Covid-19 - the New Employment Resolution and Options for UAE Employers 


1. Introduction

The unprecedented situation many UAE employers now find themselves in as a result of the Covid-19 pandemic, and the resulting economic climate, has raised various questions regarding the management of employees. In this alert we look at the options available to employers based in the UAE at this uncertain time.

In particular, we consider the provisions of the resolution recently issued in response to the current situation by the Ministry of Human Resources and Emiratization (the “MHRE”); Ministerial Resolution No. 279 of 2020 on Employment Stability in the Private Sector during the Period of Application of Precautionary Measures to curb the Spread of Novel Coronavirus (the “New Resolution”), as it applies to employment relationships governed by the UAE Federal Labour Law.

2. The New Resolution

Under UAE Labour Law, no changes considered to be detrimental to an employee can be made to employment contracts without employee consent. The New Resolution provides a waterfall of five options available to employers registered with the MHRE (i.e. onshore employers or those in free zones other than the Dubai International Financial Centre or Abu Dhabi Global Market) in relation to non-UAE nationals (i.e. expat employees) and employers should work through these options with their employees where possible:

  1. Implement remote working system
  2. This is the preferred option where employees can carry out their functions remotely. Where employees are unable to carry out their functions from home, employers are still legally obligated to pay the salary stated on the employee’s official employment contract (the one filed with the authorities) unless an amendment to terms is agreed in writing with employees (as below). Payment of salaries onshore in the UAE continues to be tracked through the wages protection system (WPS).  

  3. Grant paid leave 
  4. It is possible to request that employees take their annual leave during this period. Under UAE Labour Law, employers may specify when annual leave is required to be taken. This may be appropriate for those unable to work remotely and who have accrued leave entitlements. 

  5. Grant unpaid leave
  6. Staff can also be given the option to take unpaid leave with a view to maintaining their role for the longer term. This gives the additional comfort to employees that they will keep their current visa and may be beneficial for those with children at home, particularly for those engaging in home learning to the end of the academic year. This must be expressly agreed with the employee and set out in writing. The MHRE has issued a template form of temporary employment amendment annex that should be used for this purpose (the “Temporary Amendment Annex”).

  7. Agree a temporary salary reduction during the specified period
  8. Agreeing a temporary salary reduction is another way to try to secure the long-term future of employees. If agreed with employees, this must be done through the Temporary Amendment Annex and is applicable for a limited time as agreed therein or the validity period of the New Resolution (whichever is shorter). The Temporary Amendment Annex can be further renewed by agreement of the parties, and a copy must be provided to the MHRE if requested.

  9. Agree a permanent salary reduction
  10. This option is only available with the approval of the MHRE and amendment of the registered employment contract.

Whatever option employers select, it is recommended that the company be prepared to present their justifications to the MHRE as they may be requested at any time.

3. Obligations towards sick employees 

The standard sickness provisions under the UAE Labour Law continue to apply and employees cannot be terminated during sick leave. The employee must report his/her sickness within two days and, provided they have completed their probationary period, will be entitled to 15 days of sick leave at full pay, 30 days at half pay, and 45 days without pay. 

Upon expiry of the 90 days sick leave, employers may terminate employees who do not return to work. If terminated, the employee is still entitled to receive their end of service gratuity. However, an employee cannot be terminated for sickness alone, unless they have taken in excess of 60 working days of sick leave during a 12 month period. 

If more favourable provisions on sick leave are set out in the relevant employment contract these will be applicable over the minimum requirements set out above.

4. Terminating Employment Contracts

If none of the options set out under the New Resolution are viable for a business, employers may still look at the option of making redundancies. There are strict reasons for which employment can be terminated under UAE Labour Law and any terminations made without valid reason could open the employer up to claims for unfair dismissal. 

Under the New Resolution, employers with an excess of employees under their sponsorship may register the employees’ details in the MHRE’s Virtual Labour Market job portal to enable rotation of workers between other businesses who may have need for them. While such listing is not currently mandatory, the MHRE has indicated that it would be best practice. 

Following issuance of the New Resolution, there were inconsistent interpretations of the provisions relating to termination of employees and ongoing employer obligations. The latest MHRE guidance available at the time of writing states that, while termination of employment may be made in the same way prior to the issuance of the New Resolution, in addition, under the New Resolution, employers must keep paying the housing allowance of any employee whose employment is terminated until the employee leaves the country or obtains authorisation to work for another establishment.  This has been confirmed by the Labour Courts  who have noted that these provisions were designed to prevent tenants facing an uncertain financial future being evicted by their landlords following termination of their employment and, while court judgements are not binding, this is in line with the approach MHRE have indicated they are taking. This is a particular concern in the current situation where employees cannot be repatriated to their home country as easily as before and will, therefore, need to continue to find means to subsist in the UAE.

This means that, in the case of redundancy, employers will need to continue allowing any employee in company provided accommodation to remain, or continue paying accommodation allowances, until the employer is able to secure the repatriation of the relevant employee to his/her home country or the employee is able to secure another job. We understand some repatriation flights are now available from the UAE (to London for instance) but availability and ability to repatriate employees will depend on the particular employee’s country of origin and circumstances. In order to limit its liability, an employer will need to try to repatriate any employees made redundant as soon as possible following termination of employment. It is not currently clear what the consequences of employers failing to provide this support will be, however, employees can bring a claim against employers on an urgent, fast tracked basis where required, going directly to the labour courts rather than through the MHRE first.

Various aspects of this new accommodation support requirement remain unclear however, for example, the MHRE has not so far been able to provide guidance on how this will be interpreted in the case of employees who do not have company provided accommodation or a specified allowance under their contracts. In addition, it is not clear to what extent the payment of housing allowances after termination by the employer will affect the assessment of any awards for compensation in claims for unfair dismissal. This will need to be considered on a case by case basis but it is likely that the absence of a specific accommodation allowance in an employment contract will not be sufficient to absolve an employer of all liability in that regard. 

Where an employee made redundant has at least one year’s continuous service, they will still be entitled to an end of service gratuity payment. The company may also want to consider ex-gratia payments as compensation to reduce the risk of subsequent claims for arbitrary dismissal. Employment claims can be long, costly, and can result in temporary bans on issuing new visas to other staff. CMS strongly recommends that professional advice is sought, and settlement agreements are entered into with each employee being terminated where possible. 

5. Other issues

There are a range of other employment issues that employers in the UAE may be facing as a result of the current Covid-19 pandemic and the pressure it is putting on businesses, for example, an employer’s obligations where employees are unable to return to the UAE due to travel restrictions, difficulties recruiting or following through with employment offers already made and/or difficulties cancelling visas and repatriating staff.   

If you would like specific advice based on your circumstances and particular employee related concerns in the current climate, please do get in touch.

Co-authored by Eleanor Furlong.