Employers in the UAE Face Redundancies for the First Time

The economic downturn is forcing employers in all parts of the world to confront new and worrisome challenges. In the United Arab Emirates, businesses are facing the prospect of redundancies for the first time in recent history—arguably, for the first time ever. This means that many companies have no established procedures for redundancies, and many HR managers have never had to deal with them. Adding to the difficulty are laws that forbid firing an Emirati national unless he or she is in breach of contract and requiring that any expatriate employee laid off leave the country if he or she has not found another position within a month.

Not surprisingly, then, members of ORC’s UAE HR Network were eager to explore best practices for managing the legal and employee relations implications of redundancies at the group’s meeting in Dubai earlier this month.

The UAE government is considering possible changes in the immigration laws that will allow more time for expatriates to seek fresh employment before being forced to leave the country. In the meantime, however, managers are seeking alternatives to layoffs. One option is to institute a shorter working week with commensurate reductions in pay. UAE labor law permits this strategy, and most member companies that have tried it report positive feedback from employees who understand that the alternative might be losing their jobs.

Another option is perhaps unique to the Middle East, where 80 percent to 85 percent of the workforce in many parts of the region is made up of non-nationals. A number of companies at the UAE HR meeting and others surveyed by ORC are implementing an enforced unpaid extension, typically 60 to 90 days, to the required 30 days’ vacation. This measure is not as popular with employees because, in addition to being without pay for an extended period, there is no guarantee that they will be called back to work at the end of the period.

Where redundancies are unavoidable, “employer of choice” companies in the region are taking pains to mitigate as much as possible the impact on their employees by:

• Consulting ahead of time with affected employees and explaining the business case
• Making every effort to find alternative employment within the company
• Allowing the employee time off to search for other opportunities
• Paying discretionary enhanced severance pay (up to 3 months’ pay in some cases)
• Delaying the cancellation of the employees’ work permits to allow them more time to find another job

ORC member companies in the region are also taking steps to maintain the morale of the remaining workforce and retain key high performers. They are beefing up internal communications, clarifying career paths, and improving processes for identifying and developing high potentials: in short, they are doing their best to be “employers of choice” even in difficult economic times.

For more information on ORC’s UAE HR Network, contact John MacDonald in our Dubai office.