Tim Elliot: Welcome to another edition of Lawgical, the Gulf Region’s first and only legal podcast. It’s a regular weekly podcast from the Dubai-based law firm, HPL Yamalova & Plewka. I’m Tim Elliot, and as ever I’m here at the firm’s offices on the 18th floor of Reef Tower in Jumeirah Lakes Towers in sunny Dubai with the Managing Partner, Ludmila Yamalova. It’s always a pleasure.
Ludmila Yamalova: Lovely to see you too.
Tim Elliot: The theme of this edition of Lawgical: Employment considerations. I’ll explain what that means. Now, this summer has seen some change to work permit laws in the United Arab Emirates. Government fees, first of all, for somewhere close to 150 services and transactions have been reduced. It was an announcement made in response to a cabinet resolution, number 51 of 2019, by the Minister of Human Resources and Emiratization. That was announced on July 10, 2019. We will consider the decision and its impact shortly.
First of all, though perhaps more interestingly, effective July 28, 2019 the Ministry of Human Resources and Amortization announced they’ve started issuing work permits for establishments recruiting male workers sponsored by families. Now, Ludmila, previously workers were almost exclusively issued to women sponsored by fathers or husbands, a male direct relative. Let’s start with this. It’s going to be a popular move, particularly given where we are in the economic cycle. Times are tight now.
Ludmila Yamalova: Indeed, and therefore this particular initiative and development have been much welcomed. Then in general terms, the government continues to introduce more flexible and more inclusive, if you will, immigration policies to encourage people to remain in the country even with the changing economic tides. As you rightfully pointed out, the times are challenging right now, and companies are continuing to reexamine their staff and their hiring practices and more and more announcements are made about downsizing and another round of termination and such, so these are very relevant and very real pains that are happening right now for a lot of people who have moved here years ago and have called this place their home. Many of us here have perhaps initially come here for what we thought was going to be a short stint and 10+ years later we’re still here and we’ve built families here. Therefore, when one breadwinner or one member of the family loses a job all of a sudden, it’s not so easy as perhaps it was when we just came here to pack up and go back because for many of us this is our home.
That being said, it’s not so easy to stay in this country if you do not have a job, and it’s not just because of the commercial aspects of it, that is not having an income, but also from the immigration standpoint. Historically, it’s been easier for women to be here and not work because they have been able to work part time or on a freelance kind of a basis, relying or sponsored by their husbands even when they didn’t have a full-time job. That option has always existed for them. In other words, let’s say a family moved here because the husband received a job. He has a residence visa, and he sponsors the entire family on the basis of his visa, and now the wife wants to start working part time. She would not be required to have her own visa. She would have been sponsored by her husband, but the husband would have given her permission to work. These are perhaps a little bit antiquated terms right now, but from an administrative standpoint, that is what was required. In most of these cases, and it’s still the case today, the visa itself, the residence visa on the passport actually would say, for dependents, for example, wife, and it says “housewife, not allowed to work.” But even with that format of the visa, if the husband would give the wife a simple letter with basically no objection, I do not object for my wife to work, with that letter alone she could go and work for another company, either part time or full time, without having to change her residence visa.
This, from a company standpoint, was quite a beneficial arrangement for many because sponsoring an employee is a cost to a company, especially if it’s a small business or if a company’s not sure about the duration of a particular employee’s role and having to justify hiring a full time employee and having to pay the visa costs, for many companies it’s a consideration that they carefully think through. For many companies, because of it, many cannot even afford to hire an employee because of those additional costs, and sometimes because the number of visas that a company is allowed to bring the employees on is also limited. It’s limited in real terms to the physical office, for example, where the company is based.
Let’s say the company has a 1000 square foot office. On average, that means the company can sponsor nine people. But let’s say it needs 15. You cannot get the additional 15 people. You cannot sponsor them because your office space that’s linked to your company license actually does not grant you any more visas.
There are a number of considerations as to why companies are not always eager to sponsor someone even if they want that person to work for them. It’s been easier for companies to bring in female employees that were sponsored by their husbands because they would have to deal with the immigration process and the visa cost associated with sponsoring an employee. But that particular arrangement has only historically been available to women.
But as of this last announcement, as you mentioned, in July, the government continues to reexamine its various immigration systems and has offered a more flexible arrangement, now even for men. That arrangement I just described, even though perhaps logically it wasn’t quite clear why that limitation existed, a wife could sponsor their husband, but the husband could not work on that sponsorship. In other words, there was not a concept of a wife granting her husband a no-objection certificate to work. It just did not exist. Now, as of this announcement, that particular arrangement mutually extends to either party.
Tim Elliot: It’s interesting as well, isn’t it? Because there’s historically always been this interdependency of a residence visa and a work permit. I suppose it clear the way in some ways. Times are changing.
Ludmila Yamalova: For sure, because it also provides for a lot more flexibility. Let’s say, now with this introduction of this new visa you’ve allowed half of the population, for example, you’ve offered this benefit to half the population that was previously not available, which means that the men can now be on their wife’s visa and can continue to look for employment or can start up their own ventures without having to apply for visas, or they can do freelance and part time jobs.
These are options that have actually been quite in demand from both sides, from the employee side because, let’s face it, a lot of employees would love the opportunity to either freelance or to work only part time, but because of the immigration laws it wasn’t really an option before. But equally so for companies. It’s great to be able to just bring in somebody part time or on a freelance type of basis. Really, this particular immigration change is introducing a lot of flexibility, not just to employees, but also to businesses, not just to individuals, but also to businesses. It’s allowing now a lot of people, given the challenging times in the economy, to perhaps consider setting up their own businesses and starting their own little ventures without the threat of having to leave the country because they do not have proper visa arrangements.
Tim Elliot: That’s really the point, isn’t it? When times are tougher, you see the government making a real effort to say, look, we are going to take some steps to allow that transfer of labor.
Ludmila Yamalova: Indeed. What’s important to highlight as well are the previously existing repercussions for violating these laws and rules. For example, in the past if there is a man that lost his job, but the family is based here, the kids are going to school here, the wife has a job, so obviously it’s not so easy for the whole family just to pack up and leave, and perhaps not even a need for that because the husband could do some kind of work and still bring in income, but probably not the kind of work that would either sponsor him or a full time job that would warrant for the company to want to apply for sponsorship for the man. Yet, the husband has skills.
What could you do in the past? He could be sponsored by the wife, but he was not allowed to work. Let’s say if you were sponsored by the wife and he had a U.A.E. visa, therefore allowing him to stay in the country, but then let’s say on the visa he starts doing some odd jobs. Let’s say, it’s website development or math tutoring or some kind of copyright, so various freelance type of jobs. Technically speaking, under the previous regime that would qualify as doing work and you can only do work in this country if you have a proper visa. The visa that the husband would have held at that time was a residence visa but not an employment visa, which is a big difference.
Therefore, any kind of work or any kind of employment that he would have been doing while being on that residence visa that was not an employment visa was in violation of U.A.E. immigration laws, and the penalties could be quite severe for many businesses and individuals that violate immigration laws. For example, for businesses and for individuals, a 50,000-dirham penalty per violation. In many cases as well, depending on the nuances of the particular employment arrangement, some people have even faced deportation.
For example, we’ve had clients that worked in this country because they could stay in this country because of perhaps the passports that they held, but they had a six month ban on employment. In a case like that, it wasn’t just the financial penalty. There was also a deportation penalty that was attached to that violation. Deportation is a very serious offense because in 99% of the cases it is a deportation for life, and it’s not possible to reverse them. We have had clients that have unfortunately run into trouble with these kinds of immigration laws and who were deported, and these were fairly young entrepreneurs that were not even aware of it, but now they’ll never have a chance to come back into the country. That’s just one example, but it just shows you the severity of the penalties for violating previously existing immigration laws.
With the introduction of the new law, obviously, it just shows how much we are leapfrogging ahead. Considering obviously the developments in the business environment and the economy today, this will allow and introduce a lot more needed flexibility.
Tim Elliot: And that is the point because the penalties were severe just for anybody, I’m sure. With the dirham conversion rate, 50,000 dirhams is something like $12,500 or $13,000, so they are hefty penalties. That’s changing so men can now be sponsored by their wives. They could work for a company full time, freelance, part time, whatever it would be with the official work permit. How do you go about applying for a work permit? What does a company have to do to get one?
Ludmila Yamalova: A work permit basically refers to, in other words, a no-objection certificate or some kind of NOC from a legal authority allowing that person to work somewhere. Let’s say it’s the man. This is an example of a man that we’re using that wants to work for a free zone company, let’s say, in TECOM. Remember he has a residence visa in his passport and perhaps it says, “not allowed to work.” Now you’ve got a visa and you have the residence emirate ID, but yet, it’s all based on the concept of this is your residence visa, but you’re not allowed to work.
Now you have to obtain documentation that shows in fact that you are allowed to work without having to actually change that visa. To do that, first of all, you need to find somebody who wants to hire you, be it on a full-time basis or on a part time basis. That would have to be a company probably licensed in the U.A.E. Let’s say that company is in TECOM. They would have to obtain a document with the TECOM authority showing that particular employee is now allowed to work here. Usually it’s called an entry or right to work within a particular free zone document, and usually it’s issued for one year. It’s a document that now you will have and on the back of that, sometimes depending on the free zone, sometimes it’s a document, sometimes it’s a card, and sometimes it’s both, but ultimately it will give that employee either a piece of paper in hand or a card in hand that shows, yes, they are now permitted to work in this particular free zone.
As part of the application, the company would have to submit it, not the employee, but the company would have to submit the employment agreement and the employee’s documents, passport, and the letter from the wife, and whatever other documents that the free zone potentially may require to register that contract and that employee in their system so that now there is official documentation to show that that employee has been registered with that particular authority and, therefore, in the event, for example, an immigration inspection, there is record of that employee and the authority has record of the employee. That basically legitimizes this employment arrangement even though the employee’s visa would still show a residence visa, perhaps not allowed to work.
Tim Elliot: And it’s the company and/or establishment’s responsibility to bear the cost?
Ludmila Yamalova: Yes. In short, yes, though it’s often the companies that want to pass on that cost to the employee, but under the U.A.E. laws any costs or any expenses that are attached to making that employee work legally in the country are the responsibility of the company. If a company wants to hire that person and to do it legally, they need to apply for all this paperwork. Therefore, by that definition or by extrapolation, all those documents are required by law and therefore whatever costs that are attached to obtaining those documents would be the company’s responsibility, though often companies say, it’s for your benefit that we are doing this, so therefore it is your cost. But technically speaking, it should be the responsibility of the company. In the event there is ever a dispute, the courts will always pass those costs to the company.
Tim Elliot: It’s also, in theory, much cheaper, Ludmila, now. The issuance of work permits for establishments recruiting male workers, as announced on July 28, 2019, it’s now a flat 300 dirham for a two-year work permit. Previously it could be between I think something like 300 to maybe as much as 5,000, depending on, I guess, category.
Ludmila Yamalova: Yes. That’s what’s been announced in the media. We will have to wait and see how implementation of this law takes effect because the 300-dirham cost could just be one cost, and certainly it has been significantly reduced, but there could be other costs associated with the application. Because of the cost we’re talking about is an immigration cost, but if you’re working for a free zone you have to apply. These would be free zones so there will also free zone costs that will have to be paid as part of the application for this visa. In most cases these days, the free zone is the one that manages the application for a residence visa. It’s not like the employee will go to immigration directly, just pay the 300 dirham and be able to apply for his or her own visa. As is the case with most free zones, all the applications are centralized and it has to be done through the free zone, so that’s why you need to just factor in potentially additional fees that would have to be paid to the free zone to manage this process.
If an employee is working on the mainland, outside of a free zone, it’s possible the relationship with immigration authorities is more direct. In that case, the cost could be lower, but because there are several government entities involved in this process, we are not quite certain yet how they may adjust their prices in light of the reduced fees from the immigration authorities. We will have to wait and see how it further develops, but certainly the general trend and the general objective is the reduce the fees and to make this process more affordable.
Tim Elliot: Employment considerations is the theme of this podcast. There were two announcements in the summer: The issuing of work permits for male workers sponsored by families on July 28, 2019 and just prior to that government fees on something like almost 150 services and transactions were reduced as well. That was a cabinet resolution. Let’s just consider that. Hopefully, it should mean that recruiting and employing workers will become slightly easier financially for companies. You’d imagine that’s a move that should encourage recruitment and employment here in the U.A.E. It should be a good thing at a time like this.
Ludmila Yamalova: Presumably, that’s exactly the reason for why this change came into effect when it did. As we are approaching the Expo, just a year from now, this certainly is a very welcomed development. We do hope to see more diverse employees entering the market. Just because of the availability of these more flexible arrangements, we anticipate that perhaps some people may even want to leave their jobs now and start doing more freelance, part time jobs. The need has existed in this market for quite some, both, as I mentioned earlier, from the employer standpoint and from the employees, so perhaps with this change we will see more flexible working arrangements and more diverse employment roles.
Tim Elliot: Ludmila Yamalova is the Managing Partner of the Dubai based law firm, Yamalova & Plewka. As ever, Ludmila, a huge thank you.
Ludmila Yamalova: Always a pleasure. Thank you.
Tim Elliot: That’s it for another edition of the Lawgical podcast. Don’t forget, if there is a specific question you’d like to get an answer to, get in touch via Lylawyers.com or via any of the social channels. We’ll try to answer queries you might have in a future edition of Lawgical. If you’d like a legal consultation, Lylawyers.com is the best place to start. Just hit Contact.
