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.
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 1 January 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 one 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 two years. Employers in this tier are subject to fines, increased work permit 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.
Employers should review the citizenship of their workforce and ensure that the new Emiratization quota is implemented by 1 January 2023. Employers’ human resource departments should create a process to enable the increase of UAE new hires over the next years until 2026 to ensure compliance with the new legislation and avoid penalties.