11. Oktober 2022

UAE: new Emiratisation requirements and consequences for failing to comply

Emiratisation is an initiative introduced by the UAE government to promote the employment of UAE nationals within the private sector. The current Emiratisation quotas are:

2% for commercial entities with over 50 employees
4% for banks
5% for insurance companies.

The Emiratisation quotas are heavily enforced for the banking and insurance sectors; however, the quotas for other commercial entities were not enforced.

The new rules

The Ministry of Human Resources and Emiratisation (MOHRE) issued a new Ministerial Decision (Ministerial Decision No. 279 of 2022) in relation to Emiratisation in the UAE, following the introduction of the UAE Federal Labour Law (Federal Decree Law No. 33 of 2021) together with UAE Cabinet Resolution No.1 of 2022.

We summarise the new Emiratisation requirements in this article.

The new Emiratisation requirements will take effect from 1 January 2023 and applies to all employers that fall under the jurisdiction of the MOHRE (ie those companies based onshore (mainland UAE)). The requirements will not not apply to companies that are based in free zones.

Private sector companies with 50 or more employees will be required to increase their UAE national workforce by 2% per year. The Emiratisation quota is to be calculated by reference to the number of skilled workers in the company:

Number of skilled workers

Minimum target for recruitment of national employees

0-50

51-100

101-150

151 or above

One national

Two nationals

Three nationals

One national for every 50 workers (or less than 50)

The aim of the Emiratisation requirements is to ensure that the private sector workforce comprises a minimum of 10% UAE nationals by 2026.

There are separate Emiratisation quotas for the banking and insurance sectors; the quotas will remain at 4% and 5% respectively.

An employee is classified as a skilled worker if the following conditions are met:

the employee falls into one of the following five categories:
- Level 1: legislators, managers, and business executives.
- Level 2: professionals in scientific, technical and human fields.
- Level 3: technicians in scientific, technical and humanitarian fields.
- Level 4: writing professionals.
- Level 5: service and sales occupations.
has obtained a certificate higher than a high school certificate or an equivalent certificate
the certificate must be attested by the competent authorities
have a monthly salary (excluding commission) of not be less than AED 4,000

The MOHRE will categories companies into three tiers to incentivise compliance with the Emiratisation requirements as follows.

Category	Details	Incentives/penalties
(1)	To fall under this category (1), companies need to achieve at least one of the following objectives: increase their annual Emiratisation quotas at least three times above the target hire and train at least 500 UAE nationals annually being a small/medium company owned by a young UAE national, or being a qualifying training and employment centre.	MOHRE will set work permit fees at a maximum of AED 250 for two years. The employment of UAE/GCC nationals will be exempt from these fees.
(2)	Companies that do not meet the above category (1), but which nevertheless meet the Emiratisation quota of 2% per year will fall under this category (2).	MOHRE will set work permit fees for employers that fall in this category (2) at AED 1,200 for two years. The employment of UAE/GCC nationals will be exempt from these fees.
(3)	Establishments that do not meet the Emiratisation quota.	For companies that fall under category (3), a fine of AED 6,000 per month in respect of each UAE national not hired will be imposed. This fine will be increased on an annual basis by AED 1,000 per month.

Category

Details

Incentives/penalties

(1)

To fall under this category (1), companies need to achieve at least one of the following objectives:

increase their annual Emiratisation quotas at least three times above the target
hire and train at least 500 UAE nationals annually
being a small/medium company owned by a young UAE national, or
being a qualifying training and employment centre.

MOHRE will set work permit fees at a maximum of AED 250 for two years. The employment of UAE/GCC nationals will be exempt from these fees.

(2)

Companies that do not meet the above category (1), but which nevertheless meet the Emiratisation quota of 2% per year will fall under this category (2).

MOHRE will set work permit fees for employers that fall in this category (2) at AED 1,200 for two years. The employment of UAE/GCC nationals will be exempt from these fees.

(3)

Establishments that do not meet the Emiratisation quota.

For companies that fall under category (3), a fine of AED 6,000 per month in respect of each UAE national not hired will be imposed. This fine will be increased on an annual basis by AED 1,000 per month.

NAFIS

The new Emiratisation requirements were authorised as part of the NAFIS programme, which is a government programme designed to increase the number of UAE nationals in the private sector. It is mandatory for all MOHRE registered companies to ensure that they are enrolled with NAFIS. NAFIS also operates a recruitment portal with the aim of connecting job applicants with companies, therefore, assisting companies in sourcing UAE nationals.

The NAFIS scheme offers a number of benefits to those employers/UAE nationals that are registered, including reduced employer pension contributions for UAE nationals and salary contribution of up to AED 8,000 per month for each UAE nationals hired under the scheme.

Next steps

The new Emiratisation requirements take effect on 1 January 2023 and the imposition of penalties for those companies that are not compliant with the requirements will start on the same date. Therefore it is imperative that all companies that are required to adhere to the new Emiratisation requirements take prompt action to ensure that they are meeting the Emiratisation targets by 1 January 2023.

If you have any questions on the Emiratisation rules, please do not hesitate to contact Kristina Broci.

Rechtsgebiete und Gruppen Employment, Pensions & Mobility