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01 Apr 2020

COVID-19: Latest employment and pensions measures deployed by UAE Government

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As the worldwide employment landscape rapidly develops in the wake of the COVID-19 pandemic, the UAE Government has announced a raft of measures designed to provide flexibility and clarity to private sector employers grappling with managing their expatriate workforce.

Virtual Labour Market programme

One such measure is the Virtual Labour Market Pool programme, details of which are set out in Ministerial Resolution 279 of 2020 regarding "Employment stability in the private sector during the period of the application of precautionary measures to curb the spread of novel coronavirus (COVID-19)" issued on, and effective from, Thursday 26 March 2020 (“Virtual Labour Market Resolution”).

Who is affected?

The Virtual Labour Market Resolution relates to employers registered with the Ministry of Human Resources and Emiratisation (“MHRE”). It does not apply to employers in the financial free zones (the Dubai International Financial Centre or Abu Dhabi Global Market). It is open to the commercial free zone areas to adopt ministerial resolutions as part of their own employment rules and regulations.

The measures in the Virtual Labour Market Resolution provide a mixture of options designed to help lessen the payroll burden whilst allowing businesses to continue to meet new demands for labour and providing expatriate employees with a degree of security and opportunities for new employment.

What are the key points?

Flexibility measures

Employers may implement any of the following measures:

  • Remote working.
  • Paid leave – This bolsters an existing right in the UAE Labour Law for employers to direct employees to take annual leave on such dates and over such period determined by the employer.
  • Unpaid leave – The right of employers to direct an employee to take unpaid leave is subject to the agreement of the employee.
  • Renewable temporary salary reduction – This may be implemented subject to the consent of the employee, which is to be recorded in an addendum to the employment contract in the prescribed form provided by the MHRE. The salary reduction must be limited in time to the earlier of the expiry of the employment contract (in the case of a limited term contract) and the expiry of the Virtual Labour Market Resolution.
  • Permanent salary reduction – Again, this is subject to employee consent and MHRE approval.

New Virtual Labour Market

  • Redeployment pool - Companies who have expatriate employees considered as surplus to current business need may register the details of such employees on a new Virtual Labour Market. Following the recent moratorium on the issuance of new work permits and visas for recruits from outside the UAE, this should provide a pool of in-country, available individuals from which other companies can source employees to fill their vacancies.
  • Salary and benefits - Employers who register employees in the Virtual Labour Market must continue to cover the costs of their existing contractual benefits such as accommodation - but not basic wage - until the employee leaves the UAE or is employed under a permit to work for a different employer.
  • Advertise vacancies - Companies wishing to recruit from the redeployment pool must advertise for vacant positions in the Virtual Labour Market.
  • Work permits - Redeployed employees will need to be issued with an appropriate new work permit to work for the new employer, as appropriate.

What about dismissals?

The establishment of the Virtual Labour Market may help to alleviate pressure by providing a way for employers to lay-off surplus staff. However, with the continuing obligation to cover accommodation and other benefits, many employers will feel that they have little alternative option but to terminate or not renew employment contracts.

Typically, this attracts the risk of claims for arbitrary dismissal compensation and (in the case of limited term contracts) early termination compensation. In these extraordinary circumstances it is conceivable, in line with historic practices, that the UAE courts will treat employers with leniency, and exercise discretion not to award compensation (or to make minimal awards) in arbitrary dismissal claims where the business has been demonstrably and adversely affected by COVID-19.

However, to mitigate the risk of liability, employers would be well minded to take reasonable steps to avoid dismissals by considering and/or adopting some or all of the measures set out in Virtual Labour Market Resolution (including the redeployment of surplus employees through the Virtual Labour Market), and to keep a ‘paper trail’ of those efforts.

Remote working resolution

On Sunday 29 March 2020, the MHRE also issued an immediately-effective ministerial resolution “Regulating remote work in private establishments during the period of the application of precautionary measures to curb the spread of novel coronavirus (COVID-19)", mandating employers to implement the following measures:

  • Remote working - Restricting the physical presence of employees in in the workplace to 30% of total employees, and also limiting visitor numbers.
  • Protection of vulnerable employees - Prioritising employees from defined vulnerable groups in remote working measures. This includes employees who are: pregnant; mothers to children in grade 9 and below at school; over 55 years old; a Person of Determination; or suffering from respiratory or chronic illness.
  • Distancing and sanitation at work - A raft of preventative steps aimed at ensuring appropriate physical distancing and heightened sanitation in the workplace (including work-provided transportation and accommodation).

Abu Dhabi, three-month pension holiday

Private sector employers in Abu Dhabi who pay pension contributions for UAE national employees into the Abu Dhabi Retirement Pensions and Benefits Fund gained some additional breathing space following the Fund’s announcement on Tuesday 31 March 2020 that they may defer payments for three months commencing with March contributions. Employers can apply for the pension holiday via the Fund’s online portal.

This is just the latest COVID-19-related attempt to free up cash or ease administrative burden for employers by relaxing obligations relating to pensions and end-of-service benefits. It follows the Dubai International Financial Centre (“DIFC”) Authority’s postponement (to 30 April 2020) of the deadline by when DIFC employers must enrol and pay initial contributions to a Qualifying Scheme for the purpose of the DIFC Employee Workplace Savings Scheme.

Need more guidance?

If you need more details about how to implement any of the above measures and/or would like to discuss other related issues, such as determining bonuses and incentive arrangements, including for workforces extending across multiple countries, please do get in touch with Kiersten LucasEmily AryeeteyPhilip Goodchild, and Alex Rush in the employment, pensions and incentives team, or your usual Stephenson Harwood contact.

We have a dedicated COVID-19 team of international employment lawyers keeping up to date on the latest government guidance and developments and who are available to answer any questions you may have. You can find more information here.

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KEY CONTACT

Philip Goodchild

Philip Goodchild
Partner

T:  +44 20 7809 2166 M:  +44 7825 384 004 Email Philip | Vcard Office:  London

Kiersten Lucas

Kiersten Lucas
Partner

T:  +971 4 407 3993 M:  +971 52 577 7731 Email Kiersten | Vcard Office:  Dubai

Emily Aryeetey

Emily Aryeetey
Senior associate

T:  +971 4 407 3942 M:  Email Emily | Vcard Office:  Dubai

Alex Rush

Alex Rush
Senior associate

T:  +44 20 7809 2187 M:  +44 7711 347 524 Email Alex | Vcard Office:  London