Free Zone Company Formation and Labor Laws in Dubai: A Quick Overview
January 27, 2016
All nations have their own set of labor rules and regulations. Dubai is one among those nations that is open to foreign trade investments. Every year a large number of foreigners and expats migrate to Dubai.
They are either in search of employment or trade opportunities. Well, Dubai has ample of options for one and all.
This is what makes Dubai the global point of intersection where trade blooms.
The government is liberal with its laws when it comes to company formation in Dubai. But, of course, like any other nation, they have their set of labor laws to help people.
But, these are not applicable across specific areas in Dubai. These include the DMCC Free Zones. The rules are different for the employees or labors working in the Free Zones. They need to abide by the rules and regulations as authorized by the Free Zone.
Though in selected Free Zones, they maintain and stipulate their own employment contracts.
Another important point to note is that:
The employment of the employees working in the Free Zone is not sponsored by their employers. But, their relative Free Zones takes up their sponsorship.
Though the Free Zones sponsor the employees, the rest of the procedures are similar. Because the employees have the right of action against their employers in case a problem pops up.
The employees can take up the matter to the Supreme Court.
Company Formation in Free Zone
Registration with the Ministry is the first step when a company is set up in the Free Zone. You need to register your company in the Free Zone, before staff recruitment.
This implies that each Free Zone has its own employment laws. Also, the UAE Labor Law is of null prominence in the Free Zone.
The supervising authorities in the Free Zone have their set of rules and regulations. This applies to all labor related and employment matters too.
They have their own employment contracts. UAE Labor Laws applies here. The amendments specified in the employment contract should abide by this Labor Law.
Whenever a Free Zone sponsors an employee they need to-Refer them to the immigration authorities.
It is not mandatory to refer them to the Ministry of Labor.
Also, Labor Department’s approval is not applicable here.
In case, of a dispute between the employees and their employers, it needs reporting. The respective authority will act as the mediator to sort out the differences.
Also, the Ministry of Labor has no role in the first hearing when a dispute gets reported.
The employers need to maintain a bank guarantee. This is to secure the employee’s dues and also the end of services benefits. The latter is applicable at the time of termination of employment contracts.
Here, we provide a deeper insight into the UAE Labor laws that comes under-
This includes all matters related to:
The employment contracts and restrictions.
The employment of juveniles and women
Maintenance of records and files
Working hours, wages.
Employee safety and medicare.
Code of discipline
End of services benefits
Compensation for occupational diseases
Injuries and death
Employment related accidents and more…
Now we will take you across all that you need to know about Labor related laws in the Free Zone:
The first important point is that:
The DMCCA holds the governing authority over the Free Zone.
In certain matters, the DMCCA might not execute the authority. This needs approval from 3rd party authorities. The General Rules includes:
1.) Required that entities or individuals
Operating or working,
Leasing real estate or business need to- Abide by the laws and regulations of Free Zone.
2.) Need to hold a valid registration and license.
3.) Abide by the activities specified on their license
4.) Focus the operations within the Free Zones and not beyond that.
5.) The License categories are
Industrial: Permits manufacturing activities as specified in the license.
Service: Activities as specified in the license
Trading: Activities as specified in the license.
An organization involved in more than one activities need to apply for more than one license. These licenses needs to be valid and approved by the respective Free Zones.
Requirements to apply and get approved for a license
Own a leased or freehold property that is valid
The address of the registered company is the address
The company needs to specify its set of rules and regulations
In case of any changes to the License details such as:
Manager Signature or company activities
Needs submission to the DMCCA authorities within 2 weeks time.
In case you fail to renew the license, you are susceptible to penalty. ( The License validity is usually between 1 to 3 years, after which it expires and needs renewal).
You need to conduct regular audits. It is mandatory to submit the financial statements on an annual basis.
In case, the license gets terminated or during the company deregistration it is mandatory:
To produce the liquidator’s report
You can appoint any auditing or legal form as the Liquidator.
Situations when a license gets cancelled, revoked or suspended:
If a licensee submits a written notice, DMCCA will revoke the license on an immediate basis:
Whenever wrong information provided with regard to the business
Breaking the terms specified in the license or laws
When there are no operations
Failure to renew license
Termination will happen after the 4th month from its expiry by the respective authorities.
This happens if the fees, rent, fines or services are not paid on time.
As per the rules and laws, DMCC provides:
Visa services and entry permits to the employees
Employment categories includes
Sponsored and unsponsored staff
Failure to renew license
The DMCCA is the authority that decides whether an employee can work
in a Free Zone.
The sponsored employees will have:
DMCC sponsored employment VISA
Company employment card
The validity of the VISA is up to 3 years.
Non-sponsored employee will either have:
Father’s or husband’s residency visa and DMCC Identity Card
DMCC Access Card and a sister company Employment Visa
Also, a point to note:
The sponsored employees cannot work outside the Free Zone jurisdiction. The rules emphasize so.
They need to get a written permission for the same from the concerned authorities.
The number of employees eligible for license and visas is as per the discretion of the DMCC.
The license must be in compliance with the labor laws and the employment contracts.
The Employer-Employee Relationship
All persons working or employed within the Free Zone needs to abide by the labor laws.
Also, the Licensee needs to bear the costs of recruitment and the other services.
The employee agreements are of 2 types and needs to comply with the labor laws:
These are some of the rules that you need to take into consideration though there are many more. A legal firm with experience like Legal Maxims can help you with the rest of the process.