Dubai's free zones, including Jebel Ali Free Zone, moved in quickly to minimise the chances of major layoffs happening at tenant companies. Image Credit: Gulf News Archive

Minimise job losses… and the disruption to the economy that comes with lots of redundancies happening at the same time.

This is what the UAE Government has set out to do on a priority basis in its response to the COVID-19 outbreak and to lessen its impact on the economy. The announcement by Dubai Free Zones Council on Saturday gives an indication of that strategy.

The Council confirmed that temporary work contracts will be issued that would allow the “free movement” of workers between companies operating in the free zones for the rest of the year. This move will also “benefit workers seeking better job opportunities, and those who have been granted unpaid leave by facilitating their re-employment in jobs in Dubai,” the Council said in a statement.

What this means is that a business finding itself saddled with excess workforce can provide them to other companies within the free zones. At the individual level, it lessens their risk of confronting a sudden job loss and then having to spend months looking for an alternative.

The Dubai Free Zones Council’s could well be the template that other emirates can follow to reduce the risk of mass lay-offs in the near-term. Dubai’s free zones are a base for 44,985 companies that provide for a combined 389,336 jobs.

But free zones have certain advantages that businesses spread over a city cannot provide. Within free zones, there would be multiple companies that require the same skills, which is why moving from one to another would be relatively straight-forward.

Can this be repeated across the city? Market sources say the local economy is much more receptive to freelance or contract work rather than take on someone with full employment benefits. The authorities too are more accepting of such a switch.

No repeat of 2008

Because the last thing anyone wants is to have a repeat of the 2008-2009 job crisis set off by the Great Recession.

“During the financial crisis, it took almost one year for the impact of the downturn to fully feed through to the job market,” said a spokesperson at GulfTalent. “And another 12 to 18 months for businesses to get back to active hiring.

“[So far, because of the COVID-19 outbreak]. we have not yet seen a contraction in recruitment activity comparable to what happened during the 2008 crisis. The slowdown seems temporary… and reversible, with employers putting things on hold and waiting to see what happens.”

But the pain is there

Sectors such as the aviation and hospitality have already gone in for significant downsizing of operations and with it, reductions in staff salaries/allowances. On Monday evening, flydubai announced it would cut salaries for the next three months, while Abu Dhabi’s Etihad Airways said it would effect between 25-50 per cent cuts in wages for April.

Hotels in the UAE too have been letting go of all non-essential staff, for what looks like an extended period until demand returns to some normalcy.

The retail sector, for now, has not had any major lay-offs, but the ceasing of commercial activity is telling heavily on their bottom-line.

In comparison, banks in the UAE seem to be better prepared, since most of them had already gone through major workforce restructuring in the last year and more. Abu Dhabi Commercial Bank said it would not have any layoffs stemming from the COVID-19 outbreak, which is also what Ajman Bank stressed in a statement it put out this week.

Send a clear message

Companies thinking of downsizing or wanting to cut down their wage-related expenses should make things clear with their workforce.

“Employers must do so only after consulting with the employees and getting them to agree for a salary cut considering the extreme circumstances,” Luke Tapp, Partner and Head of Middle East employment practice at Pinsent Masons, a law firm. “People want their leaders to be honest with what actions are being taken.

“They also want to know what the plan is to eventually return to normal operations."

And businesses are trying to provide as much information as is possible, even though they realise circumstances could change within days or weeks. Danube Properties has halted all recruitment to cope with the current situation. “It’s important for us to take care of the staff and infrastructure rather than expand our workforce,” said Atif Rahman, Director and Partner.

“We are confident that once the market recovers from this global emergency, we will start hiring again. Danube Properties supports thousands of jobs in contracting, sub-contracting, supply, building materials and the furnishings industry.”

The ‘remote’ challenge

Businesses, here and elsewhere, are also learning on the job, so to speak. The restrictions on movements and people contact required businesses to allow their staff to work remotely. Some of the multinationals already had contingency plans in place well ahead of the virus crisis, but local businesses are having to go through a steep learning curve. And with no clue as yet as to what could be on the other side.

A GulfTalent survey found that many were scrambling to get set up technically to allow their staff to sign in from their homes.

By early September, the “new hire” job market will be back to normal

- Vijay Gandhi of Korn Ferry Digital

Employers are also legally justified in asking employees to isolate themselves while working from home. Besides following the UAE government’s directives for home quarantine, companies also have an obligation towards the health and safety of their employees.

When will things head back to normal?

For now, businesses are intent on surviving the virus outbreak and what it’s been doing to their operations. Getting back into operational health will, of course, depend on how long the shadow of the COVID-19 lasts.

Vijay Gandhi, Regional Director at the recruitment consultancy Korn Ferry Digital, is one of the optimists.

“We anticipate that by early September, the “new hire” job market will be back to normal,” he said. "Companies will be setting budgets and looking ahead to planning for the new financial year.

“They will be returning to normal strategic planning for future growth and market development.”

Whether the future pans out the way Gandhi says it can only be known once the severity of the current crisis starts to taper off. What companies can do now is make sure their short-term reaction doesn’t impact their ability to retain their best employees over the long-term.

Read more

Courts are more likely to find a redundancy dismissal fair now than during a normal trading environment

- Luke Tapp of Pinsent Masons
Placing staff on paid leave is legal
It’s legal for employers to ask their staff to proceed on paid leave when business takes a downturn. A legal provision exists within the UAE Labour Law that permits this practice.

However, following the impact of coronavirus on business and profits, several employers are putting their staff on unpaid leave.

“If an employee thinks this move is unfair, they can raise a complaint internally,” said Luke Tapp of Pinsent Masons.

“If they are still dissatisfied, they can raise a complaint with the authority that governs the firm [either a free zone or the Ministry of Human Resources and Emiratisation].”

However, employees must keep in mind that employers are trying to save jobs and will reassess the situation when matters improve. The other alternative is only redundancy/dismissal.

The worst-case scenario is when employers make their staff redundant. Such employees are entitled to notice pay, accrued benefits, end-of-service gratuity and a flight ticket to their home country.

The severance pay, however, depends on the company’s discretion. It could either be one month’s pay or three months’ pay.

If an employee is keen to contest their redundancy dismissal in court, remember that the judiciary tends to rule in favour of companies during such contingencies.

“During the 2008 global financial crisis and the oil price crash in 2014-15, courts were sympathetic towards companies,” said Tapp. “It’s the same case today. Courts are more likely to find a redundancy dismissal fair now than during a normal trading environment.”