Changes to the UAE’s worker classification system

By January 2, 2018News

Diversification and a knowledge-based economy are the methods the UAE are employing to improve their economy. Attracting and retaining top talent from around the world is their strategy in the process of cultivating a knowledge-based economy.

Meanwhile, employers will feel the effect of this as the UAE addresses the skills and qualifications of employees. Authorities are now looking at using a new system that rewards companies that hire highly skilled or qualified employees and penalize those that don’t. Although, currently, qualifications are recognized by the authorities, this new system will reinforce companies who work towards this goal.

Evolution of the company classification system

In 2005, the Ministry of Labour and Social Affairs (now the Ministry of Human Resources and Emiratisation – MOHRE) created a system to evaluate a company’s compliance with the regulations and laws they’d set.

Companies were ranked on a 1, 2, 3 basis, depending on their commitment to Emiratization, cultural diversity and records of violations; with 1 being the highest rank and 3 being the lowest.

Companies in the first category received incentives and benefited from advantages such as, lower governmental fees and were given priority when processing their labour-related applications. Companies in categories 2 and 3 faced higher recruitment fees and longer processing times for their labour-related applications.

In 2001, bank guarantees were introduced as a mandatory part of the recruitment process and were used as a financial guarantee against potential workers rights violation; Dhs3,000 ($817) had to be paid for each employee under the company’s sponsorship. Those exempt from the fees were those in oil and gas, insurance, tourism, those with an industrial license issued by the Ministry of Finance, and Ministry of Economy and companies in category 1.

Companies in category 2 with more than 500 workers were offered a discounted fee of Dhs 1000 ($272).

In 2010, authorities adjusted the category system again and added subcategories into category 2, making it category 1, 2A, 2B, 2C, and 3. As most companies fell into category 2, further differentiation was necessary. At the same time, ensuring salary was paid at the specified time and that certain employees were provided accommodation also became high importance evaluating factors.

Recent changes

Further changes will be made at the end of 2017, with an additional subcategory D being added, and the MOHRE paying higher consideration to employee qualifications. This is expected to affect the way that benefits, including exemptions from bank guarantees, are applied.

According to new law expected to be implemented at the end of November, companies that hire skilled workers will receive discounted governmental fees for new work permits and renewal of existing work permits.

Companies in category 2B, for example, will pay Dhs 1,000 for a work permit for a worker with qualifications, compared to Dhs 2,200 ($600) for an unskilled worker. Currently, Dhs 1,500 ($408) must be paid per employee regardless of their qualifications.

Those in subcategory 2D will pay the highest fees of the second category, Dhs 2,000 ($545) or Dhs 3,200 ($871) depending on qualifications. Companies in category 3 will pay a standard fee of Dhs 5,000 ($1,361) regardless of worker qualifications.

The MOHRE recognizes 5 levels of professional workers, with levels 1 and 2 having a university degree certificate, a minimum of high school diploma for level 3 and levels 4 and 5 representing workers with no degree requirements.

Furthermore, companies in all 3 categories will be exempt from bank guarantees as long as skilled workers are hired. Category 1 companies, however, will be exempt from bank guarantees regardless of employee qualifications.

Favoring companies that hire those with skills is one step towards creating a knowledge-based economy. However, companies should be prepared for stricter Emiratization regulations.

Part of the UAE’s National Agenda is to have more Emiratis working in the private sector. Companies that offer flexible work conditions and training opportunities will be able to encourage top UAE talent to move from the public to the private sector and therefore increase workforce competitiveness.

Employers in the UAE should therefore plan their recruitment strategies to accommodate the Emiratization policies whilst hiring the right talent for the job.