Emiratization has been, and remains, a prominent subject of discussion in the United Arab Emirates (UAE), especially given the emphasis on attracting foreign investment and the easing of restrictions on foreign ownership.

Recently, in July 2023, the Ministry of Human Resources and Emiratization (MOHRE) of the UAE introduced updated Emiratization rules that apply to small businesses operating within the country. Under these new regulations, private sector companies in the UAE with a workforce ranging from 20 to 49 employees are now obligated to employ at least one UAE national by the year 2024 and another one by the year 2025. It is worth noting that previously, based on the Ministerial Decision 279 of 2022, the Emiratization rules applied exclusively to companies with 50 or more employees.

The government has actively tried to increase the participation of Emirati citizens in the private sector as part of its Emiratization initiative. Subsequently, the main objective of these regulations is to provide Emirati graduates with opportunities for employment within startup ventures and small to medium-sized enterprises (SMEs). This initiative is anticipated to offer valuable learning experiences for Emirati graduates while enabling them to nurture and enhance their skills and talents. Through the implementation, it is anticipated that the Emirati employment rate will rise to 6 percent in 2024, 8 percent in 2025, and 10 percent in 2026.

Bear in mind that the companies located in free zones are exempt from these rules. Nonetheless, they are strongly encouraged to take part in the program voluntarily. In fact, the new requirement applies to a total of 14 distinct sectors including information and communications, real estate, financial and insurance activities, professional and technical activities, administrative and support services, arts and entertainment, education, mining and quarrying, transformative industries, healthcare and social work, construction, wholesale and retail, transportation and warehousing, hospitality and residency services.

Starting in January 2025, companies that fail to adhere to the 2024 Emiratization requirement will be subject to a fine of AED 96,000 (25,000 €). This penalty will then escalate to AED 108,000 (28,000 €) for companies that do not meet the Emiratization targets set for 2025, effective from January 2026. In addition, any effort to bypass the Emiratization requirements, such as reducing the headcount of employees (for instance, by transferring employees from one entity to another) or reclassifying skilled workers as unskilled, may result in penalties. These fines commence at AED 100,000 and escalate to AED 500,000 for a third violation.

In order to reach the objective, for businesses falling within the range of 20-49 employees, it is of utmost importance to promptly meet the Emiratization requirements by consulting with a legal professional in this matter.

Dott.ssa Niloofar Forrozanfar

Niloofar Foroozanfar