Why compliance and labor law knowledge is key to outsourcing staff and employees in the UAE
Posted on 2023 Jul,20

Listen to the article

As the UAE’s outsourcing market nears US$6.8 billion in 2023, it is imperative that local businesses choose a compliant Employer of Record, with strong knowledge of labour laws. Liam Doherty, Enterprise Director of Connect Resources explains it all.

When hiring outsourced staff in the UAE, it is vital that you choose an Employer of Record who is well versed in compliance and local labour law, says Liam Doherty, Enterprise Director of Connect Resources.

According to a recent report by Boston Consulting Group (BCG), the UAE’s outsourcing services market is set to hit US $6.8 billion in 2023, representing a compound annual growth rate (CAGR) of 7%. The report identified customer support, finance and accounting, human resources, hospitality, leisure, telecommunications and KPO roles as the major areas of growth.

Since all employees in the UAE must possess a current work permit in order to engage in any employment-related activity, it is crucial that employees and outsourced staff are classified correctly in accordance with the latest labour laws.

With this in mind, it is crucial for local businesses to confirm that their Employer of Record is entirely compliant with the activity they are performing and that they have a valid license to perform outsourcing activities in the UAE – failure to do so could result in employment violations against the business and the outsourcing company.


The perils of misclassification

In a recent article posted by the US Department of Labor, we see what ‘may be’ the largest misclassification case in its history. The US Department of Labor has asked a federal court to force a Florida-based customer service provider for major national brands, including Barnes & Noble, Comcast, Disney and Walgreens, to pay back wages and liquidated damages to more than 22,000 workers after investigators found the employer misclassified employees as independent contractors and denied them their legally required minimum wage and overtime pay.

In the release, the US Department stated that, “The division found the employer often recruited workers with promises they would ‘be their own bosses’ and that they could generate income by providing customer support services to Fortune 500 clients.”

This is a clear exploitation of employees' rights to employment benefits and a violation of the labor laws in that nation. As the world continues to shift towards more Employer of Record and remote worker solutions, these cases will become more common.


Choosing the right Employer of Record

The UAE has strong and well-defined employment rules.

Before choosing an Employer of Record provider in the UAE, consider these legal aspects to ensure you are fully compliant:

  1. Request a copy of the Trade License from an outsourcing or EOR company to verify they are compliant and properly registered to carry out these operations. Compliant organizations should have an ‘On-Demand Labor Supply’ License from the DED (Department of Economic Development)
  2. Require the EOR to share its MOHRE license and it needs to be updated and renewed in a yearly basis.
  3. Ensure the provider and the employee, as well as the client, have a mutual understanding of the role and its legal requirements.
  4. In the UAE, hiring contractors is not a legal employment solution. Before working for any company in the UAE, all employees must get a work visa from the UAE. No employee may work in the UAE while on a tourist or resident visa without first applying for an employment visa.