Employers will have to give the Ministry of Labour and Social Affairs a Dh3,000 bank guarantee for every new employee they hire under a proposal approved on Monday by the Cabinet. The guarantee will be used to settle disputes involving the non-payment of wages if a company collapses or an expatriate partner flees, leaving behind financial commitments to its workers.

The requirement takes effect immediately, the Arabic daily Al Khaleej reported yesterday. The biggest impact will be on small companies employing fewer than 100 workers. Previously they were exempt from providing any financial guarantee. Companies in which the government has a stake, banks, insurance companies, oil firms and first-class hotels are exempt, as are companies wholly owned by UAE nationals and international companies.

Among those who must deposit the guarantee are those involved in construction, transport, garment-making, oilfield services and maintenance, private schools, sellers and importers of fruit and vegetables, tailors, cleaning companies and handicraft dealers. Employers of expatriates already in the country must pay the bank guarantee when the employee's labour card is renewed or his sponsorship transferred.

According to the Cabinet decision the guarantee applies to the following instances:

* When a new employment permit is issued by the Ministry of Labour and Social Affairs.
* When a change of sponsorship is approved.
* When a labour card is submitted for renewal if the guarantee was not paid at the time it was issued or sponsorship changed.

The Ministry of Labour and Social Affairs will make use of the guarantee in the following circumstances:

* To meet the cost of returning a worker to his home country or other destination agreed with the sponsor.
* When the sponsor or employer or his representative admits in court or to a labour dispute panel that the employee is owed gratuity.
* When a court rules that a worker must be paid what is due.

The guarantee can be redeemed when a worker's sponsorship is cancelled and he departs, or upon his death or transfer of sponsorship to another company.

Prior to the new ruling the ministry put companies into five categories based on the number of employees.

Companies in categories 1, 2 and 3, employing 1,001 or more workers were obliged to deposit a Dh500,000 guarantee. These companies will not have to pay any additional guarantee.
Companies in category 4, employing 101 to 1,000 workers, previously had to pay a Dh300,000 guarantee. Companies in this category must pay an additional Dh3,000 for each new employee.

Companies in category five, employing 100 or fewer workers, were previously exempt from paying any guarantee. Under the new rule they must pay a guarantee of Dh3,000 per employee.