U.A.E.: Revised Emiratization framework announced

Employer Action Code: Act

The Ministry of Human Resources & Emiratization (MOHRE) has announced a series of amendments to its existing Emiratization framework with the goal of having at least 10% of the private sector workforce being made up of Emirati citizens by 2026. The changes introduce new provisions to motivate compliance, most notably by imposing heavy fines, and by expanding incentives for companies that meet or exceed their targets or engage in certain training activities focused on local nationals. Current minimum Emiratization rates (i.e., the percentage of the workforce made up of Emiratis) vary based on sector, ranging from 5% for insurers to 4% for banks and 2% for commercial establishments with more than 50 skilled employees. The new requirements take effect in January 2023.

Key details

• Employers with more than 50 employees will be subject to a minimum Emiratization rate of 4% (applicable specifically to highly skilled roles). The rate will increase annually by two percentage points until reaching 10% in 2026. Employers located in any of the Free Zones are exempt.
• Noncompliance with minimum Emiratization rates will be subject to a monthly fine of 6,000 Emirati dirhams per unmet position (to be increased by 1,000 Emirati dirhams in each subsequent year). Fines will be payable in full at the beginning of the following year. Failure to pay fines will result in MOHRE refusing to issue or renew work permits.
• Covered employers will be classified under one of three tiers based on their level of Emiratization, the number of local nationals they train (in cooperation with the national training program – NAFIS) and their general compliance with federal labor law (among other things). Tier 1 companies will benefit from reduced costs and expedited service for certain transactions (such as work permits), full government subsidization of social security contributions for Emirati employees for up to five years, and a subsidy of up to 8,000 Emirati dirhams a month per local national employed to offset employer wage costs. Other companies that comply with mandates will be classified as Tier 2 and will benefit from lesser incentives, while employers that do not comply with requirements for two years will be classified as Tier 3 (and be subject to penalties).
• According to MOHRE, skilled employees are those in defined functions (including management, certain types of professionals/technicians and sales/service roles), having a post-secondary degree or salary exceeding 4,000 Emirati dirhams per month.

Employer implications

The government has long struggled to attract Emiratis to the private sector and reduce its reliance on foreign workers, leading it to revise Emiratization requirements on multiple occasions. The International Labour Organization estimates that roughly 90% of the private sector labor force is composed of foreign nationals; however, the latest changes represent notably stronger requirements and harsher penalties for noncompliance, increasing over time. As such, employers should review the upcoming requirements and consider the impact on their current and future staffing.

Contact

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Steve Clements

Senior Director, Integrated & Global Solutions, CEEMEA

email Email phone +971 44 55 1743

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