Similar to other member states of the Gulf Cooperation Council (“GCC”), the private sector labour market in the United Arab Emirates (“UAE) has traditionally been dominated by a rather large foreign workforce. However, to ensure better employment opportunities for nationals in the private sector, workforce nationalisation programs have been introduced in several GCC-countries (e.g., Saudisation in the Kingdom of Saudi-Arabia, Omanisation in the Sultanate of Oman). The UAE has gradually boosted its workforce nationalisation program Emiratisation in recent years and has implemented stricter hiring quotas for UAE nationals and penalties to be imposed on obliged companies in cases of non compliance. This briefing aims to provide an overview on the status of Emiratisation and its effects on companies operating in the UAE.
1. What is Emiratisation?
Emiratisation refers to a UAE government initiative aimed at boosting the employment of UAE nationals particularly in the country’s private sector. The rules governing Emiratisation are, amongst others, set out in various Cabinet Decisions and Ministerial Decisions. In 2021, the UAE launched the Nafis-Program at a federal level with the aim to further increase the employability and employment of UAE nationals in the country’s private sector. The UAE’s Ministry of Human Resources & Emiratisation (“MoHRE”) announced in May 2024 that there are now more than 97,000 UAE nationals working in about 20,000 companies, a 170 % increase since the launch of the Nafis-Program in September 2021.
In addition to workforce nationalisation programs, various GCC-countries have implemented value-add programs with the aim to localise supply chains and to (further) develop local industries and services. These programs generally incentivise bidders who source services, raw materials, and goods locally (instead of internationally). Whilst hiring of nationals is not the only decisive condition under these programs, a major social impact of these initiatives is the creation of jobs for nationals. The UAE’s In-Country-Value Program (“ICV program”) was first introduced by ADNOC in 2018. At UAE federal level, the national ICV program was introduced in 2021 and is overseen by the UAE Ministry of Industry and Advanced Technology (“MOAIT”). MOAIT announced in August 2024 that since 2021, 19,000 Emiratis obtained competitive jobs in companies that are members of the national ICV program.
2. Which companies are required to adhere to Emiratisation rules?
The Emiratisation rules require certain companies to employ a certain number of UAE nationals. The requirement applies to private sector companies established in UAE mainland. Companies established in one of the UAE’s free zones (including the financial free zones ADGM and DIFC) are not subject to Emiratisation rules.
Initially, Emiratisation regulations only targeted companies incorporated in UAE mainland with 50 or more employees (Ministerial Decision No. 297 of 2022). For such companies, the annual hiring target is set at 2 % of overall skilled workforce per year (2 % year on year increase), split into half-yearly targets of 1 %. The aim is to reach a 6 % Emirati workforce by the end of 2024 and a 10 % Emirati workforce by the end of 2026.
Following the entry-into-force of Ministerial Decision No. 455 of 2023, Emiratisation requirements also apply to private sector mainland companies with 20 to 49 employees operating across 14 key economic sectors (e.g. finance and insurance, real estate, education, healthcare and social work, construction, wholesale and retail). Such companies are required to hire at least one UAE national by the end of 2024 and another UAE national by the end of 2025. According to MoHRE, more than 12,000 companies with 20-49 employees, operating across 14 key economic sectors are now required to comply with these Emiratisation targets.
3. Which penalties apply to companies for non-compliance?
The current Emiratisation rules set out fines to be imposed on companies that are in scope of the regulations in cases of non-compliance.
Companies with 50 or more employees are subject to a fine of AED 8,000 monthly for each UAE national not hired as per Emiratisation targets in 2024. Fines increase by AED 1,000 every year until 2026.
Penalties for companies with 20 to 49 employees that are in scope of the Emiratisation regulations are subject to a fine of AED 96,000 for the UAE national not hired in 2024. Such fine is payable in January 2025. A fine of AED 108,000 will be imposed for failure to meet the 2025 targets, payable in January 2026.
Cabinet Decision No. 44 of 2023 (which amended Cabinet Decision No. 95 of 2022) introduced fines for companies circumventing Emiratisation quotas, ranging from AED 100,000 to AED 500,000.
Additionally, Ministerial Decision No. 296 of 2023 establishes administrative fine criteria for Emiratisation violations, specifying the procedure for imposing fines on related offenses.
4. What other aspects do companies need to be aware of when employing UAE nationals?
Apart from hiring quotas, companies need to adhere to several other legal requirements applicable in the context of hiring and employing UAE nationals.
For example, Ministerial Decision No. 663 of 2022 sets out special rules to be observed when advertising jobs for the purpose of Emiratisation.
When hiring UAE nationals, companies also need to adhere to special procedural requirements, such as obtaining a respective work permit from MoHRE for Emirati employees. Salaries are to be transferred in accordance with the Wage Protection System (“WPS”).
Companies also need to be aware that eligible UAE nationals working in the UAE are entitled to pension. The respective legal basis is Federal Decree Law No. 57 of 2023 (for Emirati employees joining the labour market for the first time after 31 October 2023) and Federal Law No. 7 of 1999 as amended (for other Emirati employees). Special rules apply in the Emirate of Abu Dhabi. Companies that employ UAE nationals are required to register the company and each Emirati employee with the General Pension and Social Security Authority (“GPSSA”) from the first month of employment. Additionally, the required pension contributions need to be made monthly. Under Federal Law No. 7 of 1999, a monthly contribution equal to 20 % of the employee’s salary needs to be made to GPSSA (breakdown: employee contribution: 5 %; employer contribution: 12.5 %; government: remaining 2.5 %). Under Federal Decree-Law No. 57 of 2023, other contribution percentages apply.
Companies should also be aware that Ministerial Decision No. 212 of 2018 sets out protections for UAE nationals and legal obligations for employers in the event of termination of employment. The current applicability of this Ministerial Decisions is unclear. The set of rules predates the entry-into-force of the new UAE Labour Law in 2022 and has not yet been officially repealed. Companies are, however, advised to liaise with MoHRE in the event of termination of UAE nationals to obtain current information on MoHRE’s view point on the continued applicability of said Ministerial Decision.
5. Conclusion and Outlook
Emiratisation requirements are likely to continue to evolve, and it remains to be seen whether Emiratisation requirements will be extended to companies established in one of the UAE’s free zones. As they do, special procedural requirements in the context of hiring and employing UAE nationals are likely to gain importance.
Given that rather hefty fines are to be imposed in case of non-compliance with Emiratisation rules, HR professionals need to familiarise themselves with the changing legal landscape. In practice, filling of required Emiratisation quotas might prove challenging in some sectors and in particular for smaller companies also due to a shortage of respective job applications. Companies should consider registering to the Nafis Program’s digital platform to identify suitable Emirati candidates for job vacancies. Companies may also wish to consider introducing certain measures to attract and retain Emirati talent, e.g. training schemes and incentive programs.
Companies with operations in the wider GCC-region should familiarise themselves with the workforce nationalisation programs in other jurisdictions (such as the Saudisation policy in the Kingdom of Saudi Arabia) as well as value-add programs in force in other GCC countries to always ensure compliance with local legal obligations.
Dr. Constantin Frank-Fahle, LL.M.
Founding Partner
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