Labour Laws and Protection of Wages in ADGM

ADGM labour laws are very stringent about employee welfare and protection of wages. Not paying wages can lead to court intervention and hefty penalties. Each stage of non-compliance would amount to different stages of penalty. 

Every employer is obliged to make payments to their employees in accordance with the employment contract executed between the employer and the employee . If such an amount is not specified in the employment contract, then the employer is responsible for the consequences that they might face in the future.  

Payment terms in ADGM 

An employee shall be entitled to receive a sum amount for their work that shall include the basic wage amount and all the other allowances that the employee is entitled to receive such as transportation allowance, housing allowance, and any other payments that the employee might be entitled to in accordance with their type of employment. 

 In Abu Dhabi Global Market (ADGM), the protection of wages is dealt with under the provisions of ADGM Employment Regulations 2019 (“the Regulations”), and the penalties for failure to make such payment of wages are dealt with under the provisions of ADGM Employment Regulations 2019 (Compensation Awards and Limits) Rules 2019 (“the Rules”).  

 According to the ADGM Regulations, the employer must pay the employee a basic wage within the pay period not exceeding one (1) month and basic wages (vacation pay) shall be made within seven (7) days from the end of the relevant pay period. 

What if the salary is not paid in time? 

This time period is stipulated as per Section 12 of the Regulations. If the employer violates or does not comply with section 12 of the Regulations, then the employee shall make an application to the court, where the court shall order the employer to make an award as compensation to the employee of such amount that is outstanding or as the court considers just and equitable while considering that the (i) employer has defaulted in making payments and his obligations as per section 12 of the Regulations and (ii) the employee has suffered a loss due to the reason for which the complaint was made thereof. 

Wage settlement after termination 

Upon termination of the employee, the employer is obligated to make any and all outstanding payments that are due to the employee within a period of fourteen (14) days of such amount becoming due (or from the date of termination).  If the employer fails to comply with this rule as per the section 13 of the Regulations, then the employee may make an application to the court for a declaration to that effect, for which the court may have its discretion to order the employer to make the payment to the employee along with the compensation for such failure, and / or with such compensation that the court may consider just and equitable in all respects. However, the amount ordered by the court shall be up to a maximum sum equivalent to the last daily wage for each day during which the employer failed to comply with, i.e, for example, let’s consider the daily wage of the employee at AED 130 (on an average of 30 days per month) * the number of days the employer failed to make the payment.  

Can an employer deduct the salary? 

Further, according to section 14 of the Regulations, the employer shall not deduct the salary of the employee. However, according to section 14 of the Regulations, there are some exceptions where the employer may deduct the wages of the employee in the following circumstances: 

  1. Where the deduction or payment is made in accordance with the employment contract of the employee, as per the applicable legislation of ADGM; 
  2. Where there is written consent from the employee consenting willfully to such deductions; 
  3. Where such deduction is a reimbursement for a payment that was made in excess previously; 
  4. Where such deduction is as per the order or judgment from the Abu Dhabi Global Market Court;  

 Other than the circumstances as stated above, the employer shall not deduct any sum of amount from the employee’s wages. Also, the employer shall not deduct the amount that has been incurred during the recruitment of the employee, including the cost of a visa and a work permit, for such a position for such a period as stipulated in the employment contract.  

 If the employer deducts the amount from the wages of the employee or accepts a payment that is not in accordance with the permissible exception as stated in section 14 of the Regulations, then the employee shall make an application to the court against the employer. The court may, considering the reasons for which the deduction is made, order the employer the following: 

  1. To pay the employee the amount that was deducted in contravention of section 14 of the Regulations; 
  2. To repay the employee the amount that the employer received and/ or deducted from the employee’s salary by contravening section 14 of the Regulations; 
  3. To pay the employee (other than the amount payable as given above) such amount in lieu of compensation as the court may order the employer to pay to the employee for any financial loss incurred by the employee during these deductions (or non-payment), as the court deems fit, under such circumstances.  

In case the court orders the employer to make such payments to the employee, then such amount shall not be recovered from the employee by any means whatsoever.  

Can anyone charge a fee for providing employment with ADGM? 

Further, a person (any employment agency or employment broker for that matter), shall not request, charge or receive any amount, directly or indirectly, from any person who is seeking employment from ADGM. The following payments shall not be sought from the person: 

  1. Payment for employing or obtaining employment for the person seeking the employment;  
  2. Providing any kind of information from the employers regarding the employment 

 Any payment that has been made to such person by the employee, in contravention of such provisions, shall be repaid to the employee by way of wages or salary or as a debt due to the person who is seeking employment.  

 An exception to the above is where a person requesting, charging or receiving payment for any form of advertisement from the person who placed the advertisement. 

 A person who fails to comply with the provisions as stated above shall be liable for a fine not exceeding level 3 on the standard fines scale, in addition to the sum which may be payable by the employer to the person seeking employment.  

 Key takeaway: 

  • Not paying the wages to the employees would lead to court intervention and the employer paying hefty sums by way of a penalty and fines. Each stage of non–compliance would amount to different stages of penalty.  
  • The Wage Protection System (WPS) is a system implemented by the UAE government to ensure that private sector employees’ wages are paid accurately and on time through an electronic salary transfer process. It primarily applies to companies registered in mainland UAE and companies operating in free zones that fall under the UAE MOHRE jurisdiction.  
  • ADGM, being a financial free zone with its own legal framework, may have its own regulations in place to ensure the protection of wages for employees, but it may not necessarily require the use of the WPS. 

The protection of wages is an important part of the ADGM’s legal framework. These laws help to ensure that employees are paid on time and in full and that they are not subjected to unauthorized deductions. If an employee believes that their wages have been withheld or otherwise violated, the employee has the right to approach the Financial Services Regulatory Authority (FSRA) to file a complaint against the employer. 

About ATB Legal

ATB Legal is a full-service legal consultancy in the UAE providing services in dispute resolution (DIFC Courts, ADGM Courts, mainland litigation management and Arbitrations), corporate and commercial matters, IP, business set up and UAE taxation. We also have a personal law department providing advice on marriage, divorce and wills & estate planning for expats. Please feel free to reach out to us at office@atblegal.com for a non-obligatory initial consultation.

by Aparna T Nambissan

Aparna is a legal consultant at ATB legal. She holds a Bachelor’s degree in Law and Commerce from Karnataka State Law University. She is enrolled with the Bar Council of Karnataka.

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