United Arab Emirates: Transferring Sponsorship in the UAE – Increased Flexibility for 2011?

Last Updated: 16 March 2011
Article by Simon Adams

Introduction

Like many of the countries in the Arabian Peninsula, the United Arab Emirates (UAE) attracts a high percentage of foreign workers.  Individuals from across the world have long been drawn to the Gulf, and the UAE in particular, by rapid economic growth and the potential for lucrative employment opportunities that comes with it.

Perhaps keen to stabilise an often transient workforce, the UAE Ministry of Labour previously enforced a rigid sponsorship transfer regime which curbed the ability of expatriate employees to change their jobs too frequently.

Following the global economic downturn, more flexible rules have been enacted by the Ministry of Labour to regulate the transfer of non national workers in the UAE.  The start of 2011, in particular, has seen the introduction of a number of new Cabinet and Ministerial Resolutions which affect the ability of workers in the UAE to change jobs more easily and with greater frequency.  This article discusses some of these recent legislative changes. It is worth noting, however, that the following summary focuses on the transfer between employers located "onshore" in the UAE.  The move by an individual from employment onshore, into one of the UAE's free zones (or vice verse,) is outside the scope of this article.

Employee Sponsorship

For expatriates (who are otherwise referred to as "non nationals"), the right to live in the UAE is coupled with the right to work. A non national is required to be "sponsored" by his or her employer, in order to obtain an employment visa and work permit. Subject to their being able to satisfy certain conditions, such as a minimum salary requirement, employees are, in turn, entitled to sponsor their dependents to enable them to reside in the UAE. For an employee, the issue of changing jobs is therefore inextricably linked to how easy it is to transfer sponsorship from one employer to another.

Previous Methods of Transferring Sponsorship

Prior to the 1 January 2011, there were two mechanisms through which an employee could seek to transfer his or her sponsorship to a different employer.  These are set out below:

  1. Sponsorship Transfer

    This required the employee to obtain the consent of his previous employer in order to effect the transfer of his sponsorship.  The employee was required to have served at least one year of continuous service with his previous employer.  If the employee had completed less than one year's service the sponsorship transfer application could still be accepted by the Ministry of Labour but an additional fee would be payable. 
  2. Cancellation of Work Permit and Application for New Work Permit

    On the cancellation of the employee's work permit, a 6 month employment ban would automatically be imposed by the Ministry of Labour which meant that any applications for a new work permit on the employee's behalf by a different employer would be automatically rejected by the Ministry of Labour.

The 6 month employment could be lifted in the following circumstances:

  • The former employer could issue a "No Objection Certificate" (NOC) declaring that it did not object to the issuance of a new work permit for the employee. In most cases, the employee would still need to have completed at least one year of continuous service with his former employer for this to be a viable option;

OR

  • The employee could pay a prescribed fee to have the 6 month ban lifted. In most cases, this option was only available if the employee had completed at least 3 years of service with his former employer.

1 January 2011 – Increased Sponsorship Transfer Flexibility

In general, the use of the Work Permit Cancellation mechanism set out above was more prevalent than the Sponsorship Transfer mechanism (which was more expensive and required the co-operation of both the former and new employer).  However, the automatic imposition of the 6 month employment ban associated with the Work Permit Cancellation mechanism, and the limited circumstances through which this could be lifted, often made life difficult for an employee wishing to move from one employer to another.  In particular, an employee who had completed less than 3 years of service would struggle to get the ban lifted if he did not have the consent of his former employer.  Employers were under no legal duty to provide an NOC.  The NOC could, therefore, be used as a tool by an unscrupulous employer, either to force an employee to accept a lower end of service settlement, or simply to limit the employee's chances of taking up alternative employment elsewhere.

Cabinet Decision No. 25 of 2010 introduced a new regime to regulate the movement of workers in the UAE, as of the 1 January 2011.  The "Sponsorship Transfer" mechanism was abolished.  Instead, any non national employee wishing to move from one employer to another is now required to cancel his existing work permit and apply for a new work permit, sponsored by his new employer.  However, the Ministry of Labour's 6 month employment ban is no longer automatically applied on cancellation of the employee's current work permit, subject to the following conditions:

Condition One

The employment terminated on the basis of mutual consent, or in accordance with the terms of the contract (i.e. requisite notice has been provided).

AND

Condition Two

The employee has completed at least two years of continuous service with his previous employer.

Exceptions

If either of these two conditions are not satisfied, the Ministry of Labour might not impose a 6 month employment ban if the employee can prove that the termination of employment is covered by one of the exceptions set out in Cabinet Decision No. 25 of 2010.

Exceptions to Condition One

The Ministry of Labour might agree to waive the requirement set out in Condition One:

  • if the employer has breached any of its legal or contractual obligations towards the employee. For example, if the employer has delayed paying the employee his salary for a period exceeding 60 days.
  • if the employee is not the cause of the termination of the employment. For example,

    1. where the employee has filed a complaint against his employer with the Ministry of Labour and this has been forwarded by the Ministry to the labour courts;
    2.  where the employee can show he was terminated "unilaterally" by the employer. This exception could arguably be applied to employees who have been dismissed on economic grounds, including redundancy.

Exceptions to Condition Two

The Ministry of Labour might agree to waive the requirement set out in Condition Two:

  • if the employee is classified within the "first skill level" meaning that he holds Bachelors degree (or higher), provided that his new salary is at least AED 12,000;
  • if the employee is classified within the "second skill level" meaning that he holds Diploma provided that his new salary is at least AED 7,000;
  • if the employee is classified within the third skill level meaning that he holds a High School degree provided that his new salary is at least AED 5,000;
  • if the employer has violated any of its legal obligations towards the employee.  For example, if the employer has delayed paying the employee his salary for a period exceeding 60 days;
  • if the employee is not the cause of the termination of the employment (as set out above);
  • if the employee is moving to another establishment owned by his employer or if the employer is a shareholder in such establishment.

Points to Note

Where an employment contract is for a fixed term, the contract cannot be terminated or breached by the employee on the grounds that he or she has completed two years of service and wishes to move to another employer.  Employees on fixed term contracts who seek to cancel their work permit prematurely will be subject to a one-year ban.

The exception to this rule is where the employer and employee have agreed to terminate the fixed term contract prior to its date of expiration by mutual consent. 

Another key point to note is that the recommended salaries are not minimum salaries but a means of regulated movement between employers and relate to the imposition or waiver of the 6 month employment ban.  Also the skill set an employee falls into is commensurate with the role he or she is carrying out, e.g. the employee may have a degree certificate but be performing a role commensurate to a diploma level, e.g. a secretarial or administrative role.  In such a situation a new employer could apply for sponsorship on the basis of skill set 2, with the lower recommended salary provided the employee could submit the necessary educational or professional certificates duly attested.

New Work Permits

In addition to introducing a more flexible mechanism for transferring sponsorship from one employer to another, Cabinet Resolution No. 25 of 2010 also introduced five new work permits:

1.  Part Time Work Permit

This can be issued to a national or non-national who is recruited for a role where they are to be working less than the normal working hours of full time employees within an organisation, undertaking the same job.  Normal working hours for a full time employee are generally 8 hours per day, excluding lunch.  The permit is valid for a period not exceeding one year.

Previously, a non national was not permitted to work for any entity other than the entity which sponsored him or her for work and residence purposes.  However, Ministerial Resolution 1188 of 2010 Concerning the Regulations and Conditions of Issuing Internal Work Permits which followed Cabinet Resolution No. 25 of 2010 specifically provides that the Ministry of Labour may, at its sole discretion, issue a part time work permit for an employee to work for more than one establishment. This development means that it will now be possible for an individual to take up a second part time job, in addition to any other full time or part time employment he holds.  However, in such circumstances Ministerial Resolution 1188 of 2010 provides that the approval of the first employer is necessary. 

It is not clear what obligations each employer of a part time employee, who also holds another job, has towards that employee.  Currently, the UAE Federal Labour Law (Law No.8 of 1980, as amended) (the Labour Law) does not specifically provide for part time employment and, therefore, no distinction is made with respect to the benefits owed to a full time employee and a part time employee.  For example, part time employees under the Labour Law are entitled to the same end of service gratuity, annual leave, sick leave and maternity benefits as full time employees and there is no provision for pro-rata entitlements.  However, given the scope for an employee to legitimately work for more than one employer at the same time, it remains to be seen whether the Ministry of Labour will maintain that the employee is entitled to full benefits under the Labour Law from each employer, or whether new rules will be introduced to govern the benefits owed to individuals who hold more than one job.

2.  Temporary Work Permit

This type of permit is available to a national or non-national who is to be employed on a specific project or in a role which is not for more than six months in duration.  Ministerial Resolution 1188 of 2010 also provides that the Ministry of Labour may issue a temporary work permit to an employee who has instituted a claim in the labour courts.  This permit therefore, enables employees who are involved in litigation against their former employers to continue to earn a living while claims against any former employer proceed through the courts.

Temporary work permits are also available to:

  • Employees who are already registered with the Ministry of Labour and hold valid labour cards. Such employees will need to obtain the prior approval of their current employer before being provided with a part-time permit (unless they have already filed a claim against their employer in the labour courts, as set out above).
  • Persons who are sponsored for UAE residency by a family member (e.g. housewives).
  • Students who are over the age of 18.
  • Government servants.

It is worth noting that the above categories are also eligible to obtain part time work permits.

3. Worker Transfer Permit

This applies where a non-national employee wishes to transfer his employment from one employer to another.  For this permit to apply, both the former and future employer should be registered with the Ministry of Labour.

4.  Work Permit for Personnel Sponsored by their Kinship

This permit was introduced in Cabinet Resolution No. 25 of 2010 and further detail is provided in Ministerial Resolution No. 1188 of 2010.  The permit applies to the following individuals who are sponsored for UAE residence purposes by their family:

  • women below the age of 18,
  • the husband of a UAE woman,
  • children of a UAE national woman.

5.  Juvenile Persons Work Permit

This permit can be issued to nationals or non-nationals between the ages of 15 and 18.  The permit is valid for a period not exceeding one year.  Ministerial Resolution No. 1189 of 2010 sets out the conditions attached to the issuance of this permit, including, the need to obtain the consent of the minor's custodian and a prohibition against the minor working at night or for more than six hours a day.

Reclassification of Establishments

Finally, it is worth briefly noting that Ministerial Resolution No. 1187 of 2010 was also recently issued by the authorities.  This resolution introduces new categories of classification for employers and also sets out new penalties for violations of the Labour Law.

Conclusion

There is no longer a requirement on an employee who has worked for his employer for less than 3 years to produce a NOC from his former employer in order to get the 6 month employment ban lifted.  Some conditions for being able to move from one employer to another remain in place.  However, it is hoped that the introduction of the new rules to regulate the transfer of employees in the UAE and new work permits, aimed at making it easier for a broader cross section of society to enter the work force, will result in a more flexible labour market.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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