Employment Agreements
Efficient & Reliable Support for Employee Onboarding
When recruiting employees in the UAE, a free zone-specific standard employment contract is usually provided. However, these generic agreements often do not address the unique terms and conditions mutually agreed upon by both the employer and the employee.
For example, the employer and employee may agree on a six-month notice period for dismissal, whereas standard free zone agreements usually limit the notice period to three months.
To amend these predefined agreements, it is essential to provide for an addendum, allowing employers and employees the flexibility to define their working relationship within legal terms.
Key Considerations
In some free zones, employment contracts do not specify the salary currency, though local regulations assume salaries are paid in UAE Dirhams.
Employment commencement dates in standardized contracts may not correspond with the legal start date, which is determined by the issuance of a valid work visa.
It is also worth remembering that lawful entry into labor relations starts from the date of issue of the employment visa, not from the date of signing a contract or requesting an employment visa. Failure to understand these differences can lead to compliance problems.
Employees often require Salary Certificates to open bank accounts or rent accommodations. However, certain free zones may not clarify whether stated salaries are monthly or annual, leading to potential complications.
For employees holding managerial positions who apply for a Golden Visa, immigration authorities may request wage protection records from free zones that do not operate under the WPS. In such cases, issuing alternative documentation, such as salary slips, may be necessary.
You should have a good understanding of UAE labor laws and local free zone practices to make your labor agreements and related documents comply with all legal requirements.
Consequences of Non-Compliance
01
Fines
Substantial fines, varying from AED 5,000 to several hundred thousand dirhams, are imposed under the UAE Federal Labor Law. The specific fine amount is determined by the type and seriousness of the offense.
02
Legal disputes
Often arising from unpaid salaries, end-of-service benefits, or wrongful terminations, which can be costly and time-consuming.
03
Unfavorable Audit Findings
Labor disputes and failure to adhere to UAE Labor Laws can result in negative audit outcomes during financial or regulatory assessments. Such findings may uncover unresolved employee issues, potentially leading to additional penalties and damage to the company’s reputation.
04
Challenges in liquidation
Before beginning your liquidation audit and starting liquidation process, all pending employee-related matters must be addressed. Failing to resolve these issues may cause delays or even prevent the company’s liquidation, as labor-related obligations take precedence in the liquidation process.
Get professional help to understand the intricacies of UAE labor laws and minimize your legal risks. Competent lawyers will assist you in managing your labor relations in full compliance with regulatory requirements and the needs of your business.
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