On 1 November 2020, a new statutory redundancy procedure comes into force in Oman.


Unusually, rather than through an amendment to the Oman Labour Law (promulgated by Royal Decree 35/2003 as amended) the redundancy procedure has been introduced through the Job Security Systems Law (promulgated by Royal Decree 82/2020) and so it can be easily missed by many employers.

The Job Security Systems Law is primarily concerned with the establishment and administration of an unemployment benefit fund (from 1 January 2021) for eligible Omani nationals who have lost employment through redundancy (rather than by resignation or termination for disciplinary reasons). 

Any private sector employer contemplating collective redundancies of Omani national employees will now be required by law to notify the Ministry of Labour at least three months in advance of the proposed termination date. Redundancy terminations concerning expatriate employees are not caught by the Job Security Systems Law and such terminations will be subject to the usual termination processes (i.e. service of the contractual notice period which must not be less than 30 days).   

A failure by an employer to comply with the redundancy notice procedure for Omani national employees  will subject that employer to fines (which are not specified) imposed by a specially formed committee which will be comprised of representatives from the Ministry of Finance, the Public Authority for Social Insurance (PASI) and other concerned authorities. Interestingly, the Ministry of Labour is not expressly mentioned but no doubt will be involved.  

The statutory redundancy procedure now brings a degree of clarity on an employer's obligations when considering redundancy, however there remains a number of procedural and other legal issues. 

The Job Security Systems Law stops short at the obligation on employers to notify the Ministry of Labour of proposed redundancies.

For example, the Job Security Systems Law does not define the minimum number of employees required to constitute a 'collective' group of employees to trigger a notification to the Ministry of Labour.

It is anticipated that further details by way of regulations will be issued given that the Job Security Systems Law makes provision for the Chairman of the PASI Board of Directors to determine which cases are deemed to constitute collective termination. Until then, employers may have to make a notification if as few as two to three Omani nationals are proposed to be made redundant. 

Apart from the advance notification requirement, no further provisions are legislated in relation to the process after a notification is made. For now, this means that the procedure which was announced by Ministry of Labour earlier this year in March 2020 is likely to continue to apply. As part of this procedure (which has not been published in the Official Gazette), a committee, led by the Ministry of Labour, will be formed to examine and scrutinise an employer's reasons for proposed redundancies during the three month period triggered by the notification. A task force will also be formed to seek out alternative job opportunities for affected employees across all sectors.

At the end of the three month period, it is assumed (although the Ministry of Labour procedure does not address this directly) that if an affected employee does not secure employment elsewhere, the employer may proceed with the termination of employment, although from a strict legal position, the Ministry of Labour's procedure does not usurp an employer's right provided under the Labour Law to serve earlier notice.

It is too early to know how the Oman courts will treat redundancy terminations which have complied with the procedures mandated by the Job Security Systems Law and the Ministry of Labour, and which have been subject to committee scrutiny. What employers need now is certainty on the Oman courts position on redundancy terminations and what, if any, compensation awards are likely to be made in these cases. 

For further information, please reach out to our Employment team.

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Gorvinder Pannu

Gorvinder Pannu

Partner, Employment
UAE, Oman and Qatar

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Nasser Al Habsi

Nasser Al Habsi

Partner, Corporate Finance
Oman

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Saif Al Mamari

Saif Al Mamari

Partner, Commercial Disputes
Oman

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