Over the past couple of years, there have been major developments in the rules governing Emiratization in the private sector. In line with these developments, in June 2023, Ministerial Decision No. 296/2023 On the Standards of Imposition of Administrative Fines According to Cabinet Decision No. 95/2022 on the Offences And Administrative Fines Related to the Initiatives and Programs of the Emirati Talent Competitiveness Council (NAFIS), and Its Amendments (hereinafter referred to as ‘Ministerial Decision’), has been issued to address the procedure for imposition of administrative fines for various offences in relation to Emiratization.
In our previous alert titled Foolish to fake it: risks and penalties of not following Emiratization rules, we spoke about the penalties imposed by the MOHRE and the NAFIS Council for not meeting the Emiratization targets and for various offences amounting to ‘Fake Emiratization’. This alert serves as an update on the same by referring to legislative developments in 2023.
Cabinet Decision No. 44/2023 issued in April 2023, inserted a new clause in Cabinet Decision No. 95/2022, under which an establishment circumventing the Emiratization targets by reducing the numbers or modifying the classification of its workers or committing some form of fraud with the aim of circumventing Emiratization targets will be subject to a fine of AED 100,000 for the first offence, AED 300,000 for the second time and AED 500,000 for the third time and every time after.
A new development can also be seen in relation to businesses having less than 50 employees. The Emiratization drive initiated by the government is gaining traction and a large number of Emiratis are now being employed in the private sector.1 Capitalizing on this trend, the government has further expanded the Emiratization drive to smaller businesses in 14 key economic sectors.2 Establishments with a workforce ranging from 20 to 49 employees are now required to hire at least one Emirati employee by 2024.
What have been the most significant changes in the fees?
The Ministerial Decision has brought about some changes in relation to the fines imposed. The most significant change is in the procedure for imposition of fines, with a specified fine depending on whether the violation was a first-time violation or a recurring violation.
Cabinet Decision No. 95/2022 issued in October 2022, made provision for the violations and penalties to be imposed on violating establishments by MOHRE as well as violating beneficiaries by the NAFIS Council. The Decision was promulgated as a crackdown on establishments circumventing the Emiratization rules. In this Decision, the provisions for fines mentioned a minimum and maximum fine per case. The current Ministerial Decision issued in June 2023, lays down the procedure for the imposition of these fines, which has been explained in detail below.
An administrative fine of AED 20,000 for the first time, AED 50,000 for the second time and AED 100,000 for the third time and every subsequent violation, has been imposed on any person committing the following offences:
1. If the establishment has a fictitious Emiratization ratio;
2. In case of submitting incorrect documents or data in order to obtain the benefits related to NAFIS; and
3. If the establishment terminates the service of the beneficiary and reappoints him at the same establishment for the purpose of obtaining the Council’s support.
In case the establishment fails to report any change made to the terms of benefit of an Emirati employee, without a reason acceptable to the Council, an administrative fine of AED 20,000 for every case is imposed.
An administrative fine of AED 20,000 for every national is imposed for failing to comply with the Labour Law (Federal Law No. 33/2021) and its implementing regulations, in the following cases:
1. If the beneficiary did not join work after issuing work permit and after the establishment gets support of the Council
2. In case the beneficiary, after joining work, does not work on a regular basis
3. If the beneficiary ceases to work and the establishment fails to inform the Council.
In case of invalidity of the required documents or failure to renew them within the prescribed time limit, an administrative fine of AED 2,000 per month with a maximum of AED 5,000 is imposed.
Are there any additional points of note about the types of offences that are mentioned?
The types of offences mentioned under this Ministerial Decision are not new. The offences tackle instances of fake Emiratization, failure to comply with the applicable rules in relation to Emiratization, obtaining advantage of NAFIS benefits unfairly etc. It has now been clarified as to how these fines are to be imposed, especially in case of multiple violations by an establishment.
The offences laid down come from the MOHRE’s experience with violations committed by establishments in the past year, noting specifically how businesses may seek to circumvent the Emiratization targets. The fines laid down act as a mechanism to counter the fraudulent acts of establishments.
What does it mean for employers?
The employers face severe consequences for any violation of the Emiratization targets as well as rules against fake Emiratization. The fines imposed are higher when an offence is committed for the second time or any time after. Employers will have to take utmost care that they comply with the Emiratization targets as well as rules for implementation of Emiratization. Our advice would be that establishments closely monitor the developments in relation to Emiratization, and work together with governmental authorities to ensure that the entity is compliant with the applicable laws in this regard. Failure to do so would have undesirable consequences, ranging from imposition of hefty fines to legal action by the Public Prosecution.
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1 Number of Emiratis in private sector jumps to nearly 80,000, available at https://www.thenationalnews.com/uae/2023/07/09/more-than-70000-emiratis-now-working-in-private-sector-ministry-confirms/ (last accessed 26th July, 2023 at 10.15 AM)
2 UAE announces major change in Emiratisation rules, available at https://www.thenationalnews.com/uae/government/2023/07/11/private-companies-with-20-to-49-employees-now-included-in-emiratisation-drive/ (last accessed 26th July, 2023 at 10.40 AM)