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Significant Labour Law Changes in the UAE and KSA: What Employers Need to Know

Authors

Mahmoud Shalabi

Senior Counsel Employment Law & Compliance - Middle East & North Africa

In recent months, both the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia (KSA) have introduced significant amendments to their labour laws. These changes aim to enhance protections for employees, increase compliance for employers, and align with broader visions for economic development.

UAE Labour Law Changes: Effective August 2024

On July 29, 2024, the UAE enacted Federal Decree Law 9 of 2024, which brought major updates to Federal Decree Law 33 of 2021. The amendments, which came into force on August 31, 2024, apply to all private sector employees except those based in the Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC).

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Below are the key changes:

1. Individual Labour Disputes (Article 54)

Extended Timeframe for Filing Disputes: Employees now have up to two years from the date of termination to file a complaint with the relevant labour authority, giving them more time to pursue legal action if necessary.
New Final Appeal Process for Claims Under AED 50,000: Such claims will now be adjudicated in the Court of First Instance, bypassing the Court of Appeal, streamlining the process for lower-value claims.
Longer Court Adjudication Period: The time given to courts to resolve these cases has been extended from 15 to 30 working days, offering more flexibility in handling disputes.

2. Enhanced Labour Penalties (Article 60)

Employers now face significantly higher penalties for labour law violations, with fines ranging from 100,000 AED to 1 million AED. The upper penalty limit has increased from AED 200,000 to AED 1 million. Violations that can result in these fines include:

Recruiting employees but not providing them work.
Employing workers without proper work permits.
Misusing work permits.
Employing minors without adhering to UAE labour laws.
Closing businesses or suspending operations without settling employee entitlements.
Fictitious employment practices.

KSA Labour Law Changes: Aligned with Vision 2030

On August 6, 2024, the KSA Ministry of Human Resources and Social Development announced changes to the labour law in line with Saudi Arabia's ‘Vision 2030’. Vision 2030 is a government programme to diversify Saudi Arabia socially, economically and culturally and help establish the country as a global leader. These amendments, set to take effect 180 days from the publication of implementing regulations, aim to create a more stable, attractive, and compliant work environment.

Key updates include:

1. Probation Periods for Labour Contracts

Employers can now include a probation period of up to 180 days in contracts without requiring a separate agreement with the employee, simplifying the hiring process.

2. Changes to Fixed-Term Contracts (FTC)

Limiting Contract Periods: Fixed-term contracts are now limited to one year, if no specific term is stated.
Resignation from FTCs: Employees can resign by submitting a formal request, and employers have the right to postpone the resignation for up to 60 days. If the employer does not respond to the resignation within 30 days, the contract will terminate automatically.

3. Housing and Transportation Allowances

Employers are now required to provide either adequate housing and transportation or cash allowances for these needs, ensuring employees have the necessary resources for their daily lives.

4. Right of Grievance

Employees have the right to file grievances related to penalties imposed on them. If no decision is made within 15 days of submission, employees can escalate the matter to the Labour Court. This ensures workers have a clear path to contest unfair treatment.

5. Overtime Pay Flexibility

Employers can now substitute overtime pay with compensatory paid leave, provided they obtain the employee’s consent, offering more flexibility in managing extra work hours.

6. Bereavement and Maternity Leave

Bereavement Leave: Employees are now entitled to three days of paid leave following the death of a sibling.
Maternity Leave: Maternity leave has been extended from 10 to 12 weeks.

Impact of the Labour Law Changes

The updates to labour laws in both the UAE and KSA reflect a growing focus on employee protection, compliance, and stability within the workplace.

These amendments aim to:

Streamline the handling of employment disputes.
Offer enhanced protection and security for employees.
Impose higher penalties on employers as a deterrent against violations.
Reinforce the governments' commitment to compliance enforcement and the improvement of the work environment.

How Atlas Can Help

Managing compliance with local labour laws is critical for businesses expanding internationally or operating in multiple jurisdictions. Atlas helps businesses navigate these complexities by offering Employer of Record (EOR) services, ensuring that your workforce complies with local regulations in over 160 countries.

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