On 24 July 2023, Oman issued Royal Decree 53/2023 The Labour Law (the “New Labour Law”) introducing a raft of changes intended to modernize the existing law, encourage productivity and enhance and balance rights and duties in the work environment. The New Labour Law replaces the existing law that has been in place since 2003 and includes significant changes for business operating in Oman. The new law came into effect following publication in the Gazette on 30 July 2023, and regulations pursuant to the new law are expected to be issued in the coming months.
Importantly, employers in Oman must ensure compliance with the New Labour Law within six months, i.e., by 30 January 2024. Businesses should begin to review their employment contracts and manuals for compliance now, and discuss with employees how the New Labour Law will affect them.
Curtis sets out below a summary of the key changes that will be of interest to both employers and employees:
Sick Leave/ Paid Leave /Special Leave:
- Sick leave: The new law increases maximum paid sick leave from 10 weeks to 182 days per year. Payment of salary while on sick leave is per a tier graduated throughout the 182-day period. The period of 100% paid sick leave is extended from two weeks to three weeks.
- Special leave:
- Increases the leave in the event of death of a spouse, son or daughter from three days to 10 days.
- Introduces 14 days’ leave for non-Muslim women in the event of the death of a husband.
- Increases maternity leave to 98 days, in addition to a maximum of one year of unpaid leave for childcare at the discretion of the employee. In a welcome change, introduces seven days of paternity leave.
- Introduces special leave of 15 days to accompany a patient with material relationship or up to the second degree when seeking health care.
- Removes emergency leave, and introduces unpaid special leave at the discretion of the employer without pay/PASI contributions.
- Provides that up to 30 days’ annual leave may be carried over to the next year.
Working Hours:
- Maximum reduced from 45 hours a week to 40 hours a week (i.e., from nine hours per day to eight hours per day). Increases minimum daily break timing from 30 minutes to one hour.
- One-hour break per day for nursing mothers for a period of one year from the end of the maternity leave.
- Ramadan working hours are not changed and remain at six hours per day/30 hours per week for Muslim employees.
Overtime:
- Introduces a regime to govern circumstances in which an employee may be entitled to overtime or time in lieu.
Omanisation, Productivity, Redundancy and Termination:
- In order for companies to meet Omanisation requirements, employers are permitted to terminate non-Omani employees. The replacement of the terminated expatriate worker must be an Omani citizen.
- Employers are permitted to terminate an employee for poor performance if an employee fails to perform, and failed to improve its performance after notice, over a period of six months. There are strict conditions that must be complied with and, in practice, such procedure will need to be carefully managed and documented. If an Omani employee is terminated for poor performance, any replacement employee must be an Omani citizen.
- Redundancy, or termination for economic reasons, is now recognized by law. However, in order for redundancy to be considered lawful, an employer must follow a strict procedure, which includes obtaining prior approval from a Ministry of Labour committee. The committee will consider the request for redundancy and take into consideration alternative measures such as reduction in working hours and salaries. It should be noted that non-profitability or failure to be successful in the market do not automatically qualify as evidence of financial loss and the ability to invoke redundancy.
- Time limits for notifying the Ministry of Labour of an employee’s termination for actions that resulted in significant financial loss to the employer have been extended from three days to 30 days.
Compensation for Unjustified Termination:
- In cases of unjustified termination, any court-ordered compensation is now capped at 12 months of gross salary. The previous Labour Law provided a minimum of three months’ compensation for unjustified termination, but did not set a maximum cap.
Project-specific and Fixed-term Contracts:
- Fixed-term contracts no longer automatically become permanent or unlimited after the passing of two years’ continuous employment. However, they may do so after five years of continuous employment. This is also the case with project-specific contracts.
Restrictive Covenants:
- Parties may agree to non-compete clauses in certain prescribed circumstances.
- Such restriction is limited to an agreed period of not more than two years, and is to be limited to the geographic area of the business.
- As previously, it is unlikely that a two-year restriction could be justified in most circumstances.
End of Service Benefit (“EOSB”):
- The new law increases the expat gratuity payment, from 15 days per year for the first three years of service and 30 days after the third year, to 30 days for each year served from the first year of service in the new law. There are also new provisions governing when and how EOSB is to be paid.
- Importantly, EOSB under the New Labour Law will eventually be impacted by the new Social Protection Law (RD 52/2023) that has also been issued in the past month. The Social Protection Law provides for the mandatory creation of a “savings fund” for expatriate workers. Details as to the commencement date for the fund will be released by way of a Ministerial Decision to be enacted within three years of August 2023. Once this fund is in place, we expect that it will replace the EOSB provisions currently prescribed in the New Labour Law.
Discriminatory Practices:
- Termination based on discrimination regarding gender, race, disability, or labour union affiliation is expressly prohibited by the New Labour Law.
Non-payment of Salary/Constructive Dismissal:
- Should an employer fail to pay an employee’s salary for two consecutive months, the employee has the right to terminate the employment contract without the need to serve the contractual notice period. This is akin to constructive dismissal laws in other jurisdictions.
Strikes and Collective Action:
- The New Labour Law brings in a range of new provisions governing the settlement of collective labour disputes, strikes, and lockouts.
Essential Steps
As noted, all companies operating within Oman must comply with the new mandatory provisions of the New Labour Law by 30 January 2024. Now is a good time to review existing contracts, standard form employment contracts and company manuals to ensure compliance.
It is likely that existing employment contracts will need to be amended to take account of changes around emergency leave, sick leave, individual performance requirements, maternity and paternity policies, EOSB, and policies to account for new provisions regarding bullying, harassment and non-discrimination.
Please feel free to contact the Curtis team for assistance or to seek further details and clarification of the new law.
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