Emiratisation Law in UAE : New Rules For Private Sector Compliance [2024]

Emiratisation Law in UAE : New Rules For Private Sector Compliance [2024]

The UAE has long been a hotspot for global talent hunting for diverse job opportunities in its private sector. However, the government brought in a game-changer called the Emiratisation law. 

Its goal?

To create a more balanced workforce by giving locals better job chances. But here’s the latest scoop: this law recently got a makeover. Now, even small businesses need to follow it, and bosses have a new set of rules to follow when hiring folks. In this article, we'll dive deeper into these updates and how they're shaking up things for employers and employees alike.

TABLE OF CONTENTS:

• Emiratisation Evolution: UAE's Path to Inclusive Employment

• What is Emiratization Law in UAE ?

  • Skilled workers criteria - Emiratization

  • Classification of Companies based on Emiratization Law

• Key features of the Emiratization law in the UAE include:

• Historical Background of Emiratisation

• Changes in Emiratisation Law

• Compliance with Emiratisation Regulations

  • Rules for Advertising Emiratisation Jobs:

  • ● Advertisement Standards:

  • Employer Obligations when Hiring Emiratis:

  • ● Responsibilities and Protocol:

  • Prohibited Actions by Employers:

  • Emirati Employee Obligations:

  • Penalties and Fines for Violating Emiratisation Targets:

  • Note on Resolution Mandate:

  • Impact on Key Sectors:

  • Exemptions and Uncertainties

  • Encouraging Emirati Workforce Engagement

  • Progressive Emiratisation Targets:

  • Pension

  • The Significance of the Nafis Award

  • Bringing All This Together

• Frequently Asked Questions (FAQs) Related to Emiratisation Law:

What is Emiratization Law in UAE ?

Emiratization, also known as "Tawteen" in Arabic, is a national workforce employment initiative in the United Arab Emirates (UAE). The primary goal of Emiratization is to increase the participation of Emirati nationals in the job market, particularly in the private sector. The government introduced this policy to address unemployment concerns among Emiratis, promote economic diversification, and ensure that citizens actively contribute to the country's development.

Emiratisation law mandates private-sector companies to annually recruit Emirati employees, constituting a minimum of 2% of the total skilled workforce. This requirement is structured based on company size:

• 0-50 skilled workers: At least 1 Emirati employee

• 51-100 skilled workers: At least 2 Emirati employees

• 101-150 skilled workers: At least 3 Emirati employees

• More than 150 skilled workers: 1 Emirati employee for every 50 employees or less

Skilled workers are defined by the Ministry of Human Resources and Emiratisation (MoHRE) as those in specific categories, possessing certain educational qualifications and attested certificates, with a minimum monthly salary of AED 4,000.

Skilled workers criteria - Emiratization

Skilled workers, as defined by the Emiratisation criteria set by the Ministry of Human Resources and Emiratisation (MoHRE), encompass individuals who fall within the following five categories:

1. Legislators, Managers, Business Executives: Professionals holding managerial or executive positions within organizations.

2. Professionals in Scientific, Technical & Humanitarian Fields: Individuals engaged in professions requiring expertise in scientific, technical, or humanitarian disciplines.

3. Technicians in Scientific, Technical and Humanitarian Fields: Workers possessing technical skills in scientific, technical, or humanitarian areas.

4. Writing Professionals: Individuals involved in professional writing occupations.

5. Service & Sales Occupations: Workers employed in service-related and sales-oriented roles.

Additionally, these skilled workers must meet the following criteria:

- Hold at least a secondary school certificate, its equivalent, or a higher educational qualification.

- Possess certificates attested by relevant authorities.

- Receive a monthly salary of no less than AED 4,000.

These criteria are essential for companies to adhere to when incorporating Emirati employees into skilled roles as part of the Emiratisation initiative.

Classification of Companies based on Emiratization Law

Companies are classified into three categories, impacting the incentives received based on compliance:

Category 1:

• Achieving Emiratisation rate three times above the target.

• Collaborating with the 'Nafis' program, training at least 500 citizens annually.

• Categorized as a training and employment center supporting the Workforce Planning Policy.

• Active in targeted sectors determined by the Council of Ministers.

• Venture owned by a young citizen.

Category 2:

• Classification based on commitment to labor laws, wage protection, and promoting diversity.

• Further classified as A, B, C, or D, depending on the ratio of skilled workers and commitment to diversity.

• Work permit fees set at AED 1,200 for two years.

Category 3:

• Non-compliance with Emiratisation quota.

• Violations specified in Ministerial Resolution No. 209 of 2022.

• Penalties, as mentioned in the resolution, imposed on companies in this category.

Key features of the Emiratization law in the UAE include:

1. Quotas and Targets: Certain industries and companies are assigned Emiratization quotas, specifying the percentage of the workforce that should be comprised of UAE nationals. Targets are set to encourage businesses to hire and retain Emirati employees.

2. Preferential Treatment: Employers are encouraged to provide preferential treatment to Emirati job seekers, such as offering them training and development opportunities. This is aimed at enhancing the skills and qualifications of Emirati workers.

3. Training and Development: Companies are often required to implement training programs to enhance the skills of Emirati employees and prepare them for various roles within the organization.

4. Government Incentives: The government may provide financial incentives, subsidies, or support to businesses that actively engage in Emiratization efforts. This can include grants, reduced fees, or other forms of assistance.

5. Monitoring and Compliance: The UAE government monitors companies to ensure compliance with Emiratization requirements. Non-compliance may result in penalties, restrictions, or other consequences.

6. Job Categories: Certain job categories may be designated for Emiratis, and companies are encouraged to prioritize the hiring of nationals for these roles.

It's important to note that Emiratization laws and policies may evolve, and specific details can vary across different emirates and industries. Businesses operating in the UAE should stay informed about the latest updates and regulations related to Emiratization to ensure compliance.

Historical Background of Emiratisation

Emiratisation has its roots in how the UAE's economy changed over time. Way back, before they found oil, the UAE mostly focused on farming and had just a few folks doing things like pearl diving and trading. When they discovered oil in the late 1960s, everything changed. Lots of people from other countries came to work in the booming industries.

As the country grew richer, people started worrying that relying too much on workers from other places might affect the UAE's own identity. So, in the early 2000s, the UAE government started making plans to get more Emiratis into jobs, especially in private companies.

These plans have changed a lot over the years. They included things like training programs, money help from the government, and rules about how many Emiratis companies should hire in different industries.

Another big thing they're trying to fix is that lots of young Emiratis can't find good jobs. So, these plans aim to help them get into skilled jobs. Emiratisation isn't just about using fewer foreign workers—it's also about making sure Emiratis nationals  have good job chances and the country keeps growing.

Looking back, Emiratisation shows how the government planned for the UAE's economy to grow and stay strong, all while keeping its own culture and identity.

Changes in Emiratisation Law

In a significant expansion of the UAE's Emiratisation initiative, small and medium-sized enterprises (SMEs) are now mandated to integrate Emirati nationals into their workforce. The Ministry of Human Resources and Emiratisation announced that companies with 20 to 49 employees will be subject to new Emiratisation quotas, signaling a pivotal shift in the country's employment landscape.

Compliance with Emiratisation Regulations

The Ministry of Human Resources and Emiratisation (MoHRE) has established stringent guidelines to ensure compliance with the Emiratisation system, mitigating fraudulent practices, and safeguarding the integrity of Emiratisation initiatives.

Rules for Advertising Emiratisation Jobs:

• Advertisement Standards:

Firms must uphold specific standards when advertising Emiratisation jobs:

1. Advertise jobs accurately, don't mislead.

2. Obtain prior permission from MoHRE before referencing government Emiratisation policies or associated benefits in advertisements.

3. Don't talk about government benefits without approval in ads.

Employer Obligations when Hiring Emiratis:

• Responsibilities and Protocol:

1. Employers must adhere to a set of obligations when hiring Emiratis:

2. Provide suitable workplace environments and necessary tools for Emirati employees.

3. Ensure minimum on-the-job training to facilitate their performance.

4. Secure a work permit from MoHRE for the Emirati employee.

5. Conclude an employment contract meeting regulatory standards.

6. Adhere to salary disbursement guidelines as per the Wages Protection System.

7. Enroll Emiratis in the pensions and social security system within a month from their work permit issuance.

8. Report any contract amendments that might impact eligibility for the 'Nafis program.'

9. Upon contract termination, immediate cancellation of the Emirati's work permit is mandatory.

Prohibited Actions by Employers:

• Salary Deductions and Discrimination:

Employers are strictly prohibited from:

1. Deducting Emiratis' salaries under the pretext of government support programs.

2. Discrepantly paying lower salaries to Emiratis compared to their counterparts in similar positions.

Emirati Employee Obligations:

• Compliance and Reporting:

Emiratis employed in the private sector are obliged to:

1. Adhere to regulations outlined in labor relation laws, executive regulations, and Nafis program-related decisions.

2. Comply with obligations specified within their employment contracts.

3. Report any practices contravening Emiratisation resolutions to MoHRE.

These stringent compliance guidelines aim to ensure fair practices, ethical employment standards, and equitable opportunities for Emirati nationals within the private sector.

Penalties and Fines for Violating Emiratisation Targets:

• Cabinet Resolution No. 95 of 2022:

This resolution outlines administrative penalties and fines against firms failing to comply with Emiratisation and Nafis targets. Various violations and their corresponding penalties include:

Violations Include:

• Fake Emiratisation and Submission of False Documents:

Firms engaging in fraudulent Emiratisation practices or submitting falsified documents for Nafis benefits.

• Employee Non-Compliance Post-Work Permit Issuance:

Situations where an employee doesn’t commence work after the issuance of a work permit, while the firm continues to benefit from Nafis support.

• Employee Non-Commitment Post-Nafis Support:

Instances where an employee supported by Nafis shows a lack of commitment towards work, unreported by the employer.

• Failure to Employ Trained Emiratis Post-Nafis Program:
  

Firms neglecting to employ Emiratis upon completion of the Nafis training program without providing a valid justification.

• Non-Reporting of Benefit Changes:

Firms altering benefit terms without reasonable cause or justification acceptable to Nafis.

• Cabinet Resolution No. 44 of 2023:

This resolution further extends penalties for non-compliance with Emiratisation targets, including:

Additional Violation:

• Employee Reduction or Classification Modification:

Situations where firms reduce employee numbers or manipulate their classification to evade meeting Emiratisation targets.

• Fines for Non-Compliance of Emiratization in 2023, 2024 , 2025 & 2026
  

Private companies failing to meet the Emiratisation targets by the July 7 deadline now confront significant fines, with the possibility of fines reaching up to Dh500,000. The Ministry of Human Resources and Emiratisation (MoHRE) had previously indicated that a fine of Dh42,000 would be imposed for each Emirati not employed by the deadline.

In cases of fabrication or misleading information regarding Emiratisation numbers, companies may also incur substantial fines. For companies falling short of the 4% Emiratisation target in 2023, fines were initially set at Dh84,000 per unfulfilled Emirati position, escalating to Dh120,000 per worker for 2026.

Private companies with 20 to 49 employees failing to hire at least one Emirati in 2024 now face a Dh96,000 ($26,000) fine, which increases to Dh108,000 ($30,000) for businesses that have not employed at least two Emiratis in 2025. Non-compliance with Emiratisation targets carries significant financial consequences for companies of varying sizes and underscores the government's commitment to promoting a skilled Emirati workforce in the private sector.

The fines levied against companies for Emiratisation target violations are structured as follows:

• First-Time Violation:
  

AED 100,000 fine for companies failing to meet Emiratisation targets for the first time.

• Repeat Violation:
  

• Subsequent violations incur increased penalties:

  • AED 300,000 for repeated violations.

  • 
    

• Third or Subsequent Violation:

• For repeated non-compliance:

  • AED 500,000 penalty for the third or subsequent violations.

The MoHRE had previously issued fines totaling Dh400 million against private companies failing to meet Emiratisation targets in 2022. The fines escalate annually, increasing by Dh1,000 per month per Emirati not hired. The penalty, which was Dh6,000 last year and Dh7,000 this year, is set to rise to Dh8,000 in 2024, Dh9,000 in 2025, and Dh10,000 in 2026.

Note on Resolution Mandate:

The resolution mandates violating companies to achieve the required targets based on their authentic status before any circumvention.

Mandatory Emiratisation Rate Increase:

Companies with 50 employees or more are obliged to increase Emirati employees in skilled jobs by 1% every six months, ultimately achieving a 2% Emiratisation rate by year-end.

Impact on Key Sectors:

The law spans across various critical sectors integral to the UAE's economy, including:

1. Information and communications

2. Financial and insurance activities

3. Real estate

4. Professional and technical activities

5. Administrative and support services

6. Arts and entertainment

7. Mining and quarrying

8. Transformative industries

9. Education

10. Healthcare and social work

11. Construction

12. Wholesale and retail

13. Transportation and warehousing

14. Hospitality and residency services

Exemptions and Uncertainties

While exemptions previously existed for larger companies and those operating in free zones, it remains uncertain if similar exemptions will apply to companies with 20 to 49 employees situated in free zones.

Encouraging Emirati Workforce Engagement

One of the primary aims behind these legislative changes is to stimulate increased Emirati participation within SMEs and start-ups. This strategic initiative seeks to provide Emirati graduates with ample opportunities for professional growth, skill development, and career advancement within smaller enterprises.

Progressive Emiratisation Targets:

Phase 1: Immediate Targets
4% Emiratisation Target by the End of the Current Year:

This immediate goal requires companies to ensure that 4% of their workforce comprises Emirati nationals by the conclusion of the ongoing year. It sets the initial benchmark for compliance with the Emiratisation law.

Phase 2: Mid-term Goals

6% by 2024:

Building upon the initial target, companies are mandated to elevate their Emiratisation efforts to achieve a 6% Emirati workforce representation by the year 2024. This marks a progressive increase from the initial benchmark set in the law.

Phase 3: Intermediate Objective

8% in the Subsequent Year:

Continuing the upward trajectory, the subsequent year following 2024 necessitates companies to further bolster their Emiratisation initiatives, aiming for an 8% Emirati workforce composition. This represents a substantial increase from previous benchmarks.

Phase 4: Ultimate Goal

Reaching 10% by the Close of 2026:

The culmination of the phased Emiratisation targets sets the ultimate benchmark, requiring companies to achieve a significant 10% representation of Emirati nationals in their workforce by the conclusion of 2026. This final goal reflects the comprehensive commitment to Emiratisation integration within the private sector.

Pension 

As per Federal Law No. 7 of 1999 for Pensions and Social Security, along with its subsequent amendments, a compulsory monthly contribution to the General Pension and Social Security Authority (GPSSA) is required, equivalent to 20% of the employee’s salary.

This contribution is divided as follows: the employee is responsible for contributing 5% of their salary, while the employer is mandated to contribute 12.5% of the employee’s salary. Additionally, the government is required to contribute 2.5% towards this pension scheme.

The Significance of the Nafis Award

The revered Nafis Award is a testament to private sector excellence in Emiratisation efforts, recognizing firms for their exceptional dedication to hiring UAE nationals. Beyond honoring organizations, this accolade celebrates the remarkable contributions of talented Emiratis, showcasing their impactful roles across diverse economic sectors within the private domain. 

The Nafis Award serves as a beacon, inspiring and acknowledging exceptional commitment towards Emirati employment initiatives while encouraging a culture of achievement and inclusivity within the private sector. Explore the Nafis Award's application process to witness the strides made in Emirati empowerment and organizational excellence

Bringing All This Together

The UAE worked hard to grow its economy and empower its people. The Emiratisation law shows this journey, from farming roots to booming industries. It's about nurturing local talent and keeping the UAE's identity strong. The law aims for a fair workforce and lasting growth, making sure Emiratis have important roles in building the nation. It's all about creating a strong economy that includes everyone and respects the UAE's rich culture

Frequently Asked Questions (FAQs) Related to Emiratisation Law:

1. What is Emiratisation?

   - Emiratisation is a government-driven initiative in the United Arab Emirates (UAE) aimed at increasing the participation of Emirati nationals in the country's workforce, particularly in skilled and leadership roles.

2. Who is required to comply with Emiratisation laws?

   - Private-sector companies in the UAE are obligated to comply with Emiratisation laws. The focus is often on companies with 50 or more employees, and specific targets are set for the inclusion of Emiratis in skilled positions.

3. What are the penalties for non-compliance with Emiratisation quotas?

   - Non-compliant companies may face fines for each Emirati position not filled, with the amount increasing annually. Additionally, other violations, such as providing incorrect data, conducting fake Emiratisation practices, or violating workers' rights, may result in penalties.

4. How are skilled workers defined under Emiratisation laws?

   - Skilled workers, according to Emiratisation criteria, include professionals in managerial roles, scientific and technical fields, technicians, writing professionals, and service and sales occupations. Specific educational and salary criteria apply.

5. How does the Emiratisation classification system work?

   - Companies are classified into three categories based on their commitment to Emiratisation objectives. Categories determine the incentives and work permit fees. Category 1 companies demonstrate higher compliance and receive more favorable incentives, while Category 3 includes non-compliant companies.

6. What is the role of the Nafis program in Emiratisation?

   - The Nafis program supports Emiratisation by providing training opportunities. Companies cooperating with Nafis to train citizens may receive incentives and favorable classifications.

7. How often do companies need to meet Emiratisation targets?

   - Companies are required to add 2% of Emiratis to their workforce annually until 2026. The annual target is split into two, with 1% required in the first half of the year and the other 1% in the second half.

8. What is the purpose of the Emiratisation law?

   - The Emiratisation law aims to create a more diversified and sustainable workforce in the UAE by increasing the representation of Emirati nationals in various sectors and job roles.

These FAQs provide an overview of common inquiries related to Emiratisation laws in the UAE. It's essential for companies to stay informed and compliant with these regulations.