The United Arab Emirates (UAE) hosts the second-largest economy in the Arab world, distinguished by fast-growth and business-friendly free trade zones that have facilitated inbound foreign direct investment in recent years. Although petroleum exports are still important to the economy, the UAE’s strategic plan now focuses intently on economic diversification, particularly in its largest city Dubai. The goal is to establish the UAE as a hub for global trade and tourism, promote economic development and create more job opportunities for residents through improved education and increased private sector employment.
Why the United Arab Emirates?
- More than 40 free zones in the UAE with innovative capabilities and competitive advantages are attracting long-term investments from foreign companies. Furthermore, 100% foreign ownership is allowed in the UAE and English is widely spoken in business.
- The UAE earns high marks for its straightforward business environment and cutting-edge innovation, being named the top country for innovation in the Arab world by the Global Innovation Index 2021.
- The UAE does not impose income tax on individuals, investors or corporations, with the exception of oil companies and local branches of foreign banks.
- The UAE is home to a diverse, multicultural population and large amounts of expats from more than 190 countries. The country’s well-known 10-year Golden Visa system attracts investors, business owners and professionals in key sectors.
- Dubai has direct airline routes to more than 250 cities around the world. The UAE has also become a major player in global supply chain networks, offering shipping lines to more than 400 cities.
What should multinational companies (MNCs) be aware of when hiring in the United Arab Emirates for the first time?
There are more than 40 ‘free zones’ in the UAE, two of which are the Abu Dhabi Global Market (ADGM) and the Dubai International Financial Centre (DIFC). MNCs should note that these free zones have entirely distinct legal systems, with their own employment legislation replacing the UAE Labor Law. The main differences in the ADGM Employment Regulations and DIFC Employment Law relate to the employment of foreign and UAE nationals, payment of wages, health, safety and the termination of contracts.
MNCs should also take note that the new Federal Law No. 33 of 2021 (New Labor Law) went into effect on February 2nd, 2022, repealing the previous labor framework. The New Labor Law applies to employers and employees in the UAE’s private sector, companies owned in whole or in part by the federal or local government and companies incorporated in the UAE mainland and also regulated by the Ministry of Human Resources and Emiratization (MoHRE). It also applies to companies in the freezones, except for ADGM and DIFC.
Employment contracts must, in principle, be offered to employees in writing, with copies retained by the worker and the employer. As per the new labor law that took effect in 2022, unlimited contracts were ordered to be replaced by fixed-term employment contracts. All employees must be employed on fixed-term employment contracts not exceeding three years, which can later be extended for the same duration or a different period.
There are no specific provisions regarding employee/contractor classification. The concept of a ‘contractor’ or ‘self-employed’ individual is not directly recognized under the law. In some free zones, there is a special freelancer visa that individuals may be able to obtain in order to work independently. Individuals can establish their own consultancy company, akin to a contractor, and render services within the confines and terms of their trade license. However, these arrangements are limited and not easy to obtain.
Why is demand growing in the United Arab Emirates for Employer of Record (EOR) services?
The UAE’s attractiveness among MNCs has been growing in large part due to its talented workforce, which is becoming increasingly skilled and sought after by foreign firms. In particular, the workforce of Dubai has been ranked among the top ten cities in the world by BCG, outperforming the likes of Los Angeles, Paris, Sydney, Tokyo, Toronto, Vienna, Singapore, Melbourne, Zurich, Geneva, Boston and Hong Kong. It is also noteworthy that Dubai and Abu Dhabi have each ranked among the world’s top ten most desirable cities for digital talent to live and work, according to the BCG Decoding Global Talent. Thanks to the latter, the UAE is becoming an increasingly attractive market for expats.
While MNCs want to take advantage of burgeoning opportunities in UAE and tap into the talented workforce, there are still risks, requirements and restrictions that can make the process of directly hiring an employee difficult. In particular, the UAE’s labor framework was recently overhauled and is expected to usher in additional changes in upcoming years. For example, the labor code was amended to cover remote workers and there may be additional changes that come about to regulate virtual work. Moreover, there are different requirements in each of the free trade zones. For HR departments managing global payroll, it can be difficult to keep pace with these changes and variations in regulations.
For these reasons, MNCs often find the EOR model a suitable alternative to setting up a local entity and hiring locally in the UAE. Effectively, by partnering with an EOR, the MNC can eliminate the burdensome risks, requirements and restrictions that typically come along with hiring in the UAE – while still drawing from the country’s innovative workforce that offers the most robust digital talent pool in the Arab world.
How can partnering with GoGlobal help MNCs grow their team in the United Arab Emirates?
While the UAE offers favorable economic conditions and a talented, up-and-coming workforce, language barriers and certain administrative requirements can make HR processes challenging for MNCs. Essentially, GoGlobal assumes the legal liabilities and handles the burdensome administrative requirements of managing payroll in the UAE. This way, our clients can focus on the core business activities that help them scale new opportunities and thrive – without being weighed down by red tape and paperwork.
Our innovative EOR team has a proven track record of success in building fully compliant workforces in the Middle East and North Africa (MENA) markets, offering expertise on the region’s complex regulatory compliance frameworks that have undergone significant changes in recent years. We take pride in embracing a global mindset, but we also maintain a team of local experts on the ground in each of the markets we serve. Therefore, our dedicated team in the UAE knows the “ins and outs” of the regulatory environment, staying current on all requirements. At the same time, they are also fully practiced in the UAE’s business customs and unique local culture. This ensures a comfortable experience for clients and client-employees alike.
If your company offers a positive employee experience in your home country, GoGlobal will help you localize it and bring it to the UAE. Before we begin the onboarding process, our onshore team in the UAE works hands-on with each newly hired team member to explain how the EOR arrangement operates. Throughout the arrangement, that same dedicated team stays on as the point of contact for both the client and client-employee. We are always available to address questions that come up in the areas of payroll, taxation or benefits. In serving our clients and client-employees, we strive to offer an end-to-end global hiring experience with agility, efficiency and peace of mind.