NEW UAE LABOUR POL­ICY WILL PRO­TECT WORK­ERS WHO LOSE THEIR JOBS

In­sur­ance scheme will cover perks such as end of ser­vice ben­e­fits

The National - News - - BUSINESS - ALICE HAINE

UAE leg­is­la­tion that re­places bank guar­an­tees for pri­vate sec­tor labour re­cruit­ment with a low-cost in­sur­ance pol­icy will re­duce costs for em­ploy­ers and of­fer bet­ter pro­tec­tion to vul­ner­a­ble low-in­come ex­pa­tri­ate em­ploy­ees, an­a­lysts said.

“The im­pli­ca­tions for the em­ployer is that it will have to pay a lower up­front amount but se­cure po­ten­tially much wider cover for em­ployee en­ti­tle­ments,” said Sara Khoja, a part­ner in the em­ploy­ment team at law firm Clyde & Co in Dubai.

“The em­ployee will have bet­ter pro­tec­tion as he or she can com­plain to the Min­istry of Hu­man Re­sources and Emi­rati­sa­tion in the event of non-pay­ment of min­i­mum en­ti­tle­ments and then the min­istry can draw on the in­sur­ance to pro­vide a pay­out.”

The new UAE Cabi­net-ap­proved leg­is­la­tion – un­veiled by Sheikh Mo­hammed bin Rashid, Prime Min­is­ter and Ruler of Dubai, on Wed­nes­day – does away with the Dh3,000 bank guar­an­tee com­pa­nies cur­rently have to de­posit for each new hire.

It will be re­placed by a Dh60 in­sur­ance pol­icy that of­fers work­ers pro­tec­tion for their work­place perks – such as end of ser­vice ben­e­fits, hol­i­day al­lowance, over­time al­lowance, un­paid wages re­turn air ticket and work in­jury ben­e­fits, with the max­i­mum pay­out capped at Dh20,000 per per­son.

Ms Khoja said the Dh3,000 acts as a cash de­posit with the Min­istry of Hu­man Re­sources and Emi­rati­sa­tion, which is drawn on by the Min­istry if the em­ployee has to be repa­tri­ated, for ex­am­ple, due to be­ing re­ported as an ab­scon­der, be­ing ar­rested or due to the em­ployer go­ing bank­rupt.

The new sys­tem will par­tic­u­larly ben­e­fit “vul­ner­a­ble em­ploy­ees” such as low-in­come blue-col­lar work­ers,” she said.

“The cur­rent Dh3,000 does not pro­vide any cover for em­ployee en­ti­tle­ments such as no­tice, gra­tu­ity and hol­i­day.

“This new scheme is de­signed to pro­vide some cover for these en­ti­tle­ments in the event the em­ployer can­not pay these,” she said.

While em­ploy­ees will be bet­ter pro­tected, Ms Khoja said some risks still re­main. “The risk for em­ploy­ees is that there is a max­i­mum cap on the pay­out, so if their en­ti­tle­ments are more then they will not re­cover it all,” she said.

“For the em­ployer, the risk is that the Dh60 pre­mium may go up in the com­ing years if there are a lot of claims made by em­ploy­ees.”

The re­forms will also see the gov­ern­ment re­lease the Dh14 bil­lion in bank guar­an­tees cur­rently held back into the econ­omy, which will re­duce the bur­den on pri­vate sec­tor com­pa­nies by free­ing up cap­i­tal for other pur­poses.

The move comes on the back of a se­ries of new gov­ern­ment mea­sures, in­clud­ing Abu Dhabi’s Dh50 bil­lion stim­u­lus pack­age, an­nounced ear­lier this month, aimed at low­er­ing the cost of do­ing busi­ness in the coun­try to pro­pel growth, at­tract more for­eign and di­rect in­vest­ment and cre­ate jobs

“The UAE gov­ern­ment is try­ing to lower costs to stim­u­late the busi­ness econ­omy, which is typ­i­cally where all the growth in job num­bers will be,” said David Macken­zie, manag­ing di­rec­tor of the GCC re­cruit­ment con­sul­tancy Macken­zie Jones Group.

“Be­cause the mar­ket is quite tough at the mo­ment, the gov­ern­ment is mak­ing it eas­ier for busi­nesses to be suc­cess­ful by re­duc­ing the costs and the pa­per­work.”

Other re­forms an­nounced by the UAE Cabi­net on Wed­nes­day in­cluded changes to visas, which can now be re­newed with­out the need to leave and re-en­ter the coun­try and a new, no-fee, six-month tem­po­rary visa to help those that have lost their jobs find new em­ploy­ment.

“This is great be­cause it means you have con­ti­nu­ity of work­force,” said Mr Macken­zie. “At the mo­ment, when we want to move peo­ple from one free zone to some­where else, they can get a labour ban.

“The re­forms give us com­plete free­dom of move­ment, which is a very pos­i­tive thing.”

Keren Bobker, a se­nior part­ner at Dubai fi­nan­cial ad­vi­sory com­pany Hol­born As­sets and a con­sumer rights colum­nist for

The Na­tional, said the re­forms will “safe­guard the rights and ben­e­fits of em­ploy­ees”.

“I hope there will be fewer cases where staff do not re­ceive their en­ti­tle­ments from an em­ployer when they leave a com­pany,” she said. “Al­low­ing those made re­dun­dant to have a spe­cial six-month visa while they look for new em­ploy­ment is also help­ful.

“Many na­tion­al­i­ties have only a 30-day grace pe­riod be­fore they have to leave the coun­try, so be­ing able to re­main in the UAE with­out the risk of pay­ing fines or re­ceiv­ing a ban re­duces the risk of peo­ple falling into debt.”

How­ever, Ms Khoja said the new rules will not ap­ply to do­mes­tic work­ers, such as maids, and an­a­lysts were un­sure whether banks would con­tinue to freeze ac­counts of those who lose their jobs.

“If there are no debts, then an ac­count ought to be un­frozen very quickly, but although a per­son will be able to stay I think it is un­likely a bank will want to un­freeze if they see no ev­i­dence of in­come to ser­vice debts,” said Ms Bobker.

“The smart course of ac­tion is to with­draw cash be­fore you re­ceive your fi­nal pay­ment to help tide you over.”

The new rules will be par­tic­u­larly help­ful to small and medium-sized com­pa­nies, which have strug­gled dur­ing the three-year oil price slump to stay afloat, with lit­tle ac­cess to bank fi­nanc­ing.

In the short term, “small to medium-sized en­ter­prises will ex­pe­ri­ence im­proved cash flow to in­ject back into their busi­nesses,” said Steven Mayne, manag­ing part­ner at Cre­ative Zone, a con­sul­tancy that helps busi­nesses set up in free zones.

“This prac­ti­cal and pos­i­tive ap­proach to cost re­duc­tion will serve to at­tract far more in­vest­ment here,” he said.

Reem Mo­hammed / The Na­tional

The changes will par­tic­u­larly ben­e­fit blue-col­lar work­ers in the UAE, an an­a­lyst says

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