Today's Bitesize Brief is the first of a two-part series on employee issues in the context of company reorganisations onshore in Dubai. In the wake of the coronavirus pandemic we are seeing more and more companies looking to restructure their operations to adapt to these challenging times. Top of the list of considerations in any such restructure are the employees. We take a look below at some common questions when carrying out a restructure of an onshore company in the UAE.

We are transferring the business of one group company to another – do the employees transfer automatically with the business?

There are no regulations in the UAE for the automatic transfer of employees when all or part of a business is transferred. As a result, any employees being transferred from one group company to another must agree to the transfer. The employment contract and visa with their original employer will need to be cancelled and a new contract and visa issued by the new employer.

We are unfortunately going to have to make some employees redundant – is there a consultation process we must follow? 

There is no consultation process to make employees redundant in the UAE. A redundancy will generally be seen as a termination of the employee's contract and the usual rules for termination will apply. These rules require the employer to have a "valid reason" to terminate the contract if the termination is not to be held to be arbitrary. A company restructuring or winding-up, particularly as a result of financial difficulties, is generally seen by the local courts as a valid reason. However, there is always a risk that employees will challenge the grounds on which they are terminated and claim up to three months' salary for arbitrary dismissal. It is therefore important that any redundancy programme is properly documented and approved by the company's board of directors. Different requirements apply in respect of fixed-term employment contracts and UAE national employees.

Certain temporary measures were also brought into effect earlier this year as a result of the coronavirus pandemic. These measures may impact on the requirements in respect of a redundancy programme depending on the time at which it is undertaken and should also be considered. You can read more about these temporary measures here.

If we are making redundancies, do we need to make specific redundancy payments? 

There is no specific redundancy pay in the UAE. However, employers will need to make the usual termination payments to employees who are being made redundant, including salary in lieu of notice, pay in respect of accrued but unutilised holidays and end of service gratuity. The employer will also need to pay for the employee's return flight home. Different requirements will apply in respect of fixed term contracts.

We want to change the terms of employment of some employees – is that possible? 

It is not possible to change the terms of employment contracts in the UAE unilaterally. Any changes to employment terms will therefore need the employee's consent. The temporary coronavirus measures referenced above also require approval from the Ministry of Human Resources and Emiratisation for any permanent salary reductions.

An employee wants to remain in the UAE following their redundancy – can we leave them on our visa for an extended period to allow them time to look for another job?
Employees will often make this request to employers in a redundancy situation. However, it is a grey area under applicable immigration laws as an employer should not technically be sponsoring visas of individuals who are not its employees. In addition, the employer would: (i) remain responsible for the employee before the local authorities; and (ii) be required to maintain health insurance for the employee and their family for the extended visa period. The temporary measures introduced in respect of the coronavirus pandemic could also be relevant when considering any such request, depending on its timing.

Many thanks for joining us for this first Bitesize Brief. Watch out for Part 2 of the series where we will be considering common issues in respect of UAE national employees in the context of company reorganisations.