UAE: A new classification for private companies announced

Dr. Abdulrahman Al Awar, Minister of Human Resources and Emiratisation, announced a new three-level categorization system for enterprises in the UAE. It takes effect on June 1, 2022, and its relevant resolutions address the expectations of business owners and protect workers' rights while stimulating innovation and boosting the SME sector. The companies will be categorized using an automated system that allows for transparent modifications to a company's categorisation based on its operations or transactions. The classification of new businesses is based on their commitment to the wage protection system, cultural diversity, and labor market regulation decisions.

The first category will include enterprises and institutions that pledge to abide by labor market rules and decisions while meeting all other general requirements. They must also meet at least one of the following criteria:

• Increasing their Emiratisation rate by at least three times the target,
• Collaborating with the 'Nafis' program to train at least 500 citizens annually
• Being a venture owned by a young citizen that meets approved standards,
• Being one of the training and employment centers that support the Workforce Planning Policy by promoting cultural diversity in the UAE.

The second category will encompass companies that commit to general standards, laws and regulations, and to the UAE’s policy on promoting cultural and demographic diversity, or operating within the targeted sectors and activities determined by the Council of Ministers based on the Minister of Human Resources and Emiratisation’s proposal.Companies that do not match any of these criteria while adhering to the rules and the UAE's policy on encouraging cultural and demographic diversity will be placed in the second category automatically.

Enterprises that do not follow rules, laws, or decisions regulating the labor market or standards that protect workers' rights, or companies that do not agree to the UAE's policy of encouraging cultural and demographic diversity in the labor market, will fall into the third category.

The third-tier companies involve those companies which have violated the Employment Laws and or are not compliant with the policy of manpower planning through the promotion of cultural demographic diversity in the labor market in the approved country.The third-tier companies are those that have broken labor laws or are not in compliance with the approved country's strategy of manpower planning through the promotion of cultural demographic diversity in the labor market. Enterprises categorized in the third tier, according to the notice, will pay substantially higher visa fees than other tiered companies and will not be eligible for fee rebates.

Incentives include a decrease in MOHRE fees of up to 80% for private sector firms that achieve outstanding achievements in employing and training individuals and so qualify for classification in the first category.The new strategy is in line with the UAE government's 'Projects of the 50' framework, which aims to spark a new wave of development and mapping of long-term economic and social growth. All of these initiatives are aimed at establishing the UAE as a global hub for successful people, enterprises, and investments, with the objective of achieving the UAE Centennial 2071 goals by constructing a varied, sustainable, and highly resilient economy.

The Minister will announce further decisions on the practical implementation of the tiered system in due course, including a transitional period for the implementation of this scheme, according to the Resolution.