Introduction and Legal Framework
The Abu Dhabi Global Market (“ADGM”) is an international financial center located in Abu Dhabi, United Arab Emirates (“UAE”). ADGM has its own legal framework, based on the English common law.
According to the Federal Law No. 8 of 2004, the financial-free zones and the activities that are conducted within the free zones are exempted from the Federal Civil and Commercial Laws of the UAE. Since the employment relationships between the employer and employee are regulated as a civil matter, the UAE Federal Law No. 33 of 2021 concerning labor relations does not apply to ADGM.
Therefore, the Board of Directors of the ADGM, by exercising its power conferred to them under Article 6(1) of the Abu Dhabi Law No. 4 of 2013 concerning the ADGM, decided to enact an employment regulation that governs various aspects of employment within the jurisdiction of ADGM. Hence, the first employment regulation was enacted in 2015 (ADGM Employment Regulations 2015). Further, ADGM amended the 2015 employment regulation and introduced a new employment law framework in the year 2019, the Employment Regulations 2019 (“Regulation”). The new Regulation took effect on 1st January 2020 repealing the previous employment regulations.
Although the previous ADGM employment regulations 2015 were comprehensive when introduced, the new Regulation further aligns the ADGM with international best practices and promotes itself as a leader in the region. The new Regulation also gives an attractive jurisdiction to both employers and employees. The ADGM Regulation offers the regional and international business community a world-class legal system and regulatory regime. The Regulation applies to ADGM, its authorities, establishments, and employees.
The Registrar of ADGM, while implementing Section 61 of the Regulation, outlines a set of rules for engaging the Non-Employees in the ADGM. The Rules on Engaging Non-Employees 2023 (“Rules”) were adopted on 24 April 2023. The purpose of these Rules is to supplement the Regulations and to set out the conditions for the issuance of Temporary Work Permits in ADGM as well as applicable fees and fines for non-compliance with these Rules.
Application and Interpretation of the Rules and Regulation
The ADGM Regulation outlines the minimum employment standards for the employees by giving an equal balance between the rights and obligations of both employers and employees in ADGM and fostering employment practices that would contribute to the prosperity of the ADGM. Therefore, any agreement between the employers and employees that do not include these employment standards, with permitted exceptions, as outlined in the Regulation would be considered null and void.
Some of the important definitions given in the ADGM Regulation are:
An employer
is:
– A licensed person, that is, or was, a person who has or had a valid ADGM license to carry on one or more controlled activities in ADGM; or
– The ADGM as governed by the ADGM Founding Law; and
– any person employing an individual to perform services for remuneration of any kind.
An employee
(whether under an express or implied contract of employment) is an individual who:
– works or will work in the service of another person under an express or implied Contract of Employment under which the Employer has the right to control the details of work performance;
– holds an ADGM work permit; and
– is based within, or ordinarily working within, or from the ADGM.
An intern
means a student or trainee who works for an ADGM Entity, with or without pay, in order to gain work experience.
Non-Employee
means a person who is a Secondee, an Outsourced Individual, an Intern, or a Temporary Freelancer.
Outsourced Individual
means an individual temporarily working in ADGM for one or more ADGM Entities under an outsourcing agreement and who has the right to work in the UAE but does not hold a visa facilitated by the Registrar.
Secondee
means an individual temporarily working in ADGM for an ADGM Entity on a secondment basis and who has the right to work in the UAE but does not hold a visa facilitated by the Registrar.
A temporary freelancer
means an individual who provides services in or from ADGM to an ADGM Entity on a temporary basis and is not under the exclusive direction and control of an ADGM Entity and who holds a freelancer license from a UAE-free zone.
The fees and penalties for non-compliance with the Rules, general requirements, and other aspects of the Rules would be dealt with in our upcoming article.
Key Points of the ADGM Employment Regulation
Employment Contracts
Similar to the Federal System, ADGM generally follows a system of contract-based employment. The Employers and the employees are required by the ADGM to have a written contract of employment. This employment contract amongst others would give the essence of the terms and conditions of employment, remuneration details, probation, benefits of the employees, obligations, and duties of both the employers and employees, working patterns, working hours, notice periods, termination, etc.,
The employer shall provide the employment contract to the employee within one month of the commencement of the employment. Any amendments or changes to the contract shall be in writing and signed by both parties to the employment, unless expressly stated otherwise.
Employment Visas and Work Permits
According to the Regulation, the employer shall be responsible for obtaining the work permits for the employees and shall also have the obligation to bear all the costs and expenses for obtaining such work permits, visas, and EID. Visa application in ADGM shall be done through the Corporate Relations Office at ADGM.
Duties of Employers and Employees
The Regulation outlines in detail the duties and obligations of the employees and employer. These would be dealt with in detail in our upcoming articles.
Wages and Leave Entitlements
Remuneration includes components such as basic wage, accommodation, travel, and more, based on the mutually agreed terms between the parties involved. An employee is entitled to a salary comprising the basic wage and all relevant allowances, including transportation, housing, and any other payments specific to their employment type. Under ADGM Labor Law, employees are also entitled to various types of leave, such as annual leave, sick leave, and maternity leave, each accompanied by appropriate leave pay. Read on for detailed information on wage and leave entitlements in ADGM.
Working Time
The Regulation states that the maximum working hours an employee shall work is 48 hours per week. Anything beyond that shall be considered as overtime, unless consented by the employees otherwise in writing.
Leave
According to the Regulation, an employee shall have the following leave benefits in ADGM:
Annual leave
An employer shall give an employee a minimum of paid annual leave of 20 business days.
SickPay/SickLeave
Employees are eligible for sick leave, limited to a maximum of 60 business days in total within a 12-month period. During sick leave, the employer is obligated to provide sick pay based on the employee’s daily wage as follows: full pay for the initial 10 business days, half pay for the subsequent 20 business days, and no pay for the remaining 30 business day
Maternity leave
Employees are guaranteed a minimum maternity leave entitlement of 65 business days.
Paternity leave
Male employees who become fathers are entitled to a minimum paternity leave of 5 business days, which must be taken within 2 months of the child’s birth.
Antenatal care
An employee who is granted time off under section 51 is entitled to receive payment for the duration of the absence at the applicable hourly rate. The applicable hourly rate is calculated by dividing the daily wage by the number of normal working hours in a business day as stipulated in the current employment contract on the day when the time off is taken.
Special Leave
An employee who practices the Muslim faith and has completed at least one year of continuous employment shall have the privilege of taking special leave, limited to one occurrence throughout their employment, for a duration not exceeding 30 days. This unpaid leave is specifically granted for the purpose of performing the Haj pilgrimage.
National holidays
All employees have the right to observe the national holidays declared in the UAE, depending on whether their employer is a public or private sector entity, provided that the holidays fall on a business day. Furthermore, employees are eligible to receive their daily wage for the national holidays.
Labor Rights
ADGM Regulation aims to protect employees’ rights and provide a fair working environment, and compensation for any accidents during employment and occupational diseases. The Employers must obtain and keep health insurance coverage for their employees.
Discrimination and Harassment
ADGM typically has regulations in place to prevent discrimination and harassment in the workplace based on factors such as gender, race, religion, or disability. Employers are expected to maintain a safe and inclusive work environment.
Health and Safety
ADGM Regulations may require employers to ensure the health and safety of their employees in the workplace. This may involve implementing measures to prevent accidents, providing appropriate safety equipment, and complying with relevant health and safety standards.
Termination of Employment
ADGM Regulations typically provide provisions for termination of employment. The specific terms related to termination, such as notice periods, severance pay, and grounds for termination, can be specifically outlined in the employment contract, or in such absence, the provisions from the relevant labor laws and regulations would apply.
Notice for Termination: The Regulation states that while terminating the employment, either party shall give 30 days’ notice to the other party outlining the reason for termination. The Employer has the right to terminate an Employee’s employment immediately and without notice if there is a justifiable cause. Termination for cause by the Employer refers to the cessation of employment based on the Employee’s behavior or actions that would be deemed sufficient for immediate termination by a reasonable Employer.
End of Service Gratuity
Upon terminating the employment, the employee is entitled to the end of service benefits such as gratuity. Gratuity shall be given to the eligible employee only if the employee has completed continuous employment of 1 year or more and is entitled to a gratuity payment upon the termination of the employee’s employment, provided that termination is not due to the employee’s misconduct as mentioned under section 56 (1) of the regulations. Under section 56 (1) of the regulations, the employer can terminate an employee’s employment without notice for cause, which refers to termination based on the employee’s conduct that warrants immediate action as deemed reasonable by the employer. The employee also has the right to terminate their employment without notice for cause under section 56 (2), including instances where the employer has committed a crime impacting the employee, breached a provision of the employment contract, or materially contravened the applicable regulations with a detrimental impact on the employee.
In conclusion, the ADGM Employment Regulation provides a comprehensive framework for employment within the jurisdiction of ADGM. It ensures minimum employment standards, balances the rights and obligations of employers and employees, and aligns with international best practices. The Regulation covers various aspects such as employment contracts, visas and work permits, duties of employers and employees, remuneration, working time, leaves, labor rights, discrimination and harassment prevention, health and safety, and termination of employment. The Regulation emphasizes the importance of written employment contracts, employer-provided health insurance, and adherence to notice periods for termination. Additionally, it specifies the eligibility criteria for end-of-service gratuity, excluding cases of employee misconduct or termination for cause as defined in the regulations. Overall, the ADGM Employment Regulation aims to create a fair and conducive working environment while protecting the rights of both employers and employees.
The above are a few areas that the ADGM Employment Regulation has focused on. A detailed article on each of these areas shall be focused on in our upcoming articles on ADGM Employment Regulation.
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