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12-06-2012 - Business Intelligence Middle East

Location, location, location - avoiding UAE labour and immigration

UAE. With the large proportion of expatriate workers in the UAE, employers are alive to the need to obtain authorisation for work permit and residency visa purposes in order to lawfully engage their employees.

However, such authorisations will not only be employer specific but are usually also restricted in terms of location; an issue many employers often disregard.

As an employer, the issue of where your employees actually perform their work may not come high on your list of priorities. Providing employees are correctly sponsored for UAE residence visa (UAE Visa) and work permit (Labour Card) purposes, should it matter where these employees are actually based?

The short answer is a resounding yes and, to the UAE Ministry of Labour (MOL) and General Directorate of Residency and Foreigners' Affairs (Immigration Authority), it can matter a great deal.

This article seeks to clarify the rules relating to where employees, who are legally sponsored by an entity 'onshore' in the UAE (meaning not in a free zone), are permitted to work.

What does the law say? Under UAE Federal Law No. 6 of 1973, as amended (the Immigration Law), and Federal Law No 8 of 1980 on the Regulation of Labour Relations (as amended) (Labour Law), it is an offence for a company that is registered in the UAE (Company A) to allow anyone that it sponsors for work and UAE Visa purposes to work for another company (Company B) that is registered in the UAE, without the requisite consents. There are potentially serious consequences for Company A, Company B and the employee, if any of them breaches the Immigration Law or the Labour Law in this way.

But what if Company A wishes merely to "second" an employee to Company B for a limited period of time in order to service a contract which has been executed between Company A and Company B? For example, Company A provides IT maintenance services and specialises in a specific brand of computer or software. Company B requires such services and enters into a contract with Company A for the provision of the Company A's services for one year. Given the nature of Company B's business, it requires Company A's employees to be based onsite at Company B's offices for the duration of the contract.

At some point during the course of the year, Company B is subject to an inspection by the MOL and Company A's employees are found to be working at Company B's offices. In the eyes of the MOL, will Company A's staff be considered to be working for Company B illegally in breach of the Immigration Law and Labour Law (resulting in fines and other penalties)? Or, are they merely working for Company A, but legally present at the premises of Company B in accordance with the terms of the service contract executed between the two parties?

This is something of a trick question. The answer is that, even if the Company A employees are to be based at Company B's premises only to service a contract, Company A and Company B should have obtained the requisite consents from the MOL for the employees to be based at the premises of Company B for the relevant period.

Employee secondments between two employers based onshore in the UAE It is possible for an employee sponsored by one entity, to legally work at the premises of another entity, for a limited period of time, providing that the relevant consents are obtained from the MOL.

Possible ways of obtaining consent:

Approval by the MOL Inspections Department. Temporary Work Permit. What is a Temporary Work Permit? A Temporary Work Permit (TWP) is an internal work permit issued by the MOL which enables an employee who is sponsored for work and UAE Visa purposes by one company (to continue with the previous example, this would be Company A), to legally work for another company (Company B), for a limited period of time.

What are the requirements to obtain a TWP? The TWP process is available only to onshore companies that are both registered with the MOL. This means that applicants will not be able to use the TWP arrangement if the employee's sponsor (Company A) is established onshore and registered with the Ministry of Labour but the secondment company (Company B) is based in a free zone, and vice verse. It is sometimes possible to legally second an employee from onshore into a free zone but TWPs do not apply in this context (different procedures are in place depending on the relevant free zone). Both Company A and Company B must each have a valid trade licence. Company B would apply for the TWP for each relevant employee. The TWP application must be signed by Company A, Company B and the employee. The employee must have a valid UAE Visa and Labour Card. Fee of AED 600 payable to the MOL (AED100 to submit an application and AED500 to obtain the TWP). NB these fees are subject to change.

How long is a TWP valid? A TWP is valid for 6 months.

Under the previous system, a TWP was renewable only once and therefore the maximum period of time an employee could legally remain on secondment was 1 year. As of 2011, it is now possible to continuously re-apply for a new TWP as soon as the previous one expires. Subject to the requirements set out above, this process can go on for as long as the employee's residence visa remains valid (and so technically an employee could legally be on secondment for up to 2 years).

Does it matter if Company A is established in one emirate, e.g. Dubai, and Company B is established in another emirate, e.g. Abu Dhabi?

From a labour and immigration law standpoint the answer is no, an employee can be granted a TWP to work for Company B even if it is in a different emirate to Company A.

However, if Company A and Company B are each registered in different emirates, Company A might be perceived by the economic department in the Emirate where Company B is located, as attempting to undertake business without being appropriately licensed.

The likelihood of such an allegation arising may depend on the type of work actually being carried out by the employees who are seconded into Company B, the number of employees seconded and the length of their secondments.

Companies should be correctly licensed to carry out the type of work that their employees will be undertaking while on secondment.

What about the Wages Protection System? As the sponsor of the employee's UAE Visa, Company A is ultimately responsible for ensuring that the employee receives his or her statutory employment rights and is required to confirm this on the TWP.

However, we understand that the current practice of the MOL is that employees who hold TWPs are not included in headcount by the MOL for WPS purposes.

What could happen if Company A sends employees on secondment to Company B without obtaining a TWP?

An employee who is sponsored for work and UAE Visa purposes by Company A but works at Company B without a TWP, is working illegally.

In the event that Company B is subject to an MOL inspection, both Company A and Company B could be subject to a number of penalties, including, but not limited to the following:

A fine of AED 50,000 for each employee found to be working at Company B illegally (up to a maximum of AED 5 million). The Immigration Authority also has the power to impose additional fines of AED 50,000 per employee, leading to a potential combined fine of AED 100,000 per employee found to be working illegally at Company B.

100 black points and automatic downgrading to the MOL's "third class" category. This could result in future applications for new work permits and UAE residence visas being denied by the MOL. It could also mean an increase in the cost of labour guarantees which must be provided.

Suspension or revocation of trade licence. Separately, any employee found to be undertaking work at the premises of a company other than his sponsor could be subject to:

A fine of AED 10,000. Jail for 1 month. Deportation from the UAE. A 1 year ban on working in the UAE.

The greater availability of TWPs following new ministerial resolutions in December 2010 was a significant liberalization of the previous sponsorship regime and recognition of the commercial realities of many business arrangements.

Now that TWPs are available in a wider set of circumstances, the MOL and Immigration Department are likely to more readily impose fines where they do pick up on unauthorised working arrangements. An employer in breach of the rules can expect to at least receive a hefty fine for any breach.

 

You can access related articles on the Clyde & Co website at www.clydeco.com.

 

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