New Classification of Private Companies Comes into Force

The Ministry of Human Resources and Emiratization (MOHRE) has announced that the new classification system for private sector establishments has come into force today [June 1, 2022], according to Cabinet Resolution No. 18 of 2022 and its pertinent ministerial resolutions.

The new system addresses the needs of various business sectors, protects the rights of employees and skilled personnel working within the sector, and enhances opportunities for entrepreneurship, startups and small and medium-sized enterprises (SMEs). It also motivates companies and establishments through a comprehensive framework that empowers workers and rewards companies simultaneously

The system classifies companies into three categories: first, second, and third. Companies are classified in line with their adherence to laws and decisions that regulate the business environment, protection of labor rights, commitment to the wage protection system, along with their alignment with UAE’s policy on promoting cultural and demographic diversity.

The first category will cover companies and establishments that commit to the laws and decisions that regulate the labor market, while fulfilling all required general obligations. They must also meet at least one of the following criteria: raising their Emiratization rate at least three times above the target, cooperating with the ‘Nafis’ program to train at least 500 citizens annually, being a venture owned by a young citizen according to approved standards, or being one of the training and employment centers that support implementing 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 Emiratization’s proposal. Companies that do not meet any of these criteria, while complying with the laws and the UAE’s policy on promoting cultural and demographic diversity, will be automatically classified in the second category.

The third category will comprise companies that fail to observe the policies, laws and decisions on regulating the labor market or standards that protect labor rights, or companies that do not commit to the policy on promoting cultural and demographic diversity in the UAE’s labor market.

Work Permit Payments for category companies

First & Second Category:

The application of the new classification system is accompanied by discounts on service fees related to work permits and transfer fees for the private sector establishments. Fees will not exceed AED 250 for first category companies over two years, while second category companies will be charged AED 1200 over two years. The employment of UAE and GCC nationals will be exempt from these fees.

Third category:

 Third category companies will not benefit from fee discounts, and the fees for issuing or renewing work permits will amount to AED 3450 over two years. According to the new system, companies will be classified in the third category if they violate Federal Law No. 33 of 2021 regarding the organization of labor relations and its executive regulations, resolutions that regulate the labor market, or standards for protecting labor rights. Failure to commit to the policy on promoting cultural and demographic diversity in the UAE’s labor market, or being involved in other violations specified by Ministerial Resolution No. 209 of 2022 will also lead to that classification.

These violations include a final verdict that confirms the company committed human trafficking, contracted or recruited a worker without a work permit, or submitted incorrect data, documents or information to MOHRE. It also encompasses employers’ breach of labor rights, such as lack of commitment to workers’ wages, housing and safety standards, fake Emiratization, or other serious violations.