Wage protection decree in U.A.E, ensures employees’ full salaries on time

Abu Dhabi: The Ministry of Human Resources and Emiratisation will start implementing the newly launched wages protection decree on 3rd October 2016. The decree, launched by Saqr Ghobash, the Minister for Human Resources and Emiratisation, ensures employees’ full payment of their salaries on time.

Maher Al Obed, Assistant Undersecretary for the Inspections Sector, said: “The decree fairly contributes towards labour market stability as it safeguards employees while keeping business owners interests, salaries paid on time is a major contribution towards labour rights protection which is highly recognised by the UAE.”

“We value such decisions as it promotes labour relations which in turn secures a balanced labour market productivity, and eventually turns out with positive outcomes for both labourers and employers,” he said.

The decree highlights companies employing over 100 workers. Such companies must pay wages within a period not exceeding 10 days from the registered payday in the (WPS) wages protection system, if they fail, the ministry will stop granting them any additional work permits starting from the 16th day of delay.

“Two main scenarios should be considered in this matter, firstly, salary delays occur usually if the company fails to pay wages a month from the due date, the second, which refers to completely refraining wages, starts after entering into the second month, however, the decree shall refer to each case in a different matter,” Al Obed said.

According to the decree, if a company delays wages a month from the due date, which means the company has entered into refrainment period, the ministry shall inform the judicial authorities and other related parties to take all necessary punitive measures against the violating company, additionally, the ministry halts other companies owned by the same employer, plus forbid any upcoming projects foreseen by the same owner.

Furthermore, if a company continues to refrain wages, the ministry shall take necessary measures to use the company’s bank guarantee, then slapped by a downgrade to a third category company, plus enable their workers' mobility options to other companies.

“If the company fails to pay wages for 60 days from the due date, then administrative fines shall follow, in addition to registered fines for failing to pay wages a month from the due date, as stated above in the first scenario,” Al Obed added.

Administrative fines reach Dh5000 per worker’s delayed wage pay, stretching a maximum of Dh50,000 dirhams in events which include multiple workers protesting about deferred wages past 60 days.

Fortunately, the ministry lifts bans on violating companies allowing them to apply for new work permits only if they promptly paid deferred wages during the first late month, while the ban lasts for 60 days if companies fail to fund wages for more than two months.

According to the decree, companies that pay refrained salaries yet record such violations repetitively shall face a doubled duration ban.

On the other hand, if the ministry notes salary delays or refrains by a company that employs less than 100 employees, the current regulations shall apply, which includes work permits ban to fines to court referrals, however, only if the company fails to pay wages within 60 days. If the company repeats such violations over the span of one year, then, in this case, the ministry shall apply penalties declared for companies hiring over 100 workers.

The decree clearly states that the ministry shall not proceed with any transactions with companies that did not register in the (WPS), in addition, owners of these companies would be kept aside until the registration in the (WPS) is completed

UAE bankruptcy law effective from 2017

In a media round table, the UAE’s Ministry of Finance (MoF) today shared details of the federal bankruptcy law which was recently approved by the UAE Cabinet on September 4.

The federal bankruptcy law falls under the directives of His Highness Sheikh Khalifa bin Zayed Al Nahyan, UAE President, and His Highness Sheikh Mohammad bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE, and Ruler of Dubai.

The new law works on identifying different ways to avoid bankruptcy cases and liquidation of the debtors’ funds, a comprehensive financial restructuring outside the scope of the court, composition procedures and the possibility to get new loans under terms set by the law.

Regulations will also prevent individuals from bypassing the law as there are a number of punishments, including a five-year prison sentence, as well as fines up to Dh1 million, the Ministry said in a media statement today.

The final draft of the law, which is considered an important addition to the UAE legislative system, was reviewed by Obaid Humaid Al Tayer, Minister of State for Financial Affairs.

The bankruptcy law sets up a new regulatory body the “Committee of Financial Restructuring”.

The UAE Cabinet will decide on the number of members and entities that will represent the committee, and will administer the committee’s law and its procedures.

The committee is in charge of: overseeing the procedures of financial restructuring outside the scope of the court, appointing experts in the field of financial restructuring, establishing an electronic record of individuals issued against them a bankruptcy ruling, by either imposing restrictions as ordered by the court or the loss of eligibility under the provisions of the law.

The committee is also responsible for organising and sponsoring initiatives that raise awareness among the public on the specification and objectives of the law, submitting periodical reports on the achievements, suggesting amendments to any provision of the law and determining any fees incurred, as well as any other tasks or mandates stated by the law or the UAE Cabinet.

Al Tayer highlighted that the Ministry sought to implement a law that is based on modern legislative and economic principles, while taking into consideration the global developments and changes taking place in the economic and business sectors.

These efforts have led to implementing the bankruptcy law, and distinguishing it from other laws on a regional level as well as in developed countries.

The law was set to match various bankruptcy cases, determine all legal tools to restructure the debtor’s business in accordance with specific terms and conditions as well as a legislative framework.

“Mature economies have proven the need to implement a bankruptcy law in each country that wishes to strengthen its economic status. The bankruptcy law is considered as one of the most important pillars for the local economy, as it provides protection for all parties, in addition to its pivotal role in attracting capital, in a safe and attractive investment environment and providing a protection legislation and legal acts,” Al Tayer added.

The law includes raising credit levels and financial guarantee within its legislative priority to strengthen the confidence among investors and boost the economy by enabling the financially distressed businesses to restructure, and pay their debts and obligations without disrupting the production process in accordance with transparent legal framework.

This makes it the only law which includes those specifications in the Arab region.

Which businesses are covered by the law

The law is implemented on:

-Companies that were established under commercial company laws, as well as the companies that were not established under the commercial company law

-Semi- or fully-owned companies by the federal or the local government where their establishment legislatives are under this law

-Companies and institutions established in free zones and which do not have provisions to regulate composition procedures or restructuring bankruptcy according to the Federal law No. 8 of 2004 concerning financial free zones
Any trader and licensed civil company
Al Tayer added: “We are delighted to adopt the final draft of the bankruptcy law, to encourage entrepreneurs who seek a secure investment environment to direct their investments in the country, while strengthening their trust in the legislative and legal infrastructure in the UAE that implements clear and transparent laws preserving their rights and achieving balance between the creditor and the debtor as well as prioritise creditors with guarantees over the ones without guarantees.

“The bankruptcy law will contribute in supporting the strategic plans adopted by UAE to develop its economic, financial and legislative structure.

"The law will also raise the UAE’s competitiveness levels in international reports, which will support the sustainable economic growth and enhance the national economy, which in return support the sustainable economic growth and promote the national economy on a global level.”

UAE Cabinet approves final draft of federal bankruptcy law

The final draft of the federal bankruptcy law has been approved by the UAE Cabinet, Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, said on Sunday.

The legislation aims to "promote our economy’s attractiveness for investments and to facilitate business", according to a tweet from Sheikh Mohammed.

Last week the economy minister said that the law was needed to help owners of small- and medium-sized enterprises weather a slowing economy and rising levels of bad debt.

Sultan Al Mansouri said that he expected the law to be finalised within a matter of months but that it would need to be approved by the Federal National Council before it becomes law.

The law will put a moratorium on sending people to jail for bounced cheques until a restructuring plan for business owners has been agreed with creditors, a senior government official told Over the past two years a number of small business owners in the UAE have fled the country leaving unpaid loans in their wake in fear of being jailed for defaulting on debt and other financial obligations.

For years, observers have urged the government to put in place a raft of legislation to make it easier for SMEs, the lifeblood of the economy, to thrive.

Earlier this year, consultancy firm KPMG recommended in a report on small businesses that the most urgent of those changes is the implementation of a comprehensive bankruptcy law to make it easier for SMEs to cope with insolvency in ways other than fleeing the country.

Abdul Aziz Al Ghurair, the chief executive of Mashreq and head of the UAE Banks Federation, said in November that some small business owners had skipped town, leaving about Dh5 billion of unsettled loans.

In May, however, Mr Al Ghurair said the potential fallout from rising levels of SME bad debt had been contained as banks work with business owners to restructure debt.

Mandatory benefits to employees in Jebel Ali Free Zone

Employees working in firms operating under the jurisdiction of the Jebel Ali Free Zone Authority (Jafza) are entitled to mandatory termination benefits as per the laws of the free zone. If the dismissal is deemed to be arbitrary, the employee shall be entitled to compensation in addition to severance payments due that are governed by the employment contracts in Jafza.

Compensation you are entitled to: According to Rule 11.8.7 of Jafza employment law, the amount of compensation that will be payable to a terminated employee shall be decided by the deemed authority here and will not exceed three times the total of the basic monthly wage and allowances as specified in the employment agreement.

Gratuity payment at termination: An employee whose service exceeds one year shall be entitled to a gratuity payment on termination of service at the rate of 21 calendar days pay of the last month’s basic salary (or more if the employment agreement so specifies) for each year of service for the first 5 years.

For each additional year, the amount increases to 30 calendar days of the last month’s basic salary, provided that the maximum payment does not exceed two years’ basic salary.

After the first year, payment will be pro-rata for the period served. The regulation clarifies that gratuity shall be calculated at the basic pay rate as defined in the employment agreement.

Airfare to home country: When an employee’s services are terminated, airfare to the international airport nearest to the employee's home should be offered. This is applicable at the expiry of the employment agreement or when the employment agreement is terminated by the client prior to its expiry.

If an employee’s annual contract is automatically renewed in accordance with the employment agreement, the employee is entitled to airfare either in the event of submitting a resignation or on dismissal, whenever this occurs.

However, if the employee has already availed the ticket for the completed contract period, s/he will not be entitled to an additional airfare for the same period.

A free service certificate :If the terminated employee wishes for some kind of record, he can request a service certificate, which is to be provided free of charge. The certificate will have details of the employee such as period of service, work performed while employed, final rate of pay and bonus, if any, and a character reference. These things can come in handy while applying for a new job elsewhere.

UAE Finance Ministry expects approval of federal debt law this year

Younis Al Khouri, the undersecretary at the Ministry of Finance, speaks during a news conference announcing the release of the statistical report on the Gulf Common Market at the Ministry of Finance in Abu Dhabi on August 2, 2016. Christopher Pike / The National

The UAE finance ministry expects this year the approval of a federal debt law that will allow the government to sell bonds on a federal level, a ministry official said.

The ministry has been working on the federal debt law for years. Currently, individual emirates, mainly Abu Dhabi and Dubai, have tapped the international bond markets.

"We have one clause outstanding, which is the debt ceiling and the servicing of the debt," said Younis Al Khouri, the undersecretary at the Ministry of Finance. "Once we agree with the central bank then we will go to the council of ministers for approval and after that is the FNC (Federal National Council) approval.

The UAE could raise between Dh80 billion and Dh100bn via a bond sale, Mr Al Khouri said in February.

Debt issuance in the UAE is expected to accelerate as the country seeks to finance a fiscal deficit, which reached 2.1 per cent of GDP last year, according to IMF estimates.

In April, Abu Dhabi raised US$5bn from the international debt markets, its first bond sale since 2009.

The IMF has called on the UAE to tap the bond markets and the assets of its sovereign wealth funds rather than draw down its local bank deposits to balance its budget.

The IMF is forecasting that the UAE’s cumulative fiscal deficit will reach $18.4bn between this year and 2021 as low oil prices reduce government income.

As a result of expected higher debt issuance, the country’s gross public debt to GDP ratio is forecast to rise to 17 per cent next year from 16.6 per cent at the end of last year, the fund said. The debt-to-GDP ratio averaged 18.5 per cent between 2005 and 2013.