Expand your business in the Middle East: Using an Employer of Record to navigate local labour laws30 Jan, 202410:58
What is an Employer of Record?Employer of Record, or EOR, has become more important in recen...
What is an Employer of Record?
Employer of Record, or EOR, has become more important in recent years in the Middle East. With the region witnessing a surge in global business expansion, understanding the role and benefits of an EOR has become crucial for employers looking to operate in the region. Various governments have introduced new employment laws to manage and protect workers.
An Employer of Record is an organisation that accepts legal employer responsibility for a company's employees. This means that the EOR manages all the administrative tasks associated with employment, such as payroll, benefits, tax compliance, and legal requirements, on behalf of the employer.
We have previously published information on why a business may need an EOR and how EOR-compliant companies like NES Fircroft can help. In this blog, we look at why an EOR is beneficial and some of the considerations that an EOR resolves on a company's behalf.
Employment Regulations in the Middle East
When planning a workforce for a project in the Middle East, one of the most important considerations is local labour law. Many countries in the region have recently changed their existing laws and regulations. There is an increased focus on modernisation and technological progress, reducing the number of expatriate and foreign workers in favour of permanent nationals with the right skills and experience to build a local talent pool.
This can mean businesses seeking to take on projects in the Middle East region must navigate specific labour laws and regulations with strict criteria and often a penalty system for non-compliance, making an EOR partner particularly helpful.
With an expat population of around 90%, the United Arab Emirates is one of the most culturally diverse places in the world. A specific set of laws and regulations that govern employment in the UAE apply to all workers, including foreign nationals. The primary employment law is the Federal Decree Law No. 33 of 2021, Regulating Labour Relations, supplemented with the Executive Regulations (Cabinet Resolution No.1 of 2022) (Executive Regulations of the UAE Labour Law). There are additional orders that can be amended and taken into consideration as well.
The Vision 2021 initiative represents the UAE's drive to recruit 75,000 national employees into the private sector over the next five years. Companies in the region are required to consider UAE nationals over foreign contractors.
The Emiratisation of the workforce requires all private sector employers to ensure that their skilled professional workforce consists of at least 10% UAE nationals by 2026. This includes contractors and engineers, as well as managerial and support staff.
The UAE government also introduced fines at the start of 2023 for companies that were not compliant with these regulations, meaning there is a significant and growing cost for companies that employ a foreign national workforce, including companies that typically move their contractor team around the world for projects.
Like the UAE, Saudi Arabia has its own Saudization project centred around diversification and nationalisation of many areas of the country's economy.
Iraqi Labour Law No 37 of 2015 applies to all employees working in Iraq and covers both national and foreign workers. The law states that employers must pay for residence permits, work permits and recruitment fees on behalf of employees. Resident's permits, or Iqama, must be provided within three months of the employee commencing work.
Saudi Arabia follows a sponsorship system, or Kafala, for regulating the employment of expatriate workers. Any expatriate worker entering the Kingdom requires a sponsor, Kafeel, who may be a Saudi citizen or a company and shall remain under the sponsor's responsibility during the employment contract. However, as of March 14, 2021, restrictions that the Kingdom of Saudi Arabia used to impose on foreign workers have been lifted, and workers from outside Saudi Arabia
can now change jobs, travel or even leave the country without their employers' permission.
Vision 2030 is similar to the UAE's Vision 2021 project, where the country invests significant resources and innovation into diversifying economically, socially and culturally. It was initiated by His Royal Highness Prince Mohammed bin Salman bin Abdulaziz, Crown Prince and Prime Minister, and is currently under the guidance of King Salman bin Abdulaziz al Saud and the Saudi government.
A significant part of this project is the development of energy and infrastructure projects using trained and developed Saudi nationals. Vision 2030 aims to create 450,000 new job opportunities and reach 96 strategic objectives. As a third of Saudi Arabia's population of 33 million people is comprised of immigrants, any adjustments to labour laws in the country could have considerable consequences on a vast range of individuals.
While there is still an opportunity for expatriate workers in Oman, the country has followed an aggressive approach to Omanisation in the last few years. Before the COVID-19 pandemic, Oman saw a 49% youth unemployment rate in 2019, which led to drastic changes in the expatriate employment law.
Today, the employment law in Oman heavily favours the training and employment of Omani nationals over foreign workers, and there are specific bans on certain jobs being taken by non-nationals. This can make hiring in the country complex for non-national organisations.
To work in Oman, an employer must;
- Obtain a labour license from the Ministry of Manpower, which requires compliance with Omanization rules, appropriate certifications, and documentation.
- Have a contract with the foreign employee, who must have a valid work permit, physical fitness, and professional and academic qualifications.
- Provide copies of passports, certificates, and attestation from the Oman Embassy and the Ministry of Foreign Affairs for the foreign employee.
- Apply for an employment visa and a residence card for the foreign employee, who can start working once they receive them.
The Omanization Strategy
Today, Oman employs strict laws to enforce their Omanization strategy. Specifically;
- Employers must share their Omanization strategy annually with the Ministry of Labour, which details how they localise their workforce and data on diversity, job openings and remunerations.
- Companies are permitted to terminate contracts with non-Omani nationals if the intention is to replace that employee with an Omani national.
- Companies must also have plans to train Omani nationals for leadership positions.
There have also been recent changes in Omani employment law that an employer should be aware of regarding leave provisions, secondments, working hours, and further Omanisation rules. Again, an EOR provider like NES Fircroft will already know these and be on hand to advise.
While the country is also undergoing significant cultural change emphasising investment and growth, Iraq does not currently set any limitations on foreign workers. The principal employment law in the nation is the Labour Law (37/2015), which applies to both foreign workers and Iraqi nationals. There is no expectation for foreign companies to hire a percentage of the local workforce. However, requirements and employment regulations still carry hefty fines if not adhered to.
For companies looking to use expatriate workers or foreign contractors, the correct documentation must be submitted to the Ministry of Labour and Social Affairs alongside a valid work visa, typically valid for 12 months.
Egypt also has opportunities for a foreign workforce, with rules similar to those of Saudi Arabia and The UAE. These laws are Egyptian Labor Law No. 12/2003, Decree No. 485/2010 on Executive Rules and Procedures for Licensing Work for Aliens, and Decree No. 146/2019 on Terms and Procedures for Licensing Work for Aliens. Businesses are required to obtain permits from the General Office of the Ministry of Manpower. Any exceptions to the regulations in recruiting and deploying a foreign workforce must also be made here, for example, where a company requires a workforce of skills unavailable locally.
Egypt also has regulations around the percentage of foreign workers to Egyptian nationals in most roles, with many technician roles requiring that as part of employment, foreign technicians will also train at least two Egyptian nationals.
Qatar operates a Kafala sponsorship system like the UAE but with specific regulations. As dictated by Law No. 14 of 2004, known as the Labour Law, and overseen by the Labour Department of the Ministry of Labour and Social Affairs, a permit must be obtained for all foreign workers.
There are also various visas depending on the type of work and duration of stay, from full employment to business and work permits, as well as specific visas and documentation for including families as part of the expatriation process.
Expanding your business in the Middle East can be complex due to the region's specific labour laws and regulations. To navigate these challenges effectively, utilising NES as an Employer of Record (EOR) can provide numerous benefits.
We are uniquely placed across the region to support sourcing local candidates for full-time, part-time and contract work, in line with each country's nationalisation strategy. With our network of global contractors, we will also find the right skills and experience to fill gaps in your workforce. Our local teams have in-depth knowledge of Emiratisation, Saudisation, and Omanisation regulations for each region and the applicable regulatory processes.
A significant challenge for companies unfamiliar with the immigration process for expatriate workers is turnaround times. Incorrect paperwork, missing permits, or delayed visa applications can all knock on an employee's deployment time, negatively affecting projects. NES's local teams are up-to-date on their region's application processes and deadlines and can deploy staff quickly from hire.
As an EOR, we also manage payroll, tax and benefits, taking the responsibilities of legal compliance away from our clients. This frees companies from focusing on managing their teams and delivering on their projects.
Talk to us today about how NES can support your Middle East projects through EOR.