Following the consultation announced by the DIFC Authority in February 2021, the amendments to DIFC Law No.2 of 2019 (as amended by DIFC Law No.4 of 2020) and the current Employment Regulations dated 1 February 2020 have been confirmed in DIFC Law No.4 of 2021 (the Amendment Law) and the Employment Regulations (Qualifying Scheme requirements under Article 66 of the Law) (the New Regulations).
The changes introduced by the Amendment Law are not comprehensive, although there are some important points which all DIFC employers need to be aware of. The changes introduced by the New Regulations are potentially significant for those DIFC employers looking for an alternative to the DIFC Employee Workplace Savings Scheme.
We have summarised the changes below.
1. The Amendment Law comes into effect immediately.
2. Whilst the limitation period for employees to bring claims remains 6 months, the Amendment Law clarifies that the employee may bring claims during their employment.
3. Where an employee is employed under a fixed-term employment contract for six months or less, the duration of any probationary period must not exceed half the period of the term of the employment contract.
4. New provisions have been introduced regulating an employee's ability to bring claims for unlawful deductions from their wages and limit claims for outstanding wages going back two years (subject to some exceptions).
5. Nothing shall preclude an employee from rolling over at least 5 days' vacation per vacation leave year.
6. Employers will be exempted from basic workplace-related health and safety duties where employees work from home.
7. Multiple fixed-term contracts must be aggregated when determining an employee's period of service for the purposes of calculating their end of service gratuity and contributions into DEWS.
8. The definition of "Additional Payment" has been amended so that it now includes bonuses, incentives, grants commission, drawings, distributions and any other payments which are discretionary, non-recurring or calculated by reference to the profits of the employer or, importantly, an affiliate of the employer. These "Additional Payments" may be excluded from the calculation of an employee's DEWS contributions and the requirement to pay an employee all their remuneration within 14 days of the employee's termination date.
9. The definition of "Exempted Employee" has been amended to reflect the fact that many "equity partners" of international firms have partnership interests in, or are members of, an affiliate of their DIFC employing entity.
10. Employees on "Secondment" will now be subject to the provisions relating to settlement agreements, employees' statutory obligations and protection from discrimination and harassment.
11. Short-term employees will be afforded protection from discrimination and harassment.
1. The New Regulations will come into force immediately.
2. Certificates of Compliance will only be issued to Qualifying Schemes established as an EMP Scheme in the form of a DIFC Trust with both its operator and administrator being established in the DIFC and regulated by the DFSA.
3. Certificates of Exemption will only be issued to an employer in respect of specific employees where:
- the employer is under a statutory duty in another country to make pension, retirement, saving, gratuity or any substantially similar contributions into a Scheme in such other country for those Employees; or
- the employer is making payments to a Group Scheme on behalf of employees where the value of such payments (not including any payment or contribution made by the employer or the Group to the costs of operating the Group Scheme), is in excess of the Core Benefits payable under the Amendment Law. Importantly, a scheme will only qualify as a "Group Scheme" if it is available in at least four countries (although this requirement may be waived by the DIFCA) exclusively to employees of the Group and is regulated and supervised by a financial services regulator.
4. Employers which hold a Certificate of Compliance or Certificate of Exemption which will no longer be compliant under the New Regulations will have a grace period of 12 months to comply with the New Regulations.
5. Employers will be under an obligation to notify the Operator of a Qualifying Scheme (which, in the case of DEWS, will be Zurich) of any other change in circumstances that will affect the amount of an Employee's contributions.
6. A fee of US$500 will be payable when applying for a Certificate of Compliance or a Certificate of Exemption.