Too high a fee

The Labour Ministry earlier this year split companies into three categories to ensure a mix of nationalities in the workforce and to provide jobs for UAE nationals.

Company executives say the rise in such costs will have to be passed on to the customer. But expatriates say workers will eventually lose out. Mahmood Saberi and Diaa Hadid report

Dr Ali Bin Abdullah Al Ka'abi, the Minister of Labour and Social Affairs, has been pushing hard to get companies to hire UAE nationals.

He recently publicly blamed Tanmia, the body which was set up to oversee training and secure employment for UAE nationals, for not doing enough.

New rules were issued and the ministry divided companies into three categories, A, B and C, with the backing of the Cabinet.

Category A was the grade given to companies which had less than 30 per cent of the workforce from one nationality, with at least two per cent of the jobs given to UAE nationals.

The new rules include a rise in various labour transaction fees and increased fines for companies that do not follow through.

Labour officials said the new transaction fees will oblige companies to abide by the laws and discourage unskilled workers from staying in the country for long.

Ministry officials suggest that more concessions will be given to those companies which meet the emiratisation quota. They have said the new policies will ensure a better deal for all workers.

"It will now cost more to break the law," one senior official said.

There has been increasing pressure to reduce the number of foreign workers in the country and to provide jobs for nationals.

According to one Tanmia study, presently there are three expatriates to one national in the UAE.

A senior educationist at Zayed University earlier also expressed concern at the demographic imbalance in society and raised questions as to what percentage of the workforce should comprise expatriates and how long they should be allowed to continue to work here.

A recent report by the National Bank of Dubai noted that the unemployment rate among UAE nationals continues to be a major concern for policy makers.

It said that if the influx of foreign workers remained unchecked, national unemployment would reach serious levels.

"It could threaten the economic welfare and social fabric of the local population," it said.

Officials said that according to emiratisation rules, banks must prove they have employed four per cent of nationals in their workforce annually.

Insurance companies must prove they have employed five per cent annually. Trading companies with 50 employees or more must prove they have hired two per cent of nationals in the workforce every year.

Companies that fail to apply the emiratisation quotas will be downgraded to Category B or C.

The other point of view

Meanwhile, senior executives and company owners have said the new rules will hinder growth and have a negative impact on the bottom line.

One company executive said the new rules were unfair to small and medium-sized firms.

Abdullah Al Shamsi, a UAE national and managing director of a general trading company, said he could not afford to fire and hire new workers to alter the nationality ratio.

He also said he could not afford to hire a UAE national.

"It takes us time to train a worker to do the job. We can't fire them and bring in others. We will lose money training new staff," he said.

He also said hiring a UAE national was not possible because of the low wages his company offers.

"The highest salary we give is Dh4,000 for an engineer," he said.

Al Shamsi called on the ministry for more time for consultations so his company would be able to comply with the new rules.

He said his company had been put under Category B, as it has between 31 per cent and 74 per cent of its workforce from one nationality.

"We have 20 employees. My brother and I are the managers. We work day and night," he said.

Al Shamsi said the rise in transaction fees had hit the company's profit margin. "We do import and export. We do not have a big mark-up," he said.

Another executive said construction companies automatically fell under Category B or C, as most of the workers in these firms would be from one nationality.

"It is known that construction companies hire workers either from India, Pakistan or Bangladesh," said Abid Junaid, executive director of Ascon.

He said it was a "time-tested fact" that workers from the subcontinent were very competitive, cost-wise.

He said many companies had tried to find manpower from other sources, but there were a combination of factors as to why companies only hired from the subcontinent.

He said while it was commendable that the ministry was trying to diversify the workforce, it also had to look into the nature of the company's work or its business.

One consultant said the new rules and fees had doubled the start-up costs of new companies.

"The initial cost for setting up a new company was already very high," said Raju Menon, managing partner of Morison Menon Chartered Accountants.

He said expenses for Category B or C companies had doubled and trebled, respectively.

"This will affect labour-intensive companies such as construction or maintenance firms," he said.

Construction companies cannot pass on the escalation costs to the customer as contracts will already have been signed, he said.

"What will happen is that the owners [of such companies] will squeeze the salaries of the workers. The burden will fall on the labourers. Many are already being paid on an hourly basis," he said.

A property developer said the rise in transaction fees would add to the cost of construction.

"The manpower costs alone will not have such a big impact," said Mohammad Nimer, general manager of MAG Group's property development department.

However, he said it would affect the overall cost of construction, which includes the already high prices for raw material such as sand and cement. He said the rules to restructure the workforce came at a cost.

"It will have an impact on the end-user indirectly," he said.

A legal adviser to a company said the overheads because of the new fees would surely "kill" small businesses.

"The costs have doubled," said Omar Qushair, legal adviser at Murray and Roberts Contractors.

He said big groups were working around the problem by downgrading or getting rid of their staff.

"Two people are now doing the job of five. Even if you have to pay overtime, it is still cheaper," he said. He questioned the nationality quota system.

"What is the difference between an Indian accountant or a Jordanian accountant? The qualifications are the same," he said.

He also said the Dh3,000 bank guarantee for each employee did not really help the worker.

"The mon