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We are excited to share the latest edition of the Law Update, beautifully and appropriately titled “Sustainable Horizons: The Saudi Arabian Vision.” Giving special honor to the Kingdom’s 2030 vision, this update focuses on a collection of both informative and inspiring articles.
For those in construction, you can learn about how the tendering environment impacts risk-pricing for contractors, the updates on the legal framework of the construction industry and how contractors can protect themselves against financial difficulties.
There is good news too from the kingdom’s banking sector, from which the practice of “Open Banking” is being pushed for! But what is open banking? We’re answering that too.
Also . . . Are there any women trail blazers in Saudi Arabia you can name? We’ll help you with that. We cover how the Middle East has been making strides in empowering women in the entrepreneurial space,most notably in STEM fields.Read the full edition
The Ministry of Human Resources and Emiratisation (the “MOHRE”) published a new Ministerial Resolution No. 279 of 2020 (the “Resolution”) effective 26 March 2020, in response to the outbreak of the novel coronavirus (COVID-19).
The Resolution aims to protect the position of non-UAE national employees by private sector employers (who operate under the remit of the MOHRE as well as those in a few free zones that follow MOHRE resolutions) during the application of the precautionary COVID-19 measures by the UAE government.
The Resolution provides procedural guidance to protect employees in circumstances where the employer identifies a surplus of non-national workers.
Significantly, the Resolution provides that the employer must continue to provide the outgoing employees’ housing and all of their entitlements (save for their basic salary) until the earlier of the individual exiting the UAE or obtaining the necessary authorization to work for another establishment (or the repeal of the Resolution upon the precautionary COVID-19 measures being removed). This is a material development and will act as a disincentive for employers when considering whether to reduce headcount.
In such circumstances the employer is required to offer outgoing employees the option of registering their details on the MOHRE’s portal for jobseekers known as the ‘Virtual Labour Market System’. Accordingly, these employees can be rotated and utilised by other establishments seeking to hire candidates within the UAE given the suspension of foreign recruitment. These employees can then be hired and authorization obtained electronically for the necessary work permits (work transfer permit to new employer, temporary work permit or part-time work permit).
The Resolution does not explicitly provide that employers can dismiss employees by reason of redundancy without compensation being payable. However, the recognition of the concept of redundancy within the Resolution (given the lack of recognition of this concept by the UAE authorities to date) may be an indication that the UAE Labour Courts may be more sympathetic to employers implementing redundancy dismissals (during the crisis) than it has viewed redundancy dismissals previously.
The Resolution gives the employer the right to take the following measures provided (steps 3-5 require employee consent):
The Resolution makes reference to these steps being taken ‘gradually’ and it remains to be seen how this will be construed in practice.
The Resolution provides the following requirements when the parties agree that the employer will temporarily reduce salary:
Where the salary is to be permanently reduced, the employer has to apply to the MOHRE for the MOHRE labour contract to be amended.
One of the concerns around reducing salaries or placing employees on unpaid leave has been the resultant impact from a Wage Protection System and the fear that the MOHRE may impose a block on an employer’s establishment card. With the introduction of the Resolution, provided that employers follow the procedural steps outlined therein, we anticipate that the employer should not face any such issues via WPS given that it is a scheme administered by MOHRE.
In summary, the Resolution places a significant burden on employers who choose to reduce headcount during the current COVID-19 crisis. In the alternative, it sets out procedural guidance and affords some flexibility for employers in terms of other steps that may be taken to alleviate cash flow pressure in the current climate.
A number of aspects within the Resolution that require to be clarified and we will issue an updated alert in due course.
Partner, Head of Employment & Incentives
Partner, Employment & Incentives
Partner, Employment & Incentives
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