Extended welcome: Jobseekers' visas and overhaul of employee guarantee scheme gains business approval

25 June 2018

A series of changes to the UAE's employment regime announced on Wednesday night making it easier for companies to hire workers and for jobseekers to remain in the country has been positively received by business owners, advisors and recruiters.

The measures, which were initially announced by the UAE vice president and ruler of Dubai, Sheikh Mohammed Bin Rasid Al Maktoum via Twitter, included a reform of the bank guarantee scheme for private sector employees, which currently requires companies to put up 3,000 dirhams per employee, replacing it with a 60 dirham per-head worker insurance scheme. Deposits for existing employees will also be handed back to companies, releasing 14 billion dirhams worth of capital.

A new, six-month, fee-free jobseekers' visa was also announced, making it easier for people seeking work to remain in the country, and two-year visas are due to be granted for talented students. Other measures included allowing for the voluntary departure of people who have overstayed their exit visas, exempting transit tourists from entry visa fees for periods of up to 48 hours and allowing people to change their visa status while still in the UAE.

Below is a round-up of reactions to the measures announced on Wednesday:

Jigar Sagar, group general manager of Creative Zone, a firm that registers start-ups in free zones, said: "The announcement which stood out was the one which abolishes the requirement of the 3,000 dirham security deposit per employee. What that's going to do is not only free up 14 billion dirhams back into the market, which creates huge stimuli, but also reduces opex (operating expenditure) requirements for new start-ups and entrepreneurs," he told Zawya in a telephone interview.

"What you're going to see is that being replaced by a low-cost insurance scheme, which is brilliant, because what you used to see in the past is that the 3,000 dirham security deposit was not enough if you had a sponsor absconding to cover any unpaid dues or travel tickets."

Sagar said that the new insurance scheme would provide cover for up to 20,000 dirhams per employee, which would offer reassurance to workers. He added that allowing for an in-country change to visa status would end the need to conduct 'visa runs' back and forth to Oman to avoid overstaying on current visas.

Rabih Khoury, partner and chief exit officer of the UAE’s Middle East Venture Partners said the decision was a “very positive” step and it shows that the government is keen to boost businesses and enhance its competitiveness position.

“There has been a bit of uproar from the people in the business community about the increasing costs of operating in Dubai and I think the government reacted very quickly and very well," he said in a phone interview on Thursday.

“From our prospective, we are investing in companies. We want to use our investments to grow the companies. We welcome any reductions in the costs of operations,” Khoury said.

Anirban Chatterji, a senior manager and solicitor at PwC Middle East, said in an emailed statement to Zawya: "Operating a business in the UAE is not an inexpensive affair and does carry with it a number of financial burdens, more so for new and smaller entrants into the UAE marketplace. 

"Change is welcome for companies - again, in particular SMEs - because it (a) removes an additional financial burden; (b) makes it more attractive to set-up in the UAE and hire additional staff; and (c) further encourages and incentivises inward foreign investment.

He said that it was unclear whether or not the 60 dirham per employee service fee would be increased.

"We suspect that it will overtime but from a cost-benefit perspective, it is still much more palatable for companies than the much higher 3,000 dirham bank guarantee per employee."

Priyesh Kapadia, a partner at accountancy firm BDO in Dubai cautioned that what has happened so far was just “an announcement” and that publication of a new law or regulatory framework is still required before it becomes official.

"Ultimately, the government is trying to make a positive impact on the economy… and make it easy for employees to stay and work… these all are positive steps,” he told Zawya in a phone interview on Thursday.

“The rules and regulations to implement them (the new announcement) should come out soon. I think by the end of this year ultimately,” he added.

He said the announcement is likely to be applied to all sectors, but the law should clarify details such as whether the removal of bank guarantees applies to both onshore and free zone companies.

Atif Rafiq, director of Al Sharqi Shipping, a Dubai-based SME operating in the logistics sector, said: "The new system (removing bank guarantees per worker) will help any company like us. We are a 29 year-old company, we have 60 people. That converts to 160,000 dirhams. It will help us to unfreeze the initial capital we invested...to convert it into an asset or to use it in a better way," he told Zawya in a phone interview on Thursday.

"When you think about it from a start-up perspective, (worker bank guarantees) hinders your expansion. When you grow fast, you have to pay up 3,000 dirhams per employee. It becomes a significant amount if you are growing by 10-15 employees every two-to-three months."

Domenic Falzarano, operating director of recruitment firm Michael Page Middle East, told Zawya in a phone interview on Thursday that the jobseekers' visa will also relieve the pressure felt by executives who lose their job to either secure something else quickly or leave the country.

"We recruit across the senior space and have seen senior candidates that come onto the market following a restructure within an organisation. These guys have built their lives here in the UAE, and they want to remain here. So this will help them to buy some time to find that right opportunity,” he said.

"Interview processes sometimes don't turn around overnight and you want to make sure you are making the right decision from an employer's, and an employee's point of view."

Firoz Merchant, founder and chairman of Pure Gold Group, said in an emailed statement to the media: “The new rules are also humanitarian in their outlook as it offers a second chance for people who have overstayed as well as (making) it easier for people to transfer their visa status. This will come as a great relief for many."

Atif Rahman, a partner and director of Danube Properties, said in another emailed statement to the media: “The new visa rule will help the tourism, hospitality, exhibition, conference and extended stay sectors. It will also help the real estate sector a great deal as foreign investors will no longer worry about their visa, stay and the fees – all are being made flexible."

The announcements were the latest in a string of new measures announced in recent weeks -  both by the federal government and by individual emirates - aimed at improving competitiveness.

For further information on those stories, see the links below:

    By Michael Fahy and Yasmine Saleh, ZAWYA