Thursday, March 13, 2014

Gulf Cooperation Council - The Year Ahead

2013 witnessed continued legislative developments in the labour and employment field with a strong emphasis across the GCC on eliminating illegal working, promoting the employment of nationals and regulating the provision of employee benefits such as health insurance. These trends are set to continue into 2014 and we examine below the key developments expected to take place in the coming months.


The aim of recent labour reform (starting with the introduction of the Nitaqat system in August 2011) is to ensure an integrated labour market where the gap between employing in the private sector and the public sector (certainly for KSA nationals) is closed. In return for opening up its markets, KSA is requiring foreign businesses (as well as Saudi employers) to invest in Saudi nationals and promote local employment. With 75% of the population being under 25 years of age, the imperative to create jobs and maintain job security for future generations is paramount.

Unlawful Working

Alongside, Nitaqat and other 'Saudisation' measures, KSA witnessed its biggest crackdown on illegal workers in March 2013, the subsequent six month Amnesty ended on 3 November 2013, during which three million foreign workers rectified their immigration status, voluntarily repatriated or were deported. Labour inspections continue amid a determination to reduce illegal working.

A draft ministerial resolution was announced in January 2014, providing for penalties of SAR 10 million and a five year prison sentence for employers falsifying their Saudisation targets by adopting measures such as employing shadow KSA national employees.

Unemployment Benefit

Legislation providing for unemployment benefit insurance was published on 1 July 2013 (expected to be implemented in the first six months of 2014), and provides for employer and employee contributions of 1% of basic salary and housing allowance to be made to GOSI, to cover unemployment allowance for up to 6 months.

Labour Law Amendment

In early 2012, over eighty proposed amendments to the Labour Law were published and have been debated at great length. Most recently on 17 December 2013, the Minister of Labour announced that within three months, the working week would be reduced to 5 days/40 hours.

Also in December 2013, the Shoura Consultative Council discussed and approved the following amendments to the Labour Law:

Unauthorised Absence
• Amendment of the Labour Law's article 80 with respect to termination for unauthorized absence. The current article provides for termination without notice and payment of end of service gratuity, if an employee is absent for 10 consecutive days (provided a written warning is issued after 5 days) or for 20 non consecutive days (provided a written warning is issued after 10 days). The amended provision provides for unauthorized absence of 30 non consecutive days (with a written warning issued after 20 days) and 15 consecutive days (with a written warning issued after 10 days).

• Fixed term contracts will convert into unlimited term contracts upon the third renewal of a fixed term (currently this is on the second renewal) or if the total length of service under a series of fixed term contracts is 4 years (currently the period is 3 years).
Compensation for unjustified termination
• to provide a statutory formula for calculating compensation for unjustified termination of employment; the proposed formula being:
• 15 days' remuneration for each year of service where the employment contract was unlimited;
• Payment for the remainder of the term where the employment contract was for a fixed term; and
• Provided that in either case, the compensation is no less than 2 months remuneration.
Once discussed by the Shoura Council the measures require a Council of Ministers resolution followed by a Royal Decree to come into effect

Introduction of a Minimum Wage?

One of the key barriers sighted by private sector employers is the high wages Saudi nationals require in comparison to non nationals, particularly those from South East Asia performing more junior and manual roles. A structural impediment therefore to employing Saudi nationals is the absence of a minimum wage applicable across the private sector for all employees (meaning that the attraction of employing a non-national (ie the lower headcount cost) would not apply. To date, such a measure has not yet been discussed. However, the Ministry of Labour has published an intention to promote higher wages through Nitaqat through the following:
• A Saudi national on SAR 6,000 to 12,000 will count as 2 employees;
• The minimum wage under Nitaqat will be raised to SAR 4,000;
• The average total for applicable quotas will be calculated over a 26 week reference period.
Other legislative developments in 2014 will be:
• Continued transition of all immigration services to an electronic system;
• Continued implementation of the wages protection system with the second stage enforced on 1 December 2013;
• An increase in the bank guarantee for obtaining recruitment licences; the current requirement of SAR 300,000 every two years will increase to SAR 450,000 every year; and
• The replacement of Labour Committees and the Supreme Labour Appeals Committee with Labour Courts integrated into the Sharia Court system. Any complaint will first have to be raised with the labour office in the region in which the employee has been carrying out his work for a confidential pre-conciliation process. Once a complaint is submitted (whether in person or electronically) a dispute hearing should be scheduled within a week and the parties have 21 days to reach an amicable agreement, failing which the dispute will be referred to the courts. If an agreement is reached, it will be documented and enforceable within 5 days of the date of the settlement agreement.
The Ministry of Labour has also recently launched the 'together' or 'ma'an' on line portal which enables employers to submit feedback on proposals and recently lead to the Ministry delaying the implementation of a proposal to cap expatriate employees' work and residency authorisation to 6-7 years.


The Emirate of Dubai announced compulsory health insurance provision for employees in December 2013, to be introduced on a staggered basis according to the number of employees employed within an organisation
Minimum earning requirements were increased for individuals to sponsor parents or grand parents (AED 20,000 a month) with additional requirements to provide rental agreements to evidence an ability to provide adequate housing for dependants.

In January 2014, Sheikh Mohammed has made several announcements confirming his vision for 'Emiratisation' and a desire to increase the rate of UAE national's employment in the private sector tenfold by 2021. The Minister of Labour, Saqr Ghobash has also stated in interviews in January 2014, that legislative amendments to the UAE labour laws are being considered in order to enhance the attraction of the private sector for UAE nationals, including potential amendment of the regulation of working hours, the working week, leave entitlements and holidays.

On 20 January 2014, the UAE Cabinet endorsed a draft law providing for mandatory military service for all Emirati males between the ages of 18 and 30, for 9 months to 2 years. The details of the scheme for those in existing employment are yet to be announced, however, press reports state that time spent on military service will be counted for the purposes of calculating employee benefits, continuous service and pension entitlements.
In January 2014, there was also an announcement that the Government will introduce legislation providing for self employed UAE nationals to be enrolled in the state pension scheme. The aim being to encourage more UAE nationals to set up their own enterprises and SMEs.


In late 2013, Qatar announced the implementation of compulsory private health insurance for employees
Legislative changes in 2014 involve an overhaul of policy and implementation of immigration regulations; in particular the recognition of certain professions; experience and qualifications (engineering being a principle focus).

EMIRATE OF KUWAIT (contribution from Rob Little & Edlyn Verz of ASAR)

Deportation of Foreign Nationals

In common with KSA, 2013 saw the Government launch a concerted effort to crackdown on illegal workers. A crackdown by Kuwait authorities on foreign nationals illegally working or residing in Kuwait started in March 2013 when the Minister of Social Affairs and Labor, Thekra Al-Rasheedi, announced a plan to reduce the number of foreign expatriates by half, from 2 million to only 1 million by 2023, culling about 100,000 expatriates per year.

“This is part of the Ministry’s efforts to regulate the labor market, curb the phenomenon of marginal labor and restore the demographic equilibrium of the country,” Al-Rasheedi said in a statement to the Kuwait News Agency.

So far thousands have been arrested and forcibly deported for an array of violations. The campaign is being coordinated by a number of ministries and security departments, and is being spearheaded aggressively by Assistant Undersecretary for Traffic Affairs Major General Abdul Fattah al-Ali, with the objective of “cleaning” the country. This campaign has left Kuwait’s foreign labor force living in fear of deportation.

An easing of the arrests and deportations has been observed by the expatriate community in the last 3 months of 2013 as heated debate on the ethics and legality of the procedure adopted by Kuwait authorities raged in the media and in the diwaniyas of the local population.

Age 65 Limit; No Transfer of Employment; Non-Renewal of Contracts –

There is no mandatory retirement age for employees working in Kuwait. Generally, an employee's age is significant only as it relates to the benefits that may accrue to employees who contribute to the Social Security fund, which applies only to Kuwait nationals.

Regarding expatriate employees who are 65 years and above, who continue to work in Kuwait, for the same employer may renew their work permit/visa automatically without any issue. However, they cannot transfer sponsorship to another employer unless an exception is expressly obtained from Kuwaiti authorities. Similarly, expatriates from outside Kuwait who have reached the age of 65 or more will not be given a work permit unless an exemption is obtained from the Kuwaiti authorities.

There are quite a number of employees working in government departments and ministries and government owned and controlled corporations that are above the age of 65. Recently, there have been reports that the contracts of these “above-65” expatriate employees are no longer being renewed or that the employees are being asked to retire at age 65. This has given rise to the belief that expatriates working in government entities would no longer be allowed to work past the age of 65. However, no formal confirmation of this policy has been issued by the Kuwaiti authorities.

Commercial Visit Visas; Processing of Work Authorizations and Work Permit

Foreign nationals who enter Kuwait on business or commercial visa of a corporate sponsor had previously been allowed by Kuwaiti authorities to stay in the country while processing their work permit for the same sponsor. This process was suspended by Kuwaiti authorities. As such all foreigners seeking to work in Kuwait would have to undergo the standard process of entry; they would have to remain outside of the country while their work authorizations are processed at Kuwait’s Ministry of Social Affairs & Labor (MOSAL).

After receipt of the work authorization, the sponsor on behalf of the foreign national will apply to the Ministry of Interior (MOI) for a working (no-objection) visa. It generally takes up to 2 weeks to receive a working visa. Before arriving in Kuwait the foreign national will be sent two originals of the working visa in his/her home country. The foreign national will contact the Kuwait Embassy in their home country and will be directed to undergo medical tests. He/she then submits the results of these tests to the Kuwait Embassy along with a copy of his/her passport. If the medical tests are in order, the Kuwait Embassy will stamp the working visa. This may take from 2 to 3 weeks to complete.

Upon the foreign national’s arrival in Kuwait, the sponsor may begin the process of applying to the MOSAL and subsequently to the MOI, to obtain a work permit and residency stamp to enable the foreign national to legally work and reside in Kuwait.

SULTANATE OF OMAN (contribution from Alessandra Zingales of Jihad Al Taie)

In common with the rest of the GCC, promoting the employment of nationals continues to be a major objective of the Ministry of Manpower, with an announcement that, in various business sectors, no further approvals for the employment of foreigners would be granted between November 2013 and April 2014; with the exceptions of those working on government projects or employers classed in the top category of employer (for compliance purposes and employment of nationals). To further support the employment of nationals, the Ministry of Manpower issued a decision which allows employers in the private sector to hire Omani employees on a part time basis. Subject to certain conditions, up to 10% of the Omanisation rate applicable to the employer may be filled by part-time workers.

Additional requirements have been introduced to obtain labour clearances to employ foreign staff and the application process has been modified by limiting the possibility to convert visas in country (e.g. from tourist visa to resident visa).

Problems have been reported in obtaining labour clearances for female expats. No official decision has been published in this respect but the Ministry of Manpower appears to have adopted a rather strict policy and has been reported to reject rather consistently labour clearance applications for female expats. Some exceptions are being made for female professionals.

From 1 July 2013, the minimum salary for Omani nationals has been increased from RO 200 to RO 325 (at least RO 225 as basic salary and RO 100 as allowances).

It has been announced that, in accordance with a joint project of the Ministry of Manpower and the Central Bank of Oman, during the course of 2014 Oman will be gradually introducing a Wage Protection System. This will apply to the banking sector first and gradually be extended to all employers in Oman in accordance with their grade as per the Chamber of Commerce classification (starting with Excellent Grade companies).

It has also been reported that the Shura Council proposed the introduction of a 2% tax on remittances by workers to their home countries. Members of the State Council have officially declared that – for the time being - they are not in favour of such proposal.

KINGDOM OF BAHRAIN (contribution from Steve Brown of ASAR)

The Kingdom of Bahrain has continued in its efforts to fully roll out ministerial orders contemplated in the 2012 Bahrain Labour Law. We anticipate further ministerial orders to issue during the course of 2014.


The Bahrain government lifted the stay on collection of monthly Labour Market Regulatory Authority (“LMRA”) fees during 2013; however, a discount on monthly fees (to BD5) for the first 5 expatriate employees has been instituted while full monthly fees of BD10 would apply to each additional expatriate employee has been imposed indefinitely.

Working While Under Travel Bans

Under existing regulations, an employee whose work permit has been canceled for more than 30 days may not mobilize to a new employer without exiting Bahrain. This has complicated the circumstances of many expatriate employees facing travel bans (e.g. arising from loan defaults) who are unable to exit Bahrain and cannot obtain lawful employment since work permits may not process prior to an exit from the Kingdom. During the later half of 2013 and through 2014, the LMRA and immigration officials have reportedly agreed to mechanisms to permit new work permits to issue to expatriates facing travel bans. This cooperation is expected to decrease instances of illegal employment while facilitating repayment of creditors by expatriates facing such bans (and ultimately seeing those bans lifted).

Sara Khoja, Clyde & Co