UAE: Country Profile

Background information

History

The Trucial States of the Persian Gulf coast granted the UK control of their defence and foreign affairs in 19th century treaties. In 1971, six of these states – Abu Dhabi, Ajman, Al Fujayrah, Ash Shariqah, Dubayy, and Umm al Qaywayn – merged to form the United Arab Emirates (UAE). They were joined in 1972 by Ra’s al Khaymah. The UAE’s per capita GDP is on par with those of leading West European nations. Its high oil revenues and its moderate foreign policy stance have allowed the UAE to play a vital role in the affairs of the region. For more than three decades, oil and global finance drove the UAE’s economy. However, in 2008-09, the confluence of falling oil prices, collapsing real estate prices, and the international banking crisis hit the UAE especially hard. The UAE has essentially avoided the “Arab Spring” unrest seen elsewhere in the Middle East, though in March 2011, political activists and intellectuals signed a petition calling for greater public participation in governance that was widely circulated on the Internet. In an effort to stem potential further unrest, the government announced a multi-year, $1.6-billion infrastructure investment plan for the poorer northern emirates and aggressively pursued advocates of political reform.

Economy

The UAE has an open economy with a high per capita income and a sizable annual trade surplus. Successful efforts at economic diversification have reduced the portion of GDP based on oil and gas output to 25%.

Since the discovery of oil in the UAE more than 30 years ago, the country has undergone a profound transformation from an impoverished region of small desert principalities to a modern state with a high standard of living. The government has increased spending on job creation and infrastructure expansion and is opening up utilities to greater private sector involvement. The country’s free trade zones – offering 100% foreign ownership and zero taxes – are helping to attract foreign investors.

The global financial crisis of 2008-09, tight international credit, and deflated asset prices constricted the economy in 2009. UAE authorities tried to blunt the crisis by increasing spending and boosting liquidity in the banking sector. The crisis hit Dubai hardest, as it was heavily exposed to depressed real estate prices. Dubai lacked sufficient cash to meet its debt obligations, prompting global concern about its solvency and ultimately a $20 billion bailout from the UAE Central Bank and Abu Dhabi Government that was refinanced in March 2014.
Dependence on oil, a large expatriate workforce, and growing inflation pressures are significant long-term challenges. Low oil prices have prompted the UAE to take steps to reduce its social spending, including eliminating fuel subsidies in August 2015, but the UAE has sufficient assets to cover its deficits with money from its sovereign investment funds. The UAE’s strategic plan for the next few years focuses on economic diversification and creating more job opportunities for nationals through improved education and increased private sector employment.

GDP (purchasing power parity):
$647.8 billion (2015 est.)
$623.3 billion (2014 est.)
$596.1 billion (2013 est.)
Note: data is in 2015 US dollars
Country comparison to the world: 33
GDP (official exchange rate):
$345.5 billion (2015 est.)
GDP – real growth rate:
3.9% (2015 est.)
4.6% (2014 est.)
4.3% (2013 est.)
Country comparison to the world: 70
GDP – per capita (PPP):
$67,600 (2015 est.)
$67,000 (2014 est.)
$66,000 (2013 est.)
Note: data is in 2015 US dollars
Country comparison to the world: 12

Information courtesy of The CIA World Fact Book.

Employment Issues

There are obviously a number of things to consider before hiring an employee in the United Arab Emirates and the following may prove useful to keep in mind:

An employer should follow the following steps prior to setting up a payroll operation in the UAE:
• Secure an office lease
• Establish a branch office or subsidiary in the UAE
• Issue a UAE employment contract, compliant with UAE employment law
• Sponsor the employee’s work permit in the UAE

Most employees in the UAE tend to be expatriate employees and are protected under UAE employment law.

Public Holidays

Employees are entitled to 9 official holidays with full pay:
• New Year’s Day
• Al Isra’a Wal Mi-raj – Ascension Day
• Eid Al Fitr
• Arafat (Haj) Day
• Eid Al Adha
• Al Hijri – Islamic New Year
• Commemoration Day
• UAE National Day
• Milad Un Nabi – Birthday of Prophet Mohammad

Bonus

Although not compulsory most employees receive an annual bonus, which is almost always less than a month’s pay.

Working Hours

The work week for white collar employees is set as Sunday through Thursday although some employees also work on Saturday.

Friday is the weekly holiday for all employees except for daily wage employees. If circumstances require that an employee works on Friday, he or she is entitled to another day off or be paid his basic pay for normal working hours plus an increase of not less than 50% of that pay.

Holiday entitlement

Employees are entitled to a minimum annual vacation leave based on length of service:
• less than 6 months: no leave
• more than 6 months and less than one year: 2 days per month worked
• more than one year: 30 days

The duration of annual leave cannot be decreased, but it can be increased. Thirty calendar days of vacation seems to be the market norm in the UAE.

Other things to consider are:
• Many employees negotiate with their employers to provide round-trip airplane ticket to and from their home country at least once per year.
• Pilgrimage Leave in the UAE: UAE employment law states that an employee is entitled to a one-time pilgrimage leave of 30 days without pay during the years of his or her employment contract.

Sick Leave

Employees are not entitled to sick leave during any probationary period.

After the probationary period has lapsed and after three months of continuous service, the employee is entitled to sick leave of not more than 90 days, continuous or intermittent, for each year of service. Pay during sick leave is as follows:
• Full wage for the first 15 days
• Half wage for the next 30 days
• The subsequent 45 days without pay

Maternity/Paternity Leave

Women are entitled to maternity leave of 45 days (60 days for public sector jobs) up to and after delivery with full pay, after completing at least one year of continuous service. If someone is employed for less than one year she is entitled to half pay.

After completing maternity leave, women are allowed up to an additional 100 consecutive or intermittent days of leave due to illness but a medical certificate must be produced.

Fathers with public sector jobs are entitled to three days of paternity leave.

Termination/Severance

Termination of Limited Employment Contracts in the UAE
o If the employment contract is for a limited period of time and the employer dismisses an employee without a stated legal reason, the employer is required to compensate the employee with 3 months total salary or the total salary of the remaining period of the contract, whichever is shorter.
o If an employee terminates a limited duration contract before it expires, he should compensate the employer with 45 days total salary or the remaining period of his contract, whichever is shorter.

Termination of Unlimited Employment Contracts in the UAE
o If the employee is employed under an unlimited employment contract and wants to terminate the contract, they should submit a written resignation letter mentioning the intention to work for only one month which serves as the notice period.
o If an employer decides to terminate the contract of the employee under unlimited contract, the employer must notify the employee in writing and give a notice of one month.

Severance in the UAE
If an employee has completed one year or more of employment, the employee is entitled to an end of service payment of 21 days pay for each year of the first 5 years of service and 30 days for each year after that.
o This is calculated based on the last base salary.
o The total end of service gratuity would never exceed the equivalent of two years’ salary.
o Periods of unpaid leave are not included within the service period.
o If an employee dies during an employment contract, the end of service gratuity is paid to his or her heirs.

Taxes

Expatriates do not have to pay social security tax.

UAE nationals are entitled to a pension and must contribute 5% of their salary to social security. Employers contribute 12.5% of the employee’s salary.

Health Insurance Coverage

Employees in the UAE are generally covered by medical insurance which is typically paid by the employer. Certain medical insurance providers are pre-approved by the UAE government.

Healthcare laws vary from Emirate to Emirate.

If an employee travels outside the UAE, it is important to ensure the employee is covered whilst travelling.

Employment Contracts

Both fixed term and unlimited term contracts are allowed in the UAE.

Although it is best practice to always put employment contracts in writing, it is not required by law for UAE nationals. The law does require written contracts for non-nationals and they must meet a legally approved format.

Contracts must also include:
1. Wages/remuneration payable.
2. Date of the employment contract.
3. Date of commencement of the employment contract.
4. Nature of the contract (limited or unlimited).
5. Nature of the work.
6. Duration of the contract (for fixed term contracts).
7. The location of employment.

It is best practice, and for expatriates legally required, to put a strong employment contract in place in the local language, which spells out the terms of the employee’s compensation, benefits, and termination requirements. An offer letter and employment contract in the UAE should always state the salary and any compensation amounts in Dirham rather than a foreign currency.

UAE Trade Tariffs

The Tariff regime in the UAE is a constantly moving scene but a good starting point get a feel for the UAE is at the Dubai government website: http://www.dubaicustoms.gov.ae/en/Pages/default.aspx
There is a great deal of very useful information on this site but we strongly recommend that you take advice on how this information applies in your specific circumstances.

Business Culture in UAE – top tips

Tip 1dubai-old-v-new
Remember that, despite its Western feel, the UAE remains an Islamic region and that great respect must be paid to Islamic tradition, beliefs and sensitivities.

Tip 2
More than 80% of the population of the region are non-Emirati expatriates and you are just as likely to meet an American or an Australian as you are a local.

Tip 3
The Emirates consists of seven, separate states which are all slightly different in feel and approach. If you are doing business outside the main centres of Dubai and Abu Dhabi, make sure you do some additional research.

Tip 4
Do not be surprised if local companies are very family–oriented and influenced. Nepotism is a way of life and is actively encouraged. You could find several family members in the same meeting.

Tip 5
Company structures will reflect this family-orientation through a strong sense of hierarchy. Try to find out the hierarchy of your counterpart – and look into who the real decision-makers are. Try to start at the top if you can.

Tip 6
As throughout the Arab world, age is worthy of respect and visitors should display respect to older people.

Tip 7
Do not assume that any expatriate you deal with who works for a local company will be the final decision-maker. It is highly likely that the expatriate (whatever their job title) will need to report to a local senior official for final authority on any issue.

Tip 8
Management style is directional and employees expect managers to lead in a fairly authoritative manner. This can mean that instructions are given in a very direct, precise and even abrupt way.

Tip 9
When in meetings, avoid pointing the soles of your shoes at your counterparties as this could be seen as rude. It is also best to pass any documents, refreshments etc. with your right hand.

Tip 10
Same gender touching is very common – although public tactility across the genders is very rare and is discouraged.

Tip 11
Meetings can often appear unstructured with no (or little reference to) agenda. People may be present who seem to have nothing to do with your meeting.

Tip 12
Meetings will not always (in fact very rarely) start on time. Levels of lateness can vary from a few minutes up to more than an hour. Be patient.

Tip 13
Try not to arrange too many meetings on the same day as lack of punctuality, the unstructured nature of meetings and heavy traffic can make it difficult to pack lots of commitments into one time slot.

Tip 14
Arabic is a language of hyperbole. Therefore, it is common for business associates to lavish extravagant praise on each other as part of the all-important relationship building phase of doing business. Don’t feel inhibited to join in this process.

Tip 15
People do not like to say ‘no’ or deliver negative news. It can be very difficult to fully understand exactly how interested people are in your propositions. Only perseverance and patience will reveal the true picture.

Tip 16
Don’t take ‘yes’ to mean ’yes’ every time. It could be being used as a delaying tactic. Remember that the person you are dealing with may not be the final decision maker.

Tip 17
Emotional discourse denotes interest and engagement. Don’t mistake loudness and emotion for hostility or anger.

Tip 18
You should endeavour to maintain strong levels of eye contact (same sex) as strong eye contact denotes sincerity and trustworthiness.

Tip 19
Women play a more active role in business than in neighbouring Saudi, although some older, more traditional Emiratis may maintain a significant gender bias.

Tip 20
Dress conservatively, but very smartly. Modesty in dress code is important for women. You will be judged partly on your appearance.

For a more comprehensive guide to business culture in the UAE please visit here.

The information above is intended as background information only and professional advice should always be taken in advance of making any decisions.