UPDATE: On 11 July 2023, the UAE government announced through the Ministry of Human Resources and Emiratization (MoHRE) that emiratization quotas will no longer apply only to companies with 50 or more employees, but will also include companies with 20 to 49 employees in selected sectors (information and communications; financial and insurance services; real estate; scientific and technical activities; administrative and support services; arts and entertainment; mining and quarrying; transformational industries; education; healthcare and social work; construction; wholesale and retail; transportation and warehousing; hospitality and accommodation services).
Affected companies are expected to hire at least one Emirati employee by 31 December 2024 and an additional Emirati by 31 December 2025. Companies that fail to hire at least one Emirati employee by end of year 2024 will be fined AED 96,000 in January 2025. Failure to comply with the requirement to hire a second Emirati employee by end of year 2025 will increase the fine amount to AED 108,000 due in January 2026.
The legislation or regulation supporting such announcement has not yet been released and ,therefore, many details about the new requirements are still unknown. It is still unclear whether the new requirement will be enforced for companies in all sectors and if employers in free zones will be required to comply. The Lockton Global People Solutions Compliance team will update this alert once more details are released.
Background
The UAE has been actively working on boosting Emiratization quotas in the workplace for a decade. Prior to 2017, Emiratization quotas were required only in the banking and insurance sectors (4% of the workforce for banks and 5% for the insurance sector). In 2016, the government established the Emirati Cadres Competitiveness Council (NAFIS) program aiming at raising the number of Emirati nationals in the private sector through an Emiratization framework requiring employers who fall under the jurisdiction of the Ministry of Human Resources and Emiratizations (MHRE), and with a minimum of 50 employees, to employ UAE nationals at a rate of 2% of the workplace. All Companies located in the UAE, excluding the free trade zones, fall under the jurisdiction of the MHRE and are required to register with the MHRE and must enroll with NAFIS. Enrolled employers may benefit from reduced fees payable to the MHRE for work permits as well as a reduction of up to AED 8,000 per month of employer’s pension contributions for each UAE national.
Key details
The amended Emiratization requirement applies to all private sector employers registered with the MHRE with at least 50 employees. The requirement does not apply to companies located in free trade zones.
From 30 June 2023, covered employers will be required to increase the Emiratization quota by 2% of Emirati nationals in the workforce every year until it reaches 10% by the year 2026. The Emiratization quota is to be calculated by reference to the number of skilled workers in the company so that for each 2% of quota, a company must hire 1 skilled Emirati for every 50 skilled employees.
The Emiratization quota mandate applies only to skilled Emirati nationals who fall under one of the following categories:
- Skilled positions such as legislators, managers, business executives, professionals in scientific, technical, and human fields, technicians in scientific, technical and humanitarian fields, writing professionals, or service and sales occupations.
- Have a post-secondary degree or certificate.
- Earn a salary of a minimum of AED 4,000 per month.
UAE nationals hired prior to September 2021 will not count toward the new Emiratization quota requirement.
Non-compliant businesses will be subject to fines of AED 6,000 per month for each Emirati employee that the business failed to hire to meet the quota requirements. Failure to pay such fines at the beginning of the following year will result in the MHRE’s refusal to issue or review employees’ work permits and there will also be an annual increase in the fine of AED 1,000 per failed hire until full payment of the fines and compliance with Emiratization quotas.
In addition, the amendments introduce three tiers under which covered employers may be classified based on their level of Emiratization as follows:
- Tier 1 includes employers in compliance with the federal Labour Law and the Emiratization requirements, and who fulfill at least one of many criteria including achieving an Emiratization level of at least three times the minimum required or using the NAFIS voluntary recruitment portal to hire and train at least 500 citizens each year.
- Tier 2 includes employers in compliance with the federal Labour Law and the Emiratization requirements. Those employers will benefit from lower work permit fees.
- Tier 3 includes employers who are not compliant with the federal Labour Law and the Emiratization requirements for 2 years. Employers in this tier are subject to fines, increased work permits fees, and possible suspensions, or refusal, of work permits.
In addition to punitive measures, compliant companies will receive preferential treatment as work permit application fees will range from AED 250 for Tire 1 employers to AED 3,450 for Tier 3 businesses.
Next steps
Employers should monitor the developments of the Emiratization requirements and ensure proper compliance. Employers’ human resources departments should create a process to enable the increase of UAE new hires over the next years until 2026. Employers should also be aware that they do have certain obligations when hiring Emiratis that include the obtention of a work permit from the MoHRE, the contribution to their pension and social security as well as the compliance with relevant employment requirements (i.e., wages and employment contracts).