Everything you need to know about the UAE's new classification of companies

Everything you need to know about the UAE's new classification of companies 

By: Contributor
Thought Leadership

The new classification of companies in the UAE, which took effect on June 1, 2022, splits existing companies into three distinct categories.

The following is a breakdown of the new categories and what they entail, by Derek Robins, Associate at BSA Ahmad Bin Hezeem & Associates.

On 24 May 2022, his Excellency Dr Abdulrahman Abdulmannan Al Anwar, the Minister of Human Resources announced Cabinet Resolution No 18 of 2022 (“the Resolution”), which is effective from 1 June 2022. The announcement incentivises private companies to comply with the terms of Federal Decree Law No 33/2021, all executive regulations and decisions issued by the Ministry of Human Resources and Emiratisation (“the Employment Laws”).

The Resolution has been implemented for private companies to commit to the prescribed laws and policies on promoting cultural and demographic diversity with a primary focus to promote Emiratisation programmes. This incentivisation scheme will be executed by the introduction of a tiered system where companies will be rewarded with a reduction of visa-related fees depending on their compliance. Companies will be categorised into three tiers, which are discussed below.

First tier - What your company must aim to attain

According to the announcement, the first tier of companies will enjoy a significant reduction of fees related to the issuing of visas. The Resolution indicates that, companies will be classified in the first category provided the establishment has fully complied with all procedures related to the Employment Laws as well as all executive regulations and decisions issued by the Ministry of Human Resources and Emiratization regarding work permits, contracts for citizens and non-citizens and the wage protection system and meets one of the following criteria: -

  1. Raising Emiratisation rates annually in accordance with Cabinet Resolutions at a rate not less than 3 times the target.
  2. Co-operating with the Emirati Cadres Competitiveness Council (Nafis) in hiring and training at least five hundred citizens a year.
  3. Being classified within the small and medium-sized enterprises of young citizens at the local or federal level or of an innovative nature.
  4. Being a training or employment centre that supports the implementation of the policy of manpower planning through the promotion of cultural and demographic diversity in the labour market in the country.
  5. Being a targeted economic sector and activity as determined by the Cabinet based on the proposal of the Minister of Human Resources and Emiratisation.
  6. Being an establishment of the Higher Corporation of Specialized Economic Zones (ZonesCorp).

Second tier - You're making progress, but you could improve your rating

The second tier of companies will be classified as such in so far as the establishment has complied with the Employment Laws requirements of the first tier without meeting the criteria required to be classified as a first-tier establishment, together with complying with the policy of manpower planning and through the promotion of cultural and demographic diversity in the labor market in the approved country. The announcement indicates that second-tier companies will also enjoy reduced visa fees, but the reduction will not be as significant as those enjoyed by first-tier companies.

Third tier - You will want to avoid this classification

The third tier involves 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 labour market in the approved country. According to the announcement, companies classified in the third tier will pay much higher visa fees than other tiered companies and will be unable to claim fee rebates.

The Resolution also indicates that the Minister will announce further decisions to provide further guidance on the practical implementation of the tiered system in due course including a transitional period for the introduction of this scheme. 

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