Global mobility considerations in the UAE
By Rebecca Ford, partner in the Mena employment team of Clyde & Co, Dubai
April 30, 2014 12:26 by kippreport
Managing an internationally mobile workforce can be challenging, particularly as home country and host country laws can be vastly different. While a multinational employer may wish to centralise its employment policies and administration as far as possible, legal compliance with local laws in the host country may mean that it is not possible to impose global policies on the workforce. Taking the UAE as an example of a host country, the following is a useful checklist of the issues that HR and legal departments have to consider:
What contractual documents do you need?
Many organisations prefer to maintain home country contracts for their mobile staff in order to provide some comfort to employees that their accrued service will continue to be recognised, benefits supplied to them will be maintained and rights and obligations will be familiar to them.
Ideally, internationally mobile staff will not be inundated with paperwork and a simple letter confirming the international status of an employee is preferred. However, it is not always possible to approach the contractual documentation with a light touch and the immigration requirements of the host country can often drive the employment documentation process. Expatriates working in the UAE, for example, must have a residence visa and work permit that will enable them to live and work in the country. As part of the application process, an employee will be required to enter into a standard form of local contract (supplied by the Ministry of Labour or a relevant free zone authority).
What law applies to the international assignment?
Where there is a requirement for a local contract, such as in the UAE, the local laws will apply to the employment – in the UAE, in most cases, this will be Federal Law No. 8 of 1980, as amended (the Labour Law). This means that a company must consider how the host country laws will dovetail with the home country, in cases where a home country contract is maintained.
For example, in the UAE, the Labour Law sets out certain minimum standards, covering issues such as annual leave, sick leave and end-of-service gratuity, which cannot be contracted out of. This means that a company will have to look at its usual policies and consider whether these need to be enhanced in order to ensure host country law compliance. Equally, a company will want to ensure that an employee does not receive two sets of entitlements and that any leave, for example, runs concurrently in both jurisdictions. In addition, local statutory rights may increase the value of benefits offered to an employee in the host country.
In order to ensure parity with employees across the globe, it may be necessary to offset statutory benefits in the host country against contractual benefits in the home country. For example, in the UAE, an employee who achieves one year’s service is entitled to an end-of-service gratuity payment upon the termination of employment (unless they are dismissed for gross misconduct or are, instead, in receipt of a pension provided in lieu of gratuity). A multinational employer may, therefore, wish to agree that any statutory end-of-service gratuity paid to the employee in the UAE is offset against a contractual redundancy payment offered in the home country.
Who is the employer?
As noted above, in many cases, the immigration requirements of the host country mean that an employee is obliged to enter into an employment contract with a local entity in the host country. The host country employer may, therefore, be a branch or other group company of the home country entity. However, it could be a joint venture partner or local sponsor.
An employee may, therefore, acquire an ability to bring a claim both against the host country entity and the home country entity in the event of a dispute. It is important, then, that both home and host entities are aligned in their management of employee relations and, in particular, who is the disciplining and dismissing party. While the host company would usually deal with the day-to-day management of the employee (including disciplinary matters), the home company will want to maintain some control over this or, at the very least, be consulted with, prior to any disciplinary or dismissal action. This can be dealt with by way of an agreement between the two employing entities.
When moving employees from one jurisdiction to another, the multinational employer must consider both the tax implications for the employee (for example, in what circumstances is income tax payable in the home or host country or both), as well as the tax implications for the employer – for example, is a permanent establishment created when one or more employees are sent to a particular location?
In the UAE, for example, there is no income or corporation tax, however, certain employees (for example, American nationals), may still be obliged to account for tax in their home jurisdiction.
Immigration requirements can pose specific problems to multinational companies seeking to transition employees smoothly to the host jurisdiction. For example, in some jurisdictions, it is illegal to require an employee to take an HIV test. However, in others, such as the UAE, the immigration process includes a medical test, which checks for communicable diseases, such as HIV.
The employer will need to explain to the employee that the medical examination is imposed by authorities and obtain the employee’s co-operation. The employer may also want to consider how it will deal with the employee if things go wrong – for example, what happens if the employee fails the medical test, either at the outset or during the course of employment when the employee’s visa is renewed? Will the company continue to employ the individual in the home jurisdiction? Will the company supply counselling (particularly if the failure of the medical examination comes as a surprise to the employee)?
Policies: can one size fit all?
In most cases, although a multinational can maintain similar employment policies globally, it is unlikely that they will all be the same. For example, a policy providing accommodation and other benefits to an unmarried couple would not be appropriate in jurisdictions, such as the UAE, where to live together would be illegal; a drug rehabilitation policy would equally be inappropriate in the UAE.
In other cases, a policy may be able to be maintained, but some parts of it amended – for example, a whistleblowing policy cannot promise protection for the whistleblower, where there is no statutory whistleblowing policy and where the publishing of certain allegations may, in fact, lead to a criminal complaint of defamation against the whistleblower.
Policies should, therefore, be looked at from a host jurisdiction perspective in order to ensure local law compliance.
Health, safety and company beliefs
In a large multinational, where employees are disbursed across the globe, it can be difficult to maintain consistent standards. For example, different nationalities may have different views as to what is and is not appropriate behaviour in a workplace. Equally, certain policies may be so important to a company – for example, health and safety policies – these must be consistently applied and observed across the globe. This may require a multinational employer to provide training and education to its workforce, both to introduce the required behaviours and maintain an awareness of them during the course of employment.
Multinational companies need to be cognisant of local nationalisation laws in the host jurisdiction; for example, is there a limit to the number of expatriates that may be employed by the company in the host location? Alternatively, are constituent nationalities that make up the workforce regulated (for example, in the UAE, additional fees are charged by the Ministry of Labour to companies who do not adequately employ UAE nationals or whose workforce is not diversified)?
While it may be appropriate to work with trade unions in certain jurisdictions (and even to have an international framework agreement in place), a multinational employer should bear in mind that it may not be able to promise the recognition and activity of a union in certain jurisdictions. For example, in the UAE, there is no right to freedom of association and collective action, such as striking is expressly prohibited by the criminal code.
Multinational companies are usually concerned to maintain best practice employment standards, not least because a failure to do so can attract criticism in the world’s press. Even where a jurisdiction does not require compliance with certain standards – for example, there are no anti-discrimination provisions in the UAE Labour Law – nevertheless, from the viewpoint of an international workforce, the integrity of a company and its policies should be consistent throughout the globe.
As companies and their employees become more globally mobile, in part as a response to economic challenges in home jurisdictions, the issues identified above will need to be considered on a more regular basis. The most appropriate time to consider the issues is at the outset, before an employee embarks on a role in a host location, in order for correct legal and immigration policies and structures to be put in place to best serve the company and its employees.