The UAE’s Ministry of Human Resources and Emiratisation (MOHRE) has unveiled a new categorization system for businesses in the UAE, with three levels of classification.
Companies will be classified based on their compliance not just with UAE labor laws, but also with programmes designed to make the UAE’s workforce more competitive and culturally diverse. The classifications are based on Cabinet Resolution No. 18 of 2022, which is titled “Concerning Classification of Private Sector Establishments Subject to Labor Relations Regulation Law Provisions.” From June 1, 2022, the resolution will be in effect.
But what factors determine whether a corporation is classified as Tier 1, 2, or 3? Is it possible for a corporation to advance from one tier to the next? The following are the specifics.
Tier 1
Companies are classified in this category if they commit 100 percent to the law and wage protection system, workers’ rights protection, and compliance with the UAE’s policy of promoting cultural and demographic diversity, as well as labor market resolutions, in addition to meeting the following criteria:
- Increase the rate of Emiratisation by at least three times the aim.
- Collaborating with the ‘Nafis’ programme to yearly train at least 500 citizens.
- Being a young citizen-owned business that adheres to established guidelines.
- Being one of the UAE’s cultural diversity-promoting training and employment centers.
- Participating in the targeted sectors and activities as specified by the Council of Ministers in accordance with the ministry’s decision.
Tier 2
The degree to which new businesses are classified in this category is determined by their dedication to the law and the Wage Protection System, as well as their adherence to the UAE’s policy of encouraging cultural and demographic diversity, as well as labor market remedies.
According to Article 7 of Cabinet Resolution 18/2022, “all new establishments, regardless of their size, shall be classified under Category 2, subject to compliance with the policy of skilled workers and cultural diversity when issuing work permits. The establishment will be classified as Category 3 if any of the criteria mentioned in Article 4 of this resolution are met”.
The factors that would lead to a corporation being designated as Tier 3 or Category 3 are mentioned in Article 4 of the resolution.
Tier 3
This category of classification includes:
- Businesses that are found to be in violation of the UAE Labour Law and executive regulations, as well as resolutions regulating the labor market and standards for protecting workers’ rights;
- Companies that are not committed to promoting cultural and demographic diversity in the UAE labor market.
- A company committing other violations stipulated in Ministerial Resolution No. 209 of 2022, including human trafficking, using or recruiting workers without obtaining work permits, providing incorrect data, documents or information to the Ministry, violating obligations on workers’ wages, housing, and safety standards, resorted to fake Emiratisation practices or committed other serious violations.
How can a company move up from Tier 3?
There is a list of infractions in Cabinet Resolution number. (209) of 2022 ‘Classification of establishments under category (3)’ that would result in a corporation being degraded to Tier 3 from three months to two years. According to Article 2 of the resolution, the facility will only be reclassified into its proper category after the period of stay in Category 3 has expired and the infractions have been fixed and the fines have been paid.
However, the Article also states that “The [MOHRE] Minister may issue a decree to keep a violating establishment under Category 3 for an extended period of time according to the gravity of the violation committed or its recurrence.”