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Emiratisation of the private sector and its approaching deadline

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Staff Writer, TLR

Published on July 14, 2023, 17:41:00

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policy Emiratisation began decade ago involves productive

The policy of Emiratisation began more than a decade ago. It involves a productive employment design for citizens of the United Arab Emirates (UAE) in both the public and private sectors. So far, the public sector has fared well yet, the private sector lags. Today, citizens account for only 0.34% of the private sector workforce, and immigrants are still favoured instead of nationals. To remedy this, the government has introduced new laws for the Emiratisation of the private sector.

The new laws are formally known as 'Ministerial Decision No. 279 of 2022 On the Mechanisms of Monitoring the Emiratisation Ratios in the Private Sector, and Contributions Imposed on the Establishments Not Abiding by Said Ratios'. They aim to increase the number of Emirati employees in private-sector companies. By January 1, 2023, those privately owned businesses with more than 50 employees must ensure that at least 2% of their staff is Emirati. This percentage must also rise by 2% every year. So, by 2026, the ideal workforce shall be 10% Emirati. Yet, companies that fall in certain free zones, like DIFC and ADGM, are exempt from complying with this law.

Under the same laws, the government has also announced better salaries and benefits for workers. Now, employees with bachelor's degrees will get a monthly allowance of AED 7,000. Those with a diploma will get AED 6,000, and those who have completed high school or less will get AED 5,000. The guaranteed benefits help promote the private sector and make it as attractive as the public sector. Employment will also increase for the Emiratis, ending their increasing levels of unemployment. Further, there will be a raise in the competitiveness of private businesses by adding skilled and educated workers to their crew. They will also have an impact on promoting higher rates of education.

On the other hand, as the deadline to implement the law keeps nearing, the overarching penalties seem to be an issue. December 31, 2022, is the last day for the private entities to secure their 2% employment mark. After this date, penalties will be imposed for non-fulfillment of this quota. There is a fine of at least AED 6,000 per month for each Emirati not hired, amounting to AED 72,000 annually. The amount fined also increases every year. Failure to pay the amount will lead to the company's work permit being suspended. In case an enterprise fails to secure the employment percentage for two consecutive years, it will fall to Tier 3 of the Classification Law. A company in the third tier means that it has violated the existing labour laws and thus is subject to harsher taxes and fines.

Advisors recommend entities to create both short-term and long-term plans to fulfill the criteria. Employers must embark on a planned recruitment procedure and must introduce provisions to retain their existing Emirati employees, who will now have many other alternatives. Entities that have already set up new diversification systems can easily achieve the deadline however, others must adjust to the new realities immediately, especially as the fines are only bound to increase year by year.

For any enquiries or information, contact ask@tlr.ae or call us on +971 52 644 3004

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