Wednesday, March 30, 2011

Sponsor system in UAE to stay for foreseeable future

Flexibility in transferring sponsor will benefit market, say legal experts

Recent proposed changes to UAE law relating to the sponsorship system will result in a more flexible labour market, but it is unlikely to lead to the abolition of the system any time soon, say experts.

According to Alexander McGeoch, Head/Employment & General Legal Services at Hadef & Partners, Dubai, the impact of the easing of certain restriction on switching sponsors may not be as big as some employees are hoping for.

“It is doubtful whether, in the UAE, we will see greatly increased flexibility in the sponsorship transfer process – still less the complete abolition of the ‘sponsor’ requirement – either this year or in the foreseeable future,” he told Emirates 24|7.

“The reason is that the sponsorship system is seen by UAE authorities not only as a means of ensuring a degree of stability in the labour market but also, to an extent, as a method of guaranteeing social cohesion,” he added.

In its recent bulletin, legal firm Clyde & Co too echoes the sentiment. “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,” it said.

According to a study, the sponsorship system costs the country about Dh50 billion per annum to host 4 million foreign workers, or an average of Dh12,500 per worker every year. In 2009, GCC peer Bahrain scrapped the traditional sponsorship system that allows the government to have great control over the movement of workers.

The UAE too has taken steps recently that ease certain restrictions on the movement of expatriate employees with the abolition of the requirement of a No Objection Certificates (NoC), which restricted workers from switching jobs without the express consent of their previous employer. Workers who have been in a job for two years can now move with just a stamp from the ministry.

“Over time, the strict rules regulating the transfer from one employer/sponsor to another have been relaxed. This increasing latitude has most notably occurred in the case of employees in the professional and managerial categories but the policy of granting non-nationals greater freedom to change employment has also been extended to benefit skilled workers,” McGeoch said.

“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,” the Clyde & Co. bulletin pointed out.

“There is no longer a requirement on an employee who has worked for his employer for less than three years to produce a NOC from his former employer in order to get the six-month employment ban lifted,” it added.

The remaining constraints, however, may be necessary in the interim to keep the labour market balanced. “These considerations are important for a small country which has traditionally relied on foreign imported labour, particularly in the construction sector, and where the expatriate workforce vastly outnumbers the local population,” explained McGeoch.

“More recently, there has been some liberalisation of the ‘sponsorship transfer’ rules applying to lower paid manual workers. However, it seems most unlikely, for the reasons indicated, that there will any significant further moves in that direction any time soon,” he said.

“[I]t 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 workforce, will result in a more flexible labour market,” the Clyde & Co. bulletin said.

According to experts at Michael Page Consultants, “the revised regulations should allow for increased movement for expatriate professionals and introduce flexibility to the local labour market.”

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