- Nathan Hunt
My business is struggling during the pandemic, can I reduce my employee salaries?
9th April 2020
Due to the current pandemic many businesses have been forced to close temporarily or are experiencing significant drops in the volume of business. They are left strategising how best to keep the company operating and one of the main questions is, can Abu Dhabi and Dubai companies reduce employee salaries?
The Ministry of Human Resources and Emiratization (MOHRE) understands that private sector companies are facing financial challenges during the Coronavirus pandemic. In light of this, they have published new labour legislation to support private sector employers. The resolutions have been passed to cover redundancy, remote working and restructuring aiming to help employers during this global pandemic.
What are the steps my business needs to take to reduce my employees’ salaries?
In Resolution No.279 of 2020 Article 2 states businesses will need to follow certain steps before reducing the salaries of their staff:
Apply a remote working system. If your staff are able to work from home, a remote working policy should be effected.
Granting a paid leave. (This unfortunately will be very difficult for some employees as they will not be able to travel back to their home countries at this time.)
Granting an unpaid leave. This is helpful for some organizations which have very little to zero revenues at this time.
Temporary reduction of salary during the mentioned period. This is when the MOHRE annex will need to be implemented (see below).
Permanent reduction of salary. This will be a amendment to the original labour contract and must be approved by both employee and employer. It will then be submitted to MOHRE for final approval and both the employer and employee will be required to explain the reduction.
How can I reduce my employee salaries during the pandemic?
Businesses are looking to reduce employee hours and salaries to keep their teams in employment. Resolution No. 279 of 2020, issued by MOHRE states that an employer can reduce employee salaries; however, this has to be in mutual agreement with the employee.
Article 5 of the Resolution states that businesses seeking to temporarily reduce employee salaries must sign an annex to the employment contract. MOHRE has provided an annex template for this. Employers and employees must each retain an original copy of the annex so that it can be shared with the MOHRE if and when requested.
How long can I reduce the salary for?
The validity of the temporary arrangement should be mutually agreed with the employee and stated in the annex or for as long as the resolution remains valid, whichever is sooner. The annex recording the temporary salary reduction can be renewed by mutual agreement of both parties.
Will the reduction in salary affect the WPS?
Employers in mainland private sector companies will not be exempt from complying with the WPS regulations (UAE's federal payroll system); however, Resolution No. 279 gives MOHRE the power to relax the rules for WPS while under the duress of the pandemic. If MOHRE was to place a block on any company for non-compliance, the company would need to submit the original annex confirming the reductions were by mutual consent.
Where can I get the MOHRE annex?
The MOHRE annex can be downloaded from the MOHRE website however Gateway has added it to the free resources section of our website for your convenience: MOHRE Annex
In conclusion, it is possible to reduce your employee's salaries due to the impact of the Coronavirus pandemic on your organisation; but it is essential that you follow the MOHRE's guidelines to ensure your organisation remains compliant and avoids penalties.
How Gateway Group can help with your organisations's visas and PRO services
Gateway's concierge PRO services help companies to stay compliant by managing their government transactions, including visas and Emirates ID processing and permit applications. Gateway's support team will ensure your organisation never overlooks an expiry date again, ensures you have the correct documents for each assignment and makes sure that you understand the cost, processes and timescales involved for each government transaction. For assistance with your UAE Employment contracts and visas email us info@GatewayToUAE.com
Call Gateway Group: 600 567562
Written by Nathan Hunt, Senior Managing Partner
Gateway Group of Companies, Abu Dhabi & Dubai UAE
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