ensures that there are no nationals registered in the employment section, capable of performing the required job.
- Starting a company in UAE
To start a company, you can choose two ways: start a business on the mainland or start a business in a free zone
- Run a business on the mainland
- Opening of a bank account
- Wages Protection System(WPS)
- Health insurance
- Legal issues
- Run a business in a free zone
Points to understand before running a business in a free zone include:
- Furnishing the office and equipping the place with utilities
- Marketing and advertising for the business
- Conducting foreign trade
- Doing business with the government
- Complying with laws
- Partner with international PEO/EOR company
Global PEO company, such as NNRoad enables you to hire talented professionals on your behalf. We assure the hiring of staff in full compliance with local labor laws and employ best practices to locate and onboard staff members.
By Utilizing NNRoad’s PEO services any business can launch in UAE without the requirement to put in minimum capital investments or the need of establishing a separate legal entity which is a lengthy and complex process.
According to the UAE labor law, the maximum probation period for any employee should be three to six months. According to the law, if the performance of an employee is not on par with the performance metrics, the company has the right to terminate the employee, and the employer can do that on a day’s notice, only if the probation period does not exceed the maximum 6 months limit.
Termination of contract without notice by the employer
An employer can terminate an employment contract without notice and deprive the employee of his end of service gratuity if the latter:
- adopts a false identity or nationality or if he submits forged documents or certificates;
- is appointed under a probationary period and dismissal occurred during or at the end of the said period;
- commits an error causing substantial material loss to the employer-provided that the latter advises the labor department of the incident within 48 hours from having knowledge of the same;
- violates instructions concerning safety of the place of business provided that such instructions are displayed in writing at conspicuous places or verbally informed to an illiterate employee;
- fails to perform his basic duties under the employment contract and persists in violating them despite formal investigation with him in this respect and warning him of dismissal if the same is repeated;
- divulges any secrets of the establishment where he is employed;
- is awarded a final judgment by the competent court in respect of an offense prejudicing honor, honesty, or public morals;
- during working hours, is found drunk or under the influence of prohibited drugs;
- in the course of his work, commits an assault on the employer, the manager, or any of his colleagues;
- absents himself without lawful excuse for more than 20 intermittent days or for more than 7 successive days during one year.
Termination of contract without notice by the employee
An employee can terminate an employment contract without a notice period if:
- the employer has failed to meet contractual or legal obligations towards the worker (for example, if he fails to pay wages for a period exceeding 60 days);
- the employee has filed a court complaint against an employer who has failed to secure employment of the worker (for example, in case of a business shutdown or if the business has been inactive for a period exceeding two months);
- the final ruling for a labor complaint referred to the labor court by MoHRE is in favor of the worker.
Employees are entitled to an annual leave of:
- 2 days per month, if they have completed six months of service, but not one year
- 30 days, if they have completed one year of service.
The calculation of the duration of annual leave will include official holidays specified by law or by agreement and any other leaves caused by sickness if they fall within the annual leave.
- Gregorian New Year: 1 January
- Eid Al Fitr: From the last day of the Islamic month of Ramadan to 3 Shawwal* (4 days)
- Arafah Day and Eid Al Adha (Feast of Sacrifice): From 9 to 12 Dhu al Hijjah* (4 days)
- Hijri New Year: 1 Muharram* in 2019 and on23 August in 2020
- Prophet Mohammed’s birthday: 9 November in 2019 and on 29 October in 2020
- Commemoration Day: 1 December (previously known as Martyr’s Day and observed on 30 November)
- National Day: 2 and 3 December (2 days).
There is no minimum salary stipulated in the UAE Labour Law, however, it broadly mentions that salaries must cover the basic needs of the employees. Article 63 of the Labour Law mentions that the minimum wage and cost of living index is determined either in general or for a particular area or a particular profession by virtue of a decree and consent of the Cabinet.
UAE nationals working in government and private sectors are eligible for pensions and other retirement benefits after reaching the retirement age of 49 or after serving for 20 years minimum. GCC nationals employed in the UAE are entitled to a pension in accordance with the schemes established in their home countries. Expatriate workers are not entitled to a pension but are entitled to end-of-service benefits also known as gratuity or severance pay.
Individual income tax
The UAE does not levy income tax on individuals. However, it levies a corporate tax on oil companies and foreign banks. Excise tax is levied on specific goods that are typically harmful to human health or the environment. Value Added Tax is levied on a majority of goods and services.
Employee termination/severance payment
If the employee resigns of his or her own free will before completing one year, then they will not be entitled to any gratuity pay. The worker is entitled to a gratuity for the served fraction of a year, provided that he completes one year of continuous service. The end of service gratuity is calculated on basis of the last wage to which the employee was entitled, namely the basic salary. Hence, it will not include allowances such as housing, conveyance, utilities, furniture, etc. If the employee owes any money to the employer, the employer may deduct the amount from the employee’s gratuity.
NNRoad provides Professional Employment Solutions to clients, enabling you to hire employees in UAE on your behalf as we serve as the employer of record. We assure the hiring of staff in full compliance with local labor laws and employ best practices to locate and onboard staff members.
By utilizing NNRoad’s PEO services in UAE, any company can launch a business without the requirement to put in minimum capital investments or the need of establishing a separate legal entity which is a lengthy and complex process.
- Sponsoring an expat employee and proceeding with visa/work permits and labor contracts.
- Engaging employees through local labor contracts including contract administration, engagement, extension, termination, and conversion to a permanent hire.
- On-boarding and off-boarding employees following local labor law practice like offer letter, contracts, medical test, work permits, Emirates ID, Visa stamp, etc.).
- Registration of employees with health insurance, if required.
- Complete payroll solution and mandatory benefit administration.
- Employee management according to local laws, including employee record, timekeeping, bonus, and allowance management, expense and claims, and leave employee database management.
- Payment management, including invoicing customers/clients and salary payments.
- Dealing with HR-related matters during the course of employment.
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