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August 08 2018
The gig economy – a labour market characterised by the prevalence of short-term contracts or freelance work, as opposed to permanent jobs – is developing and expanding worldwide. It is important that UAE-based employers that wish to engage flexible workforces are aware of the options available for gig economy-style employment relationships under local regulations.
In 2016 Forbes reported that there were 53 million freelancers in the United States, with that number expected to increase to 50% of the workforce. High-profile cases involving gig economy-based companies such as Uber and Deliveroo have challenged and sought to define the employment status of their workers within international jurisdictions.
Unlike the United States and Europe, the employment landscape in the United Arab Emirates does not naturally lend itself to gig work. However, a flexible working model is more prevalent in the country than it appears and is certainly something that the authorities are encouraging within the private sector.
The ability to become a freelancer and render services to companies within the terms of a trade licence has been available for many years. Some of the free zones are actively encouraging freelancing. For example, in June 2018 the Dubai Creative Clusters (DCC) free zone created a reduced freelance package for those in the media and education sectors. These types of initiative are welcomed by employers, many of whom have been led by corporate cost-cutting and the desire for more flexibility to hire freelancers rather than take on full-time employees.
This approach enables companies to save on employment costs such as statutory benefits, medical costs, termination payments and other costs associated with the traditional employment.
A significant shift towards greater worker mobility in the United Arab Emirates was shown when the Ministry of Human Resources and Emiratisation (MoHRE) introduced a part-time working resolution earlier this year (for further details please see "Part-time working introduced – more than just a nice idea"). The resolution permits employees to work for two or more MoHRE registered employers at the same time.
Part-time working has also been made available for students for the first time. In line with UAE Vision 2021, which has articulated setting up a competitive knowledge economy, the DCC authority has implemented a student part-time working regulation permitting young professionals to gain industry experience to complement their studies.
Another option for employers to consider is fixed-term contracts. While individuals who enter into fixed-term contracts will be regarded as having employment status locally, these types of contract provide employers with some key advantages. In particular, employers may terminate fixed-term contracts at the end of their term without a risk of being subject to a claim of unlawful termination. Further, these contracts are one of the rare contracts under which an employee may have to pay compensation to an employer if they wish to terminate the contract early.
Therefore, fixed-term contracts are an extremely effective way of providing employers that wish to hire staff on a fixed-term basis with security of service and a reduced risk of future employment disputes.
Engaging personnel via a personnel supply company remains one of the most popular ways of hiring staff on a temporary basis without creating employment liability. The personnel supply company sponsors workers and provides their services pursuant to the commercial terms agreed with the company.
Companies must conduct proper diligence to ensure that the personnel supply company has a valid licence in accordance with Ministerial Resolution 1205/2013 concerning Licensing and Organising Private Recruitment Agencies. Failure to do so could amount to a breach of the UAE immigration regulations.
There are certainly areas of the UAE employment regime that will require material changes for the gig economy to have the same impact and influence that it has had in other international jurisdictions. However, the United Arab Emirates has always been one of the most diverse jurisdictions from a workforce perspective and the authorities are constantly implementing measures to attract talented individuals and encourage a talent and knowledge-based economy.
There is a huge opportunity and appetite to increase the variety of working arrangements within the country. The gig economy has already had an impact on the UAE regulatory framework and is likely to become more central to the landscape of employee and workforce relationships within the next five to 10 years. It is certainly an area that in-house legal teams, HR professionals and senior managers should pay close attention to in the short to medium term.
For further information on this topic please contact Luke Tapp or Ruth Stephen at Pinsent Masons LLP by telephone (+971 4 373 9700) or email (email@example.com or firstname.lastname@example.org). The Pinsent Masons website can be accessed at www.pinsentmasons.com.
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