Dubai’s DIFC says employers can reduce pay during Covid-19 crisis without employee consent

The Dubai International Financial Centre (DIFC) has announced new measures for employees and business owners with regards to remuneration, termination and end-of-service benefits that are effective from April 21 – July 31, 2020, in what the freezone authority has called an ’emergency period’.

According to a new directive, DIFC companies can now impose reduced working hours, paid or unpaid leave, reduced pay, restrict workplace access and put in place remote working conditions without the consent of their employees during the ’emergency period’.

Any permanent changes will require employee consent, the statement added.

.@DIFC announces Presidential Directive which seeks to help limit the impact of the COVID-19 situation and provide greater protection for companies and employees, effective from April 21, 2020 until July 31, 2020.https://t.co/WJLAXuLMaU pic.twitter.com/GYLRPJspt3

— Dubai Media Office (@DXBMediaOffice) April 26, 2020

It said that this directive is aimed at making it easier for DIFC employers to impose temporary changes to their employees’ terms of employment, which will also reduce the likelihood of employers having to terminate their staff.

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Further, any DIFC-based employee who contracts Covid-19 or has been quarantined by the local authorities will retain full remuneration.

This is in respect of their Covid-19 related sick leave pay and any such sick leave shall not be counted towards their annual sick leave entitlement.

Employers may also defer the visa cancellation process for their terminated employees to avoid any unnecessary hardship for them provided the employers continue to provide basic medical insurance cover.

Employees working in the retail, service and hospitality sectors must also be provided accommodation in such circumstances.

The new measures also protects employees’ end-of-service gratuity accrued prior to the recent introduction of DIFC Employee Workplace Savings (DEWS) scheme. The gratuity payments for a terminated employees will be calculated on their basic salary as of February 29, 2020 to ensure that any subsequent reduction of pay does not affect the final calculation of the amount.

DIFC will also to create an available employee database for those employees who were made redundant in the current crisis, as well as those that are surplus to their employers’ current needs to help these individuals find alternative employment.

With regards to privacy and cyber security for employees working remotely, and following the example of other key jurisdictions such as the United Kingdom, DIFC will temporarily suspend the wrongful trading obligations of companies based in the Centre under the DIFC Insolvency Law. It also eases concerns of DIFC company directors that they may be held personally liable for continuing to trade amid heightened uncertainty created by the Covid-19 pandemic.

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DIFC added that all these new directives for employers and employees are in line with international best practice, and that it consulted with law firms Al Tamimi & Co, Clyde & Co and DWF while drafting these measures.

“The severity of the Covid-19 situation on businesses cannot be understated and we have a clear responsibility to do everything possible to mitigate its impact. Through the new DIFC Directive, we intend to provide companies and their employees with certainty and flexibility in a practical way that will help see them through this challenging crisis,” said Essa Kazim, governor of DIFC.

“Undoubtedly, senior executive management teams across the centre have been forced to take tough decisions to implement measures that provide relief and sustains business operations. The new DIFC directive will help decision makers effectively take stock and swiftly introduce the necessary measures to survive and prosper throughout this unprecedented period. We are taking all the steps necessary to fortify the future of Dubai’s economy and the directive is part of our wider efforts to support businesses and the entire community. Our robust legal framework is able to reinforce provisions and secure the interests of every company and professional based in DIFC, not only in times of crisis, but every day,” added Kazim.

Separately, DIFC has already announced several measures to help businesses operating within the freezone including rent waivers on base rent for business partners leasing out DIFC-owned assets as well as reducing fees, deferred payments and facilitating movement of labour.

In March, DIFC officials proposed five initiatives over the following three months including waiving annual licence fees for new companies for three months, and a 10 per cent discount on renewal fees for existing licences during the same period.

It also decided to postpone payment plans for all commercial properties owned by DIFC Investments for six months.

Read: Regulator of Dubai’s financial hub DIFC proposes relief measures for firms

DIFC additionally said that it would reduce its ownership transfer fees from 5 per cent to 4 per cent for any property sale that occurs within the authorised three-month period, if ownership transfers are registered at DIFC within 30 days after the end of the three-month period.