UAE: New Fines for Failure at Emiratization

​Emiratization, an initiative to encourage companies to employ more United Arab Emirates nationals in UAE-based companies, has been in place in some form since 2006 in the UAE. Beginning in January 2023, a new set of goals and accompanying fines for failure to comply will take effect.

"There have been different schemes over the years which have been implemented and which are designed to ensure that private-sector organizations attract and employ Emirati nationals in their workforce," said Rebecca Ford, an attorney with Clyde & Co in Dubai. "The latest scheme which has been announced is, I think, the most ambitious."

What the New Plan Entails

The new Emiratization plan requires that companies have a minimum of 2 percent of their workforce in the country be Emiratis by December. After the end of 2022, the target percentage increases, requiring that 4 percent of the workforce consist of Emiratis by the end of 2023. In 2024, the target percentage increases to 6 percent, in 2025 to 8 percent, and by 2026, the required percentage of Emiratis at companies is 10 percent.

"If you simply look at the demographic spread, the UAE population accounts for almost 10 million people. And out of these, only 11 percent from the population are UAE nationals," said Rajiv Suri, an attorney with Alsuwaidi & Co. in Dubai. "The idea of Emiratization is basically to introduce UAE nationals into the workforce." 

New Fines for Noncompliance

A key aspect of the new scheme is that after January 2023, fines will be levied on companies that do not comply with the new Emiratization requirements.

"It is ambitious and really quite an aggressive scheme in that where an organization fails to achieve their target, they then have to pay a fine, and essentially the way that they calculate that fine is a fine value per month," Ford said. "You then multiply that by the number of Emiratis that the company has failed to actually employ, and then you multiply it by 12 months."

Every year, the fines increase. The first year, the fine will begin at 6,000 dirhams (approximately $1,634), and then it will increase by 1,000 dirhams (approximately $272) every year. The fines will rise to 10,000 dirhams (approximately $2,723) per month by 2026, Suri said.

How Companies Should Prepare

Companies that haven't already started preparing for the changes should begin to make both short-term and long-term plans to meet the quotas.

"I think if they haven't historically really focused on this, then they really do need to start thinking about, do they have current roles that they are recruiting for and could they be filled by Emiratis? And if they don't have any current roles, then what other solutions do they have to ensure that they increase the Emirati population by the end of December of this year?" Ford said.

Employers might consider accelerating the hiring of roles that they weren't necessarily going to recruit for this year, for Emirati candidates only, Ford added.

Companies that have already laid the groundwork for a strong Emirati employee base will have an easier time adjusting to the new quotas. For other companies, it will be necessary to figure out ways to consistently recruit and retain Emirati employees.

"It's going to be a substantial change for a lot of organizations in thinking about how they approach and attract Emirati candidates," Ford said. "One of the important elements of a company's strategy is not only going to be attracting new Emirati talent, but actually retaining your existing Emirati staff who could be tempted to leave by other organizations looking to increase their own quotas."

Incentives Beyond Fines

In addition to the fines, there are incentives for companies to recruit more Emiratis, including subsidies to UAE nationals and private establishments.

Overall, the new quotas and fines will work to bring more Emiratis into the workforce in the UAE. "This is, I think, a very good move, which will not only help the UAE nationals to integrate into the workforce, but also give impetus to attract more investment and to make the population diversify," Suri said. "It could certainly lead to diversification in the workforce."

Katie Nadworny is a freelance writer in Istanbul.