New employment law – DIFC taking international cues

By Surabhi Singhi

06-2019

In today’s world the only constant is the assurance of continuing change and changes to the legal system are no longer optional to keep pace with complexities of business, competing markets and international practices becoming prevalent in the organisations.

In the recent years, there has been a major regulatory shift in Dubai International Financial Centre ("DIFC") with new companies' regulations, trusts law, insolvency regulations and real estate law being implemented. A new employment law has been in offing for some time now in DIFC and on 30 May 2019, a new DIFC employment law (Law No. 2 of 2019) has been enacted which will take effect from 28 August 2019 ("New Employment Law"). 

The New Employment Law has aimed at creating a harmony by balancing the requirements of both sides of a coin i.e. the employer and employee. Provisions in the New Employment Law including reduction of the statutory sick pay, inclusion of a limitation period for bringing employment claims, limiting the mandatory late penalty payments for gratuity amounts and recognising settlement agreements between employers and employees are a boon for the employers operating in DIFC. Introduction of various specific penalties in relation to ensuring basic conditions of employment, visa and residency sponsorship will provide means for the employees to ensure statutory protection of their rights.

Various prevalent regional and international practices have now been codified in the New Employment Law. Statutory recognition has been given to the concept of secondment in the DIFC. Secondment has increasingly become common in the UAE as several multinationals have employees working across locations depending on the need of the business. Further, several companies in the UAE have also been looking at secondment as an option for mobility of their employees across different emirates in the country. The New Employment Law also includes provisions on part-time employment in DIFC, which was recently introduced for mainland employees in the latter half of 2018 and clarifies the benefits available for such part-time employees. Provisions for paternity leave and time-off for spouses for ante-natal care has now been given statutory recognition in the New Employment Law.

There are also talks to replace the current end of service gratuity system in DIFC, where a lump sum is paid when an employee leaves employment, with a DIFC Employee Workplace Savings (DEWS) Trust savings scheme, similar to employer social security contribution schemes existing in several parts of the world. While this has not been included in the New Employment Law, it is expected to come into force from 1 January 2020. This will be a big leap as the organisations will now need to move the gratuity accruals from a provision based system to actual cash accruals and will provide greater certainty to employees to receive their entitlements at the end of their employment.

While this New Employment Law is expected to offer a more secure work environment to all employees and is aimed at fostering robust working relationships between employer and employees, there are likely to be initial hiccups as organisations will be required to amend their HR rules and policies to be in compliance and any change in an organisational HR policy (whether for the betterment of the employee or employer) is usually not an easy task. The New Employment Law is a welcome step on many counts and so it's time for all of us to get ready for this change.