Monday, February 06, 2006

UAE Tax of the Day I

According to Al Tamimi's publication, Labour Law in the UAE (pdf):

The Pensions & Social Securities Law, Federal Law No. (7) of 1999, concerns UAE nationals employed in both the public and private sectors. It provides, amongst other things, for certain contributions to be made by the employee and the employer to the Public Authority of Pensions and Social securities. For a person employed in the public sector these contributions are equivalent to 5% of the contributory pension salary to be paid by the employee and 15% of the contributory pension salary payable by the employer. As for the private sector, the government shall bear 2.5% of the 15% share payable by the employer as contributions to the Authority.
To make private sector jobs attractive to UAE nationals, it is very wise of the government to give nationals in the private sector participation in the government pension plan.

...And demand:
But, if your aim is to increase employment of nationals in the private sector you should not make it 12.5 percent more expensive to employ a national as opposed to an equally qualified expat.


Blogger Slagothor said...

Is 12.5% more than the cost of the end-of-service bonus paid to expats? Where I work, the EOS bonus works out to about 10% of the person's salary, so it's basically a wash. Also, nationals don't cost the companies relocation costs and annual travel allowances.

The biggest "cost" to hiring nationals is the perception that it is very expensive to fire one. So, paradoxically, in order to get more Emirtatis into the private sector, the government will have to make it cheaper and easier for firms to fire them, or do something to combat that notion if it is, in fact, false.

11:14 PM  
Blogger John B. Chilton said...

Slagothor - You may be right about the end of service to expats evening things out.

I entirely agree that the cost of firing is the most serious obstacle to inducing firms to hire nationals. (That is, at equal wages. The fact that nationals won't accept the low salaries and long hours of the private is a demand side obstacle.)It's a point I've made in several posts over the last year under the heading rights that make you worse off.

11:36 PM  
Anonymous said...

Really useful information, lots of thanks for your post.

6:53 PM  

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