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Bank guarantee for employees enforced

posted on 13/03/2001: 1856 views

The Council of Ministers has approved a proposal made by the Ministry of Labour and Social Affairs that would make it mandatory for employers to furnish a bank guarantee worth Dh3,000 for every new employee they hire. The requirement, which aims at resolving non-payment of wages and collapse of commercial establishments where expatriate partners flee the country leaving behind unsettled financial dues to workers under their sponsorship, goes into immediate effect.

It is applicable to companies in construction, transport, garment making, oilfield services and maintenance, private schools, sellers and importers of fruits and vegetables, companies offering cleaning services, tailoring firms and handicrafts companies.

Also covered are groceries, canteens, cafeterias and restaurants. Exempted companies in which the government has a stake, banks, insurance companies, oil firms and hotels falling under the first class category. Companies owned wholly by UAE nationals and offices representing international companies are also exempted from the requirement. The bank guarantee should be from any of the banks in the UAE and valid for one year favouring the Ministry of Labour and Social Affairs.

The requirement will be application to all new recruitment. Employers of expatriates already in the country have to furnish the guarantee at the time of renewal of labour cards or change of sponsorship. The bank guarantee should be furnished under three conditions:

1. When a new employment permit has been guaranteed by the Ministry of Labour and Social Affairs.

2. When the Ministry has approved a change of sponsorship.

3. When application of renewing labour card is submitted to the ministry, in case the payment has been made at the time of obtaining the permit or change of sponsorship.

Payment from guarantee amount should be made on the request of the Ministry of Labour and Social Affairs and without any objection or consultation from the employer. Article 6 of the decision specifies that the ministry should not order any payments from the guarantee amount if the employer owes nothing to the employee. The ministry should order deductions from the bank guarantee amount and pay the worker only under the following conditions.

1. When expenses for returning the worker to his home country or other destination agreed with the sponsor, are required.

2. When the sponsor/employer or his representative admits before a court or before a labour dispute panel that the employees owes gratuities to the company.

3. When a court decides that a worker be paid his dues.

The article also specifies that when the bank guarantee has been used to pay the right s of a worker, the employee is obliged to re-deposit the full amount of the guarantee. The bank guarantee cannot be recovered partially or fully if the employer has no outstanding deposit.

It can be recovered only in instances when the sponsorship has been cancelled and the worker sent to his home country. In this case, the employee should submit a document proving that the worker has been removed from the company's personnel list. Other instances where the bank guarantee can be recovered include three cases of death of the worker or transfer of sponsorship to another country, or other cases where the employer can prove that the worker has been removed from the company's personnel list.

The ministry had earlier categorised companies, which are regulated by Labour Law No. 8 of 1980, in to five categories; first grade companies sponsoring 10,000 workers, second grade involving 5,001 to 10,000 employees, third grade firms 1,001 to 5001 workers, fourth grade having 1001 to 1000 workers and first grade having one to 100 workers.

Companies which are rated as first, second and third grade are obliged to deposit a lump sum of Dh500,000 as guarantee for all the workers under the sponsorship. They need not furnish any new guarantee in accordance with the latest decision.

Fourth grade companies are obliged to furnish a Dh300,000 guarantee for its employees under its sponsorship within a year from the date of implementation of the decision. However, if the company wants to get new permits they have to produce the Dh3,000 guarantee for each new recruitment permit. The fifth grade companies will have to produce a bank guarantee of Dh3,000 according to the number of workers under its sponsorship. (The Gulf Today)


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