New DIFC Employment Law – The Changes – Part 3 (Final)

New DIFC Employment Law – The Changes – Part 3 (Final)


The new version of the DIFC Employment Law – Law No.2 of 2019 (the “New DIFC Employment Law”) – came into force on 28 August 2019 and entirely replaced the previous employment law regime in operation in the DIFC – Law No.4 of 2005, as amended (the “Old DIFC Employment Law”).

Following our last article on this matter (“New DIFC Employment Law – The Changes –Part 2”), below are additional key changes forming part of the new employment law framework:

  1. Termination of employment – same minimum notice periods but parties cannot agree to shorter (only longer) notice periods; employers will only be allowed to make a payment in lieu of notice if an employee agrees to the payment in a settlement agreement (which will now meet specific terms; employers will be entitled to place an employee on garden leave for all or part of their notice period; 

  2. ESG/pensions – For ESG calculation purposes, basic salary will need to comprise at least 50% of the employee’s total wage (which comprises allowances but excludes bonuses, grants and commissions). The ESG will be payable to an employee even if the employee is dismissed for cause (gross misconduct);

    Employees may choose to receive pension contributions into a non-UAE retirement fund (or substantially similar scheme) instead of receiving an ESG payment, provided the aggregate contributions made by an employer are not less than the ESG the employee would have been entitled to receive.

  3. Settlement agreements – an employee may enter into a written agreement with the employer to terminate the employment or settle a dispute with such an agreement including a waiver of the employee’s rights, remedies, obligations or claims, provided that specific conditions are met.

  4. Miscellaneous – The New DIFC Employment Law also includes additional changes, including but not limited to:
  • The introduction of a stringent penalty system of fines (of either US$2,000 or $10,000 per infraction) in the event of breaches or non-compliance with the New DIFC Employment Law
  • The minimum age for an employee will increase from 15 to 16 years of age
  • The mandatory retention period for employee records will increase from two to six years; and employees will only be permitted to carry over five (rather than 20) days’ accrued vacation to the following year.

The above is a general commentary on the subject matter and should not be construed as specific legal advice. For legal assistance on employment-related matters, please feel free to contact us.

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