The New Labour Law in Oman was issued on 31st July 2023 by Royal Decree 53/2023 and became effective immediately thereafter. Gorvinder Pannu, representing the legal firm Addleshaw Goddard gave a lecture at the BOS on July 25th 2024, one year following the enactment of this law.
She offered our members comprehensive details on the revisions and consequences of the new legislation, particularly focusing on its implications for the employment of foreign nationals and the Omanisation policy.
She provides us with an overview of the Labour Law below:
Employment relations in the Sultanate of Oman are governed by Royal Decree 53/2023 (the Labour Law), which came into force on 31 July 2023 (replacing the previous Labour Law promulgated by Royal Decree 35/2003).
The Labour Law applies to all employers except those who are governed by special laws or regulations. We have set out below, a summary of the key provisions of the Labour Law.
1. WORKING PATTERNS
Remote working, temporary, casual and incidental work have been recognised under the Labour Law but will be subject to further regulation from the Ministry of Labour. To date, the regulations to the Labour Law have yet to be issued.
2. JOB ADVERTISEMENTS
The Labour Law prohibits advertisements for jobs or promotions which to refer to creed, colour or remuneration packages.
SIGNIFICANCE
The prohibition on advertising remuneration indicates that the Oman Government aims for a wider pool of job seekers to apply for vacancies without first being dissuaded by the remuneration associated with the job.
3. DOCUMENTS
(a) Arabic language
All regulations, decisions and circulars must, as a minimum, be in the Arabic language, although it is permissible to use other languages. Arabic will be the only approved text.
SIGNIFICANCE
Employers who do not have the Arabic capability within their organisations will need to search for outside support from a translation service where they do not have in-house resources, which will invariably increase costs for translating employment contracts, HR policies and written communications to their employees. It is noteworthy to mention that an employer may still choose to have English as their language of business, and that commercial contracts may be written in English text.
(b) Policies and procedures
There is now an additional obligation on employers with 25 or more employees to have a performance appraisal system. The obligation to have a staff handbook/HR manual, (locally called, the Work Regulations) applies to employers with 50 or more employees (when previously this was required for employers with 15 or more employees).
SIGNIFICANCE
The burden of designing and implementing work regulations is removed for small firms i.e. those with fewer than 50 employees, as previously stipulated in the previous Labour Law. However, those with 25 or more employees will now be required to conduct annual performance appraisals and have a system in place for this.
4. FIXED TERM AND PROJECT TERM CONTRACTS
Fixed term contracts no longer automatically become unlimited upon express renewal. However, an employee’s employment will become unlimited if the total period of service under each successive fixed term contract (which continues without interruption) exceeds five years. Additionally, the Labour Law makes it clear that a project term contract will become unlimited if this also exceeds a duration of five years.
5. FEMALE REST AREAS
An employer with 25 or more female employees must set aside a separate rest place.
6. EMERGENCY AND UNPAID LEAVE
There is no longer a statutory entitlement to six days emergency leave entitlement. However, employees have a new right to take unpaid leave with the employer’s agreement. Where an employee is granted unpaid leave, they will be responsible for paying their own employee social contributions to the Social Protection Fund as well as the employer’s and Government’s contributions.
7. PARENTAL LEAVE
Parental leave entitlements have been improved under the Labour Law. The period of paid maternity leave has been increased from 50 days to 98 days with the cap on the number of times maternity leave may be taken and the previous one-year qualifying service being removed. A female employee may take up to one year of unpaid childcare leave, provided she pays for her own employee social contributions, as well as the employer’s and Government’s contributions. Mothers returning to work from maternity leave are now entitled to a daily one-hour nursing break as part of their working hours. There is also a paid paternity leave entitlement of 7 days for new fathers, provided he takes this leave within 98 days of the child’s birth. For paid leave entitlements, the employer will be liable to pay the salary until such time as the relevant provisions of the Social Protection Law come into force when employers will be entitled to reimbursement from the Social Protection Fund.
8. SICK LEAVE
Employees’ entitlement to paid sick leave has increased from 10 weeks to up to 182 days. Employees shall be entitled to: n 100% of their wage for the first 21 days; n 75% of their wage between the 22nd to 35th day; n 50% of their wage between the 36th to 70th day: n 35% of their wage between the 71st to 182nd day. Employers will be obliged to pay salaries during sick leave until the relevant provisions of the Social Protection Law come into force (after which the employer will be liable only for the first 7 days and thereafter, salaries will be funded from the Social Protection Fund).
9. REDUCTION OF NORMAL WORKING HOURS
Daily working hours have been decreased from 9 hours to 8 hours, with a maximum of 40 working hours per week. Ramadan working hours remain the same.
10. OVERTIME
An employee may be entitled to be paid overtime or receive paid time off in lieu, depending on when they work their additional hours and provided they do not exceed a total of 12 hours worked per day. The overtime rates have been increased both for voluntary/ordinary overtime and for extraordinary overtime (where an employee is required to work to meet one of the reasons specified under Article 72 as follows: n the basic hourly rate plus an uplift of 50% for daytime hours (for voluntary overtime, this remains at 25%); n the basic hourly rate plus an uplift of 75% for night-time hours (for voluntary overtime, this remains at 50%); and n the basic daily wage plus a 200% uplift for work on a weekend or official holiday (or two additional rest days in lieu of overtime pay where overtime is worked on an official holiday).
11. LEAVE ROLL-OVER
There is now a cap on the number of days of annual leave that may be carried over into the next holiday year. Employees are allowed to carry up to 30 calendar days of leave into the next year.
12. TERMINATION OF EMPLOYMENT
(a) Poor performance
Employers have the right to terminate an employee for poor performance, provided the employee has been notified of the required areas of improvement in writing but has failed to improve their performance within six months of that notification. If terminating an Omani national for poor performance, the employer may only recruit another Omani as the replacement.
(b) Discriminatory reasons
The termination of an employee’s employment for a reason related to their gender, origin, colour, language, religion, disability, creed, social status, labour union affiliation or activities, pregnancy, childbirth or breastfeeding for a working woman, or because the employee has previously raised a complaint against their employer will now be treated as an arbitrary dismissal.
(c) Disciplinary reasons
A failure by an employer to follow the company’s disciplinary procedure when terminating an employee for a disciplinary reason will now be considered as an arbitrary dismissal.
(d) Victimisation
Dismissing an employee because they have raised a complaint or a claim against the employer will be considered as an arbitrary dismissal.
(e) Constructive dismissal due to failure to pay wages
Employees now have the right to terminate their employment without notice should the employer fail to pay the employee’s salary for two consecutive months.
(f) Redundancy
Redundancy under certain circumstances is expressly recognised under the Labour Law, although there is a set process that needs to be followed to ensure such a termination is not considered arbitrary. This includes the requirement for approval of the termination by a special committee (appointed by the Ministry of Labour) prior to it taking place. Alternatives to redundancy, such as reduction in working hours and salaries, are also options that the special committee will consider and may apply.
(g) Omanisation
Omanisation is the Government’s policy to increase the employment of Omani nationals in the country and reduce its dependence on foreign (expat) labour. Employers are required to comply with Omanisation quotas as well as employ Omanis in roles reserved solely for Omani nationals. It is permitted for the employment of non Omanis to be terminated if the termination relates to the company’s Omanisation requirements and involves hiring an Omani replacement for the same role.
SIGNIFICANCE
Termination for Omanisation has long been recognised by the Oman courts as a justification for termination. This has now been codified in the Labour Law which gives employers greater certainty on their legal position, particularly when requested by the Ministry of Labour to replace expat employees with Omanis to fulfil the Government’s Omanisation strategy. There will still be visas available for skill gaps in the workforce. On the termination of a contract, the employee will also be entitled to their notice period. If not, they have rights to claim compensation for breach of contract.
(h) Time off for job searches
An employee who has been served with notice of termination is entitled to 10 paid hours per week to search for a new job.
13. CAP ON TERMINATION COMPENSATION
Arbitrary termination compensation is now capped at 12 months’ pay. However, the minimum award remains at 3 months’ pay. Note though that reinstatement still remains available.
SIGNIFICANCE
Compensation for arbitrary termination was previously uncapped. Since the Labour Law now limits compensation awards, settlement agreements are more likely to be entered between an employer and employee if they want to avoid the time and expense of litigating before the Oman courts.
14. NON-COMPETE CLAUSES
The Labour Law permits non-compete clauses to be included in employment contracts subject to specific conditions. Non-compete clauses must be no longer than 2 years, although such a lengthy restriction will probably be difficult for an employer to justify in most cases.
About the lecturer:
Gorvinder Pannu serves as a Partner in the Middle East employment practice of Addleshaw Goddard, located in Muscat. With over 25 years of experience in employment law, including 17 years dedicated to the Middle East, her expertise is well-recognised. In 2023, she received the prestigious Employment Lawyer of the Year Award from the LexisNexis Women In Law Awards. Additionally, Gorvinder is an esteemed member of the global Employment Lawyers Alliance. Addleshaw Goddard was honoured as the Law Firm of the Year in 2024.