The Sultanate of Oman has issued Royal Decree 53/2023 (the New Law), which came into force on 31 July 2023 and repeals Royal Decree 35/2003 (the Previous Law). The New Law is effective immediately, although employers have up to six months (i.e., until 30 January 2024) to ensure their employment policies and practices are compliant with the requirements of the New Law. The New Law introduces several significant changes, including new working patterns, extended leave entitlements, increased overtime rates, permitting renewable fixed term contracts subject to a cap of 5 years total duration, capping arbitrary termination compensation at 12 months gross salary, as well as introducing redundancy as a permitted termination reason
The new Oman Labour Law - What you need to know
The Sultanate of Oman has issued Royal Decree 53/2023 (the New Law), which came into force on 31 July 2023 and which repeals Royal Decree 35/2003 (the Previous Law). The New Law introduces a number of significant changes, and companies affected by the New Law will have six months from the date it came into force (i.e., until 30 January 2024) to ensure their employment policies and practices are compliant with the requirements of the New Law.
We have summarised the key aspects of the New Law below, together with the main action points for employers.
1. Working patterns
Remote working, temporary, casual and incidental work have been recognised under the New Law but will be subject to further regulation from the Ministry of Labour.
2. Job advertisements
The New Law prohibits advertising jobs which refer to creed, colour or remuneration packages or which otherwise may demean human dignity.
(a) Arabic language
All regulations, decisions and circulars must, as a minimum, be in the Arabic language, although it is permissible to use other languages. Arabic will however be the only approved text.
(b) Policies and procedures
In addition to the requirements under the Previous Law to have in place work regulations, there is now an additional obligation on employers with 25 or more employees to have in place a performance appraisal system.
4. Fixed term and project term contracts
In a welcome clarification on the status of fixed term contracts, the New Law provides that fixed term contracts no longer automatically become unlimited upon renewal. The fixed term contract does however become unlimited if the total period of service under each successive fixed term contract (which continues without interruption) exceeds five years. Additionally, the New Law makes it clear that a project term contract will become unlimited if this also exceeds a duration of five years.
5. Female rest areas
An employer with 25 or more female employees must set aside a separate rest place for its female employees.
6. Emergency and unpaid leave
The six days emergency leave entitlement has now been removed under the New Law, whereas a new right to take unpaid leave with the employer's agreement has been included. Where an employee is granted unpaid leave, they will be responsible for paying their own employee social contributions to the Social Protection Fund (when that is established) as well as the employer's and Government's contributions.
7. Parental leave
Parental leave entitlements have been improved under the New Law.
The period of paid maternity leave for new mothers has been increased from 50 days to 98 days. The cap on the number of times maternity leave can be taken has also been removed, as has the previous one-year qualifying service.
Additionally, a female employee may take up to one year of unpaid childcare leave, provided she will be responsible for paying her own employee social contributions to the Social Protection Fund (when that is established) as well as the employer's and Government's contributions.
Mothers returning to work from maternity leave are now entitled to a daily one-hour nursing break as part of their working hours.
Paid paternity leave of 7 days for new fathers has also been introduced, provided the father takes this leave within 98 days of the child's birth.
In relation to the paid leave entitlements, the employer will be liable to pay salary until such time the relevant provisions of the Social Protection Law (promulgated by Royal Decree 52/2023) come into force, after which salaries will be funded from the Social Protection Fund.
8. Sick Leave
Employees' entitlement to paid sick leave under the New Law has increased from 10 weeks to up to 182 days. Employees shall be entitled to:
- 100% of their wage for the first 21 days of their sick leave;
- 75% of their wage for the 22nd to 35th days of their sick leave;
- 50% of their wage for the 36th to 70th days of their sick leave; and
- 35% of their wage for the 71st to 182nd day of their sick leave.
Employers will be obliged to pay salaries during sick leave until such time the relevant provisions of the Social Protection Law come into force (after which salaries will be funded from the Social Protection Fund).
9. Reduction of normal working hours
Daily working hours are reduced from 9 hours to 8 hours, with a maximum of 40 working hours per week. Ramadan working hours remain as before, at 6 hours per day/30 hours per week for Muslim employees.
A worker may be entitled to be paid overtime or receive time off in lieu, depending on when they work their additional hours and provided they do not exceed a total of 12 hours worked per day.
The overtime rates have been increased where extraordinary overtime is required to meet one of the reasons specified under Article 72 as follows:
- an uplift of 50% for daytime hours;
- an uplift of 75% for night-time hours; and
- a 200% uplift or two additional rest days in lieu of overtime pay where overtime is worked on an official holiday.
11. Leave roll-over
There is now a cap on the number of days of annual leave that may be carried over into the next holiday year. Employees are allowed to carry up to 30 days of leave into the next year.
(a) Poor performance
Employers have the right to terminate an employee for poor performance, provided the employee has been notified of the required areas of improvement in writing but has failed to improve their performance within six months of that notification. If terminating an Omani national for poor performance, the employer may only recruit another Omani as the replacement.
(b) Discriminatory reasons
The termination of an employee's employment as a direct result of their gender, origin, colour, language, religion, disability, creed, social status, labour union affiliation or activities, pregnancy, childbirth or breastfeeding for a working woman will now be considered an arbitrary dismissal.
(c) Disciplinary reason
A failure by an employer to follow its disciplinary procedure when terminating an employee for a disciplinary reason will now be considered as an arbitrary dismissal.
Dismissing an employee because they have raised a complaint or a claim against the employer will be considered as an arbitrary dismissal unless the complaint is proved to be malicious.
(e) Constructive dismissal due to failure to pay wages
Employees now have the right to terminate their employment without notice should the employer fail to pay the employee’s salary for two consecutive months.
The concept of termination by way of redundancy under certain circumstances has now been included in the New Law, although there is a set process that needs to be followed to ensure such a termination is not considered arbitrary.
This includes the requirement for approval of the termination by a special committee prior to it taking place. Alternatives to redundancy, such as reduction in working hours and salaries, are also options that the special committee will consider and may apply.
It is permitted for the employment of non-Omanis to be terminated if the termination relates to the company's Omanisation requirements and involves hiring an Omani replacement for the same role.
(h) Time off for job searches
An employee who has been served with notice of termination is entitled to 10 paid hours per week to search for a new job.
13. Cap on termination compensation
Arbitrary termination compensation is now capped at 12 months' pay, however the minimum award remains at 3 months' pay.
14. Non-compete clauses
The New Law permits non-compete clauses to be included in employment contracts subject to specific conditions. Non-compete clauses must be no longer than 2 years, although such a lengthy restriction will likely be difficult for an employer to justify in most cases.
Employers should consider the following action points:
1. Communicate to employees how they are going to be affected by the New Law.
2. Amend or replace existing employment contracts which contain references to specific outdated statutory entitlements (e.g., emergency leave).
3. Amend existing sick leave policies and procedures to effectively manage ill health absence.
4. Introduce and/or update existing performance management policies and procedures.
5. Amend existing maternity and paternity leave policies to reflect the different entitlements.
6. Consider implementing equal opportunities and anti-bullying and harassment policies to reflect the new anti-discrimination provisions.
7. Amend any existing grievance policies to facilitate employee complaints of discrimination, bullying and harassment.
Please contact us if you need any assistance preparing for the New Law.
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