DIFC Employment Law: Employers and Employees of DIFC

March 19, 2024by Reshma Rose Jacob0

The DIFC Employment Law is comprehensive and provides a clear framework for the employer-employee relationship to ensure that both parties are treated fairly. 

Leading Financial Center in the Middle East  

The Dubai International Financial Centre (DIFC) is a free zone in Dubai, United Arab Emirates. It is a leading financial center in the Middle East and North Africa region and is home to a large number of international businesses. The DIFC portal has its own employment law, which sets out the rights and responsibilities of employers and employees. The law is designed to be fair and balanced, and to protect the interests of both parties. The DIFC Employment Law is a comprehensive and well-balanced piece of legislation. It provides a clear framework for the employer-employee relationship and helps to ensure that both parties are treated fairly. 

Employer and Employee Under DIFC Employment Law  

Definitions as per the DIFC Employment Law 

  1. Employer- As per DIFC Employment Law an employer is defined as any person having a place of business in the DIFC (including a body, authority, registry or entity established by or pursuant to the DIFC Founding Law) who employs one (1) or more individuals.  
  2. Employee- As per DIFC Employment Law an employee is defined as any individual employed by way of an employment contract by an employer who either  
  3. is based within, or ordinarily works in or from, the DIFC; or   
  4. agreed in an Employment Contract to be subject to DIFC Employment Law.  
  5. An employee can be employed in the DIFC in accordance with an employment contract which is applicable to any law other than DIFC Employment law in case if the  
  6. the employee is working in or from the DIFC on the basis of a secondment;  
  7. the employee is employed in the DIFC by a local or federal government entity established by decree (or similar instrument) in the UAE, except for those established pursuant to the DIFC Founding Law; or  
  8.  the President has exempted the employee’s employer from being subject to this Law. 

The law does not apply to the following persons: 

  • Individuals who are self-employed. 
  • Individuals who are working as independent contractors. 
  • Individuals who are working as interns or trainees. 
  • Individuals who are working for a government entity. 

Rights and Obligations of Employers and Employees in the DIFC 

The DIFC Employment Law sets out a number of rights and obligations for both employers and employees. These rights and obligations include, but are not limited to:  

  • Employers must provide employees with a written employment contract that sets out the terms of their employment. 
  • Employees are entitled to a minimum of 21 days’ paid annual leave per year. 
  • Employees are entitled to sick leave, maternity leave, and paternity leave. 
  • Employees are entitled to be paid their wages on time and in full. 
  • Employees are entitled to be treated fairly and without discrimination. 

Trade Unions and Workers’ Councils in the UAE 

In the United Arab Emirates (UAE), the existence of trade unions, collective associations, and workers’ councils is prohibited by law. Engaging in any form of industrial action is considered a violation of public order. This distinctive characteristic of conducting business within the Dubai International Financial Centre (DIFC) simplifies certain employment practices and procedures. However, for companies operating both in the DIFC, the existence of distinct employment regimes can often lead to challenges. These companies must navigate through varying considerations, entitlements, and practices, which can create complexities and potential conflicts. 

The absence of trade unions, collective associations, and workers’ councils in the UAE establishes a unique framework within the DIFC. This eliminates the need to navigate the intricacies associated with such organizations and their associated employment practices. By not allowing industrial action, the UAE prioritizes public order and stability in the business environment. 

 Yet, for companies with operations in multiple areas of the UAE, including the DIFC, differences in employment regulations and practices can arise. These variations can give rise to issues that require careful management. Companies may need to address diverse legal considerations, understand distinct entitlements, and align their practices accordingly. Effectively navigating these differences becomes essential to ensure compliance and harmonious operations within the broader UAE context. 

Employment Contract Under the DIFC Employment Law 

The DIFC Employment Law (DIFC Law No. 2 of 2019) sets out the minimum requirements for employment contracts in the DIFC. These requirements include: 

  • The contract must be in writing and signed by both the employer and the employee. 
  • The contract must specify the employee’s job title, duties, and responsibilities. 
  • The contract must specify the employee’s salary, benefits, and any other forms of remuneration. 
  • The contract must specify the notice period that must be given by either party to terminate the contract. 
  • The contract must specify the applicable law that will govern the contract. 

In addition to these minimum requirements, the DIFC Employment Law also allows for the inclusion of other terms and conditions in the employment contract, as long as they are not in conflict with the law. For example, the contract may include terms relating to the employee’s probationary period, employee’s right to bonuses or other performance-based incentives, the employee’s right to sick leave or other forms of paid leave, the employee’s right to participate in the employer’s pension plan. 

It is important to note that the DIFC Employment Law does not prevent employers and employees from agreeing to terms that are more favorable to the employee. For example, the contract may provide for a longer notice period than the minimum required by law, or it may provide for additional benefits, such as life insurance or health insurance. 

If you are an employee in the DIFC, it is important to read your employment contract carefully and to understand your rights and responsibilities under the law. If you have any questions about your employment contract, you should consult with an employment lawyer. 

Part Time Employees 

One key aspect is the duration of employment contracts. In the DIFC, employers have the flexibility to offer either limited or unlimited contracts to their employees. A limited contract specifies a fixed term of employment, while an unlimited contract has no predetermined end date. This allows employers to tailor the duration of employment according to their specific needs and requirements. 

Moving on to leave entitlements for part-time employees, part-time employees in the DIFC are entitled to annual leave on a pro rata basis. Their leave is determined based on the number of days or hours they work compared to a full-time employee. This ensures that part-time employees in both jurisdictions are not disadvantaged in terms of their leave benefits due to their reduced working hours. However, there is a notable distinction in the DIFC regarding written contracts and itemized pay statements for part-time employees. If the duration of their employment in the DIFC is less than 30 days, they are not entitled to a written contract or an itemized pay statement. This is an exception that applies specifically to short-term part-time employment arrangements. 

Who Can Avail the DIFC Employment Law Benefits  

The DIFC Employment Law is applicable to employment relationships within the DIFC, which includes entities registered and operating within the DIFC and their employees. It provides a comprehensive legal framework for various aspects of employment, including contracts, working hours, leave entitlements, termination, and dispute resolution. 

It’s important to note that the DIFC Employment Law is specific to the DIFC jurisdiction and does not automatically apply to employment relationships outside of the DIFC. If an employer and employee are based outside the DIFC or have their employment agreement governed by the laws of another jurisdiction, the DIFC Employment Law may not apply. 

However, it’s possible for parties to choose the DIFC Employment Law as the governing law for their employment contracts, even if they are not physically located within the DIFC. In such cases, the DIFC Employment Law would be applicable and governs the employment relationship, regardless of the physical location of the employer or employee. 

Additional Tips for Employers and Employees  

Here are some additional tips for employers and employees in the DIFC: 

  • Employers should always have a written employment contract with their employees. The contract should set out the terms of employment, including the salary, hours of work, and benefits. 
  • Employees should keep a copy of their employment contract and any other important documents related to their employment. 
  • Employees should be aware of their rights under the DIFC Employment Law and other relevant laws. 
  • Employers and employees should resolve any disputes in a timely and amicable manner. If a dispute cannot be resolved, it may be necessary to seek legal advice. 

By following these tips, employers and employees in the DIFC can ensure that their rights are protected and that they are treated fairly. 

In addition to the DIFC Employment Law, there are a number of other laws and regulations that apply to employers and employees in the DIFC. These include the DIFC Data Protection Law, the DIFC Anti-Bribery Law, and the DIFC Consumer Protection Law. The DIFC is a well-regulated jurisdiction, and employers and employees in the DIFC have a number of rights and protections. By understanding the law, employers and employees can ensure that their rights are respected and that they are treated fairly. 

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 Reshma Rose Jacob

Reshma is a legal consultant at ATB Legal. She is a law graduate from St. Joseph’s College of Law, Bangalore, and is enrolled with the Bar Council of Kerala.

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