A global company based in US intends to open its first new branch in Middle East/GCC region at Sharjah. The plan is to employ more than 1,000 people from diverse backgrounds at all levels of the organizational operations. The selection of Sharjah as the city for the company to initiate its penetration into the Middle Eastern markets is highly effective.
Thus, it forms an important epicenter for the Islamic culture. Operating in the Middle Eastern region requires an understanding of the labor regulations and other labor issues within the region. As a consultant for the organization, in this project, we offer our advice on these issues so that the US-based company can succeeds in this new region of operation.
Union and Non-union Representation for Sharjah Branch
Labor unions are important in different nations where the global organization operates.
They ensure protection of common interests of employees.
They fight for better salaries and wages for their members, reasonable working hours, and safe and conducive work environments.
Labor union also fights for unsuitable forms of labor such as child labor; ensure that employees gain health benefits while supporting people who are injured in work environments to pursue their rights through payment of damages (Shih and Chiang 585).
Consequently, it is important for the organization’s headquarters and the executives of branches in other continents to consider the roles played by labor unions within the nations it seeks to establish new branches.
This plan can help in aligning the organization’s employment policies consistently with the demands of the labor unions to mitigate risks of labor turnover or lost productivity arising from absenteeism as employees engage in strikes.
Union and Non-union Representation Cont’d
Cognition of functions and the amount of influence possessed by labor unions in the Middle East, with focus on Sharjah, is crucial.
It can help the global organization prepare for effective strategies of negotiating or compromising with labor unions in an effort to curb incidences of strikes and work boycotts.
However, the organization should not expect to encounter high pressures from employees and labor unions in Sharjah through collective bargaining with them or their representatives, for instance in the case of the US, Australia, and Sweden.
The UAE labor laws, which equally apply in Sharjah, do not make provisions for some areas.
For instance, “Trade unions and collective bargaining are not currently permitted and there are no statutory provisions relating to works councils or employee consultation” (Latham &Watkins 7).
However, the law sets conditions for termination of employees, working hours, gratuity, and disputes resolution.
Thus, the organization must consider reading the law to ensure that it addresses all legal requirements when setting policies relating to employees.
Failure to have an elaborate law allowing unions implies that the organization can only consider non-union representation of employees in Sharjah.
It is necessary for employees to informally appoint their representatives who will present their concerns before the organizational management and other stakeholders.
However, the UAE law may not honor any agreements between the representative of employees and the organization.
The only acceptable mechanism of resolving dispute is through the application made through ministry of labor, which then gives recommendation, or through legal litigation in a court of law.
The organization’s headquarters and executives of the organizations in other global markets need to utilize the lack of permission for collective bargaining in Sharjah to build employee confidence and trust
They should allow them raise their concerns with certain issues in the internal work environment.
Indeed, the fact that collective bargaining and trade unions are not permitted in the UAE does not mean that employees do not have issues, which if given an opportunity to articulate them can increase their work morale.
The global organization builds it culture around people as the source of competitive advantage.
Thus, it can competitively exploit the talent potential of its diverse workforce by eliminating work-life conflicts.
It only needs to create an internal atmosphere to allow people to bargain collectively.
This plan ensures that employees develop and attitude that the organization caters for their needs
This achievement will be contrary to other organizations that lack policies that foster internal collective bargaining since it is not a legal requirement.
The fact that the organization employs people from the international arena has some implications.
For instance, it will imply that restricting collective bargaining for people from nations where it is permissible may make them feel that the company is violating their rights.
However, they may lack a legal foundation for exploring such rights while in Sharjah.
The company may be shielded legally
But, failing to offer opportunities for collective bargaining to persons who are used to the culture only diminishes opportunities for the global organization to utilize people effectively as the source of its competitive advantage.
HR and Marketing/PR/CSR Activities
Whether an organization specializes in offering services or selling products, the aim of colonizing new markets is to increase the profitability levels and, hence its competitive advantage.
Any factor that impedes the realization of this goal becomes a major hindrance in engaging in business in foreign nations’ new markets.
Thus, it is necessary for an organization to invest in new nations after calculating risks and determining the possibilities of development of risks mitigation strategies (Yardley 219).
While Sharjah forms an attractive penetration route into the Middle East nations’ markets by the organization, considering the capacity of the organization’s cultures to receive positive embracement by local nationals is incredibly important.
Where challenges are identified, the HRM of the organization should enact strategies of ensuring that it reflects the centrality nature of Sharjah for Muslim culture in 2014.
This goal can be achieved by utilizing Islamic practices in forming work relationships and assimilating Islamic cultures into the organization.
HR and Marketing/PR/CSR Activities Cont’d
Apart from ensuring that the UAE national employees do not view the foreign company as eroding their cultures, adopting such practices can help in signaling the diverse employees who are drawn elsewhere to realize that they are in a new nation. Hence, change is inevitable.
Through CSR programs, the organization can support the Islamic culture through sponsorships of local Islamic talents.
Success in the UAE market will require the company to develop new products and services that meet the local tastes.
Consequently, marketing efforts should promote the Islamic cultures with reference to its preferences and tastes.
Thus, it is advisable that the management should not assume that it can successfully push for consumption of products, which have American, Japanese, or German design.
In fact, probability of rejection of the organization and its products and services is high if the management does not adopt appropriate changes to ensure it complies with Islamic cultural expectations.
Expectations of Managers who Exert Employer Rights
Matters that involve labor in the UAE are regulated by the 1982 federal law No.8 although several amendments’ to the law have been made.
Such amendments include amendment 1981 amendment No. 24, 1985 amendment No. 15, and 1986 amendment No. 12 among others.
In any organization, managers seek to exert the rights of the employers while labor unions seek to exert the rights of the employees in the context of national laws that regulate labor relations (Al-bahussin, Abdullah and Hassan 8).
Thus, it is incredibly important for headquarters and executives of branches in other continents to understand labor laws in the UAE, as they are also applicable in Sharjah.
Employees will also rely on these laws when engaging in collective bargaining to settle terms of employment and their disputes with the organization.
Therefore, managers of the organization must expect to employ people, whether emirate nationals or foreign nationals, within the context of the UAE labor laws.
Collective bargaining constitutes an important aspect in any employment agreement.
Mathiesen states it involves “the process in which working people, through their unions, negotiate contracts with their employers to determine their terms of employment, including pay, benefits, hours, leave, job health and safety policies, and ways to balance work and family and more” (245).
In this sense, collective bargaining constitutes an important mechanism of resolving many work-related problems.
In Netherlands, Sweden, and Australia among other nations, collective bargaining encompasses a process that involves negotiations between employers and representatives of labor unions.
The negotiation considers aspects like salary, working hours, and grievance procedure among other issues impacting employees in their work.
Collective Bargaining Cont’d
In the UAE, the above aspects are provided for in the labor law, as collective bargaining is not permissible in the law.
Indeed, failure to permit employees to negotiate on terms of employment with the employers has led to complaints over abuse of employee rights by employers in the UAE (6).
In the US, where most of the workers subscribe to a particular union, an employee’s committee and labor union representatives engage in negotiations with employers.
In particular, collective bargaining in US pays immense concern to employee job security
It proactively addresses issues such as mechanisms for protecting an employee from termination without evidence of just.
Terms of Employment Contract
Managers who exert employer rights expect to find various legal provisions in Sharjah with respect to terms of employment in areas such as salary, grievances, and disciplinary issues.
The organization can only consider two alternative terms of employment: unlimited and limited employment terms.
Unlimited contract requires people to work for an organization from a certain date to such a date when either party to the contract terminates the contract upon issuance of a notice (Al Tamimi & Company Para.5).
For fixed contracts, employees work for an organization from a particular date to particular date.
Before considering the type of the contract the organization intends to enter with the employees, it needs to conduct analysis and synthesis of conditions for hiring people in the UAE.
Besides, before employing an expatriate in the UAE, an application with ministry of labor is required.
The ministry has the sole mandate of authenticating the application before any employee arrives in the UAE.
Apart from seeking approval for employing people from outside the UAE, an organization must meet some immigration procedures.
For instance, since the organization wants to employ people from different nations, it must draw its contract in formats that are acceptable by the ministry of labor.
Additionally, “a labor permit for an expatriate employee will not be issued by the ministry unless a formal written labor contract is filed with the ministry” (Al Tamimi & Company Para.19).
In the contract, an organization needs to stipulate several things.
These things include the payable wages or salaries, employment contract date, commencement date for the contract, and contact nature (limited or unlimited).
The organization also has to consider the nature of the job the employees will be involved in, place of work, and period that the contract will last.
When setting terms of contract, the organization needs to pay special consideration to regulations on terminations of employment contracts applicable in Sharjah.
Under the UAE labor laws, initial period of employment is considered probation that lasts for at least one month and extending up to six months (Latham &Watkins 5).
On expiring of the probation period, the employer is entitled to issue a minimum of 30-day termination notice to the employees on grounds of ‘acceptable reason.’
However, the organization needs to note that ‘acceptable reason’ is not defined in the UAE labor laws (Latham &Watkins 3).
Nevertheless, employers can still terminate employees without issuance of a prior notice under two conditions.
These conditions include employees’ failure to execute their fundamental duties, for which they are employed for, or when they are found drunk or under intoxication of drugs while working.
In some situations, an organization is compelled by operational challenges to implement redundancy programs.
In the UAE, no specific regulations are provided for in the labor laws pertaining to lay-offs or redundancies.
Hence, managers of the organization should not expect any consultation obligation necessary for consideration before implementing such programs in Sharjah.
As part of disciplinary action, an organization may consider dismissing employees.
However, specific conditions are imposed when dismissing employees of the UAE in nationality.
Ministerial Decision No. 176, applicable as from February 2009, holds dismissals of the UAE national from employment in the private sector as illegal under four conditions.
Firstly, the UAE nationals can only be dismissed under the provision of ‘acceptable reason’ established in article 120 of the UAE labor laws.
Secondly, it is unlawful to dismiss a UAE national because non-national can perform the function of national scheduled for dismissal.
Thirdly, it is unlawful to dismiss them when an employer has not forwarded a notice for dismissal to the ministry within a period of at least 30 days before the dismissal.
It is also unlawful to dismiss a UAE national if an employer fails to comply with the labor of ministry’s instructions on notice of dismissal (Latham &Watkins 4).
Lastly, a UAE national cannot be dismissed if his or her retirement entitlements have not been fully paid as stated in the labor laws.
Unlike in U. S. and Germany, these UAE laws seek to protect and ensure that organizations obey the rights of the UAE nationals in comparison with foreign nationals.
This assertion perhaps makes more impacts upon considering that the UAE enacted Emiritisation program.
Emiritisation program was introduced in 2004 to ensure that organizations employ more UAE nationals.
The main purpose of the program is to reduce dependence on foreign workforce in the UAE.
Even if the organization considers opening new branches in other GCC nations, the program remains an important aspect for consideration by the managers and executives of branches in other continents
Other GCC nations such as Bahrain and Saudi Arabia coupled with Qatar are also adopting similar policies.
The law bars employers to consider employing other nationals if there are UAE nationals who can execute the task.
Although labor laws establish some free zones such as DHC and DIFC, in which the UAE labor laws do not apply in a bid to foster foreign investments, the provision of the 2004 emiritisation program may apply to some free zones.
Under terms of employment, the managers and executives of branches in other continents should expect different regulations on working hours and wages.
In terms of duration of toil, mature people are required to toil for at least 8 hours, although they get some rest after every 5 hours of continuous toil.
The law also limits overtime hours to two hours unless “the work is to prevent occurrence of a major loss or a serious accident or to remove or mitigate the consequences of such loss or accident” (Latham &Watkins 4).
Salary increase by 25% applies for all overtimes.
However, 50% raise in earnings or payment is required per extra minutes of work in case a member of staff is active in job between 9 pm to dawn.
All Fridays must be paid 50% higher, which is not the case in U.S, Germany, Japan, and other nations without a state religion. Additionally, unlike these nations, the UAE does not allow people to be in job for successive Fridays not unless the boss computes their earnings and pay every day.
Before opening the new branch in Sharjah, managers and executives of branches in other continents need to consider the meaning and the amount of wage permissible in the UAE.
In some nations like the US, minimum wage regulations exists.
In the UAE, the term wages applies to all payments made to employees on a daily basis, weekly, monthly, and yearly in the form of commission or even as per piece basis (Al Tamimi & Company Para.18).
Law requires remuneration to include living allowance and any other reward offered to employees due to their honest or hard work as provided for in an employment contract.
Wage must be specified in a contract. A major question is how much the organization should pay its employees.
The UAE labor laws do not specify any minimum wage. However, people earning lower than dhs 4,000 in addition to living stipends do not have a chance to subsidize their next of kin and/or kids while staying in the UAE.
Nevertheless, this is not stipulated in the law. It is just an immigration requirement.
Settlement of Labor Disputes in Comparison with Practices in Other Countries
In organizations, disputes are inevitable.
They occur when differences emerge between organizations and employees or among different employees.
In nations such as the US., Germany, and Japan where some organizations consider employees important sources of organizational competitive advantage, there are many ways of dealing with employees disputes.
They include collaboration, compromise, competing, avoidance, and accommodation.
Such organizations correlate disputes with negative implication s on the performance of an organization (Bagshaw 91).
In the UAE, the law requires the making of an submission to the employment department through the region where an organization is situated in case of a clash between boss and workforce.
Settlement of Labor Disputes Cont’d
Complaints are submitted in writing summarizing various facts and computations of any amount due.
A duplicate of the employment agreement must also be attached.
Workers and bosses in disagreement are summoned to present their cases before the ministry, which then issues a proposal within a fortnight as from the date of documenting the disagreement submission.
In case the global organization feels discontented with the recommendations offered implying that its disputes with employees are solved, it is important for it to consider legal litigation.
Where legal litigation must be sought to ensure resolution of disputes, “the Ministry will issue a summary of the facts of the case, and a memorandum together with its recommendation, and the arguments put forward by both parties” (Al Tamimi & Company Para. 34).
Upon receipt of the application, the court summons the second party to the dispute within three days for the hearing of matters in dispute.
Complaints are made within one year since the date when entitlement or amounts claimed become due.
In calculating this time, the court takes one year as comprising 365 days and one month as comprising 30 days (Gulf news 17).
Filing an application to the ministry of labor stops the movement of this time.
Parties in argument wait for the department to hand over the matters or the offended party can go on to lawyers if the department does not do so within a fortnight.
The law excuses all workers from reimbursing any court charges.
Where disputes are between several employees and one employer, the ministry may consider establishing a committee for disputes resolution.
In such situations, it takes longer to issue recommendations, which if the party(s) to the dispute are not satisfied with them, it transfers the case to the court, or the parties can do it if the ministry fails to make the transfers within two weeks (Gulf news 18).
Managers and executives of branches in other continents need to know regulations on disciplinary actions that are applicable in the UAE as they consider opening a new branch in Sharjah. (Latham &Watkins 4).
As argued before, the UAE takes more measures to prevent termination and to secure more jobs for its citizens.
However, these permissible disciplinary actions in its labor laws are analogous to those applied in the US and Australia.
Employers also need to pay for all unutilized leaves, wages’ balances, and overtime balances while catering for costs of repatriations.
In case of gratuity at the end of service, the time over which an employee has served an organization is deployed to determine the necessary amount of payment.
However, it is important to note that gratuity is not paid for time when an employee is absent from work.
The UAE vs. The USA
Unlike in the UAE, where trade unions are not allowed, in the US, settlement of labor dispute involves participation of trade unions, arbitrators, attorney, and mediators (Zack Para. 11).
NLRA provides the procedures followed by unions in their petitions.
To aid the conciliation course in resolution of labor disagreement, the US administration has created the FMCS body, which provides the necessary intervention and reunion to the victims.
This body acts as an impartial arbitrator.
In the UAE, courts play significant roles in taking over matters in disputes when the aggrieved parties fails to agree with the recommendations given by ministry of labor,
However, in the US, courts have shown repeated non-tolerance to appeals made against the decision of independent and neutral arbitrators such as FMCS.
The UAE vs. Germany & UAE vs. Japan
The UAE and German approach to settlement of labor disputes is much similar with the America system.
In the three nations, either party in dispute arbitrators cannot fund the arbitrator to ensure neutrality in decision making.
In Japan and Germany, courts take central roles in the litigation of labor disputes by either hearing the matter or appointing an agent to hear the matter in dispute.
Much like the case of the UAE, Japan has an established law, labor standards Act No.49 of 1947, and labor contract Act No. 128 of 2007 (Sidley Para.1).
These laws regulate all relationships between employees and employers.
Al Tamimi & Company. UAE Labor Law, 2006. Web.
Al-bahussin, Abdullah, and Wael Hassan. “The Impact of Human Resource Management Practices, Organizational Culture, Organizational Innovation and Knowledge Management on Organizational Performance in Large Saudi Organizations: Structural Equation Modeling With Conceptual Framework.” International Journal of Business and Management 8.22(2013): 1-19. Print.
Bagshaw, Martins. IRS Managing Conflict in the Workplace. London: LexisNexis, 2004. Print.
Gulf News. UAE labor law section 3: the employment contract, 2013. Web.
Latham & Watkins. Employment issues in the United Arab Emirates, 2009. Web.
Mathiesen, Kay. “Labor laws on unionization and collective bargaining-comparative study”. Journal of information Ethics 3.1 (2009):245-567. Print.
Shih, Houston, and Yang Chiang. “Strategy alignment between HRM, KM, and corporate development. Information Journal of Manpower 26.6 (2005): 582–603. Print.
Sidley. Labor Disputes in Japan: Overview of Substantive Law and Disputes Settlement Procedures, 2013. Web.
Yardley, Lehman. “Dilemmas in Marketing Research.” International Journal of Marketing Research 15.3(2000): 215-228. Print.