08 Oct 2013

HIRING COMPANY STAFF IN THE UAE THE "DO'S" AND "DON’TS" FROM A LEGAL ANGLE

Authored by: Alex McGeoch

HIRING COMPANY STAFF IN THE UAE THE DOS AND DONTS FROM A LEGAL ANGLE

In this article Alex McGeoch discusses some of the Do’s and Don’ts from a legal angle when hiring news staff in the UAE.  Whether in your role as an operational manager or as specialist HR officer, you will, from time to time, be required to engage new employees. This may be because a staff member has decided to leave the company and tendered their resignation. Or, perhaps, one of your employees has been “under-performing” and you have decided - to use the handy American euphemism - to

In this article Alex McGeoch discusses some of the Do’s and Don’ts from a legal angle when hiring news staff in the UAE.  Whether in your role as an operational manager or as specialist HR officer, you will, from time to time, be required to engage new employees.  This may be because a staff member has decided to leave the company and tendered their resignation. Or, perhaps, one of your employees has been “under-performing” and you have decided - to use the handy American euphemism - to “let them go”).  Or it may be that company business is expanding and additional staff are required.

In brief:

  • When recruiting it is important to resist the temptation to hire the first “prospect” who presents himself (or herself).  If the interviewing and vetting process is not sufficiently thorough, serious issues may subsequently come to the surface.
  • Hiring and early "letting go" of an employee can have a disruptive effect on the company’s operations.
  • For the engagement of staff at any level, but in particular in the case of managerial and professional “hirings”, the offer letter is the key document.
  • If the remuneration offered to the successful applicant is in the form of a "package" of benefits (or is, to use the modern expression, "structured"), it is desirable to set out, in the offer letter, the elements that the package will contain.
  • An offer letter will serve as a "holding" document, while the formal employment contract (or “service agreement”) is being prepared.
  • Service agreements, especially in the case of senior appointments, should, as a matter of course, be referred for review by the company’s legal department (or outside lawyers) before being offered for signature by the nearly recruited employee.
  • A standard form Ministry of Labour (or, as the case may be, relevant free zone authority) employment contract must be prepared, executed and filed whenever a new staff member is engaged by the company.

 
Whatever the circumstances, it is likely that there will be pressure on the company officers concerned to recruit the necessary personnel as quickly as possible.   However, it is important to resist the temptation to hire the first “prospect” who presents himself (or herself).  The Romans of old had a maxim "Festina lente" ("With haste but steadily") and these should be your watchwords.  For example, the company may have received unsolicited applications from “outsiders” for positions in the company or it may be that the husband (or wife) of an existing employee would seem to fit the bill conveniently.  When such “windfall” candidates present themselves and appear to have the right qualifications and experience, there is always a temptation to make an “offer”, without subjecting the candidate to the kind of searching interviews and vetting process that would be usual.  This method of filling vacancies has the advantage of speed and also, of course, the avoidance of recruitment agency fees.
 
It is dangerous, however, to rush an appointment in this way.  The reason is that, if the interviewing and vetting process is not sufficiently thorough, serious issues may subsequently come to the surface - for example, financial difficulties (e.g. heavy indebtedness to banks and outstanding court orders), business entanglements (e.g. unresolved issues with former partners and/or customers), mental instability or other health issues, or simply a poor work record, good paper qualifications and relevant experience notwithstanding.  Once the applicant has been formally engaged, the deed, so to speak, “has been done”.  If it then becomes clear that the new joiner is not suited to the role which they were hired to fill (or there are other difficulties of the type indicated above), and he (or she) has to be terminated (or the new employee being unsettled - decides to leave of their own accord), the search to find the right person to fill the vacancy will have to begin all over again. 
 
In other words, the speed with which the recruitment was conducted will prove to have been a "false economy" of time.  Moreover, the hiring and early "letting go" of an employee can have a disruptive effect on the company’s operations.  For example, a hastily recruited staff member, who has client-or customer-facing responsibilities and who then turns out to be hopelessly unfit for such a role, may do lasting damage to company "relationships". Again, if the matter is looked at from another perspective, the failure of the recruitment will reflect badly on the managers concerned (whether operational or HR specialists) and might even be formally recorded as a "black mark" on their personal record.   
 
It will be obvious, therefore, that the recruitment process should be carried out in a measured fashion.  From a "clutch" of cv’s (obtained from staff recruitment agencies or other sources) which match the "profile" of the vacant position, a selection of three or four of the most promising should be made.  Once the interviewing and vetting process has been completed and the successful candidate chosen, it is time for the "offer letter" to be issued.
 
For the engagement of staff at any level, but in particular in the case of managerial and professional “hirings”, the offer letter is the key document.  It is particularly important to note that, once accepted, the offer contained within the offer letter becomes a binding contract.  For this reason, when an offer letter is dispatched to the successful candidate, a copy of the letter, for signature and return by the recipient within a set number of days, should always be enclosed.
 
The chief purposes of the offer letter are: to confirm any prior agreement that may have been reached verbally; to identify clearly the role and principal responsibilities that the successful applicantis to undertake; and to specify the salary (and other benefits) that he (or she) will enjoy on joining the company.  The sending of an offer letter also provides an opportunity to fix the date on which the new recruit is to start work with the company and also to “flush out” the existence of any restrictive covenants (i.e. post-termination restrictions), to which he (or she) may be subject, by requiring "full disclosure" in this regard.
 
If the remuneration offered to the successful applicant is in the form of a "package" of benefits (or is, to use the modern expression, "structured"), it is desirable to set out, in the offer letter, the elements that the package will contain:- e.g. basic salary, accommodation allowance, transport allowance, educational allowance (for children), club memberships, medical insurance, company pension plan participation, contractual bonus schemes, commissions payments and "long term incentive plans" (LTIPS). An LTIP is, as most readers will know, is a form of conditional remuneration, whereby the benefit is postponed, being entirely dependent entirely on “performance”.  Share option schemes, where the right to acquire company shares may not vest for at least three years after the start date of the employee’s period of service, come into this category.
 
After the terms of the "offer letter" have been accepted by the successful candidate, the letter will serve as a "holding" document, while the formal employment contract (or “service agreement”) is being prepared.  Although, in the nature of things, the service agreement will invariably be a much more detailed and lengthier document than the offer letter, it is likely to be, in some ways, easier to prepare.  This is because many of the clauses will be a repeat, or an expanded version, of the corresponding term in the offer letter (i.e. concerning role and responsibilities and remuneration) or they will follow largely standard wording (e.g. provisions concerning “confidentiality”, restrictive covenants (see above), “intellectual property” ownership and so on).  Nevertheless, the laws of the land, government policy rules and legal drafting techniques are forever changing and developing, and all these factors may well have an impact on how company employment contracts should be worded.  It is therefore a great mistake to imagine that a form of employment contract that seems generally satisfactory will remain so always.  Service agreements, especially in the case of senior appointments, should, as a matter of course, be referred for review by the company’s legal department (or outside lawyers) before being offered for signature by the nearly recruited employee.
 
Lastly, a standard form Ministry of Labour (or, as the case may be, relevant free zone authority) employment contract must be prepared, executed and filed whenever a new staff member is engaged by the company.  So far as possible, particularly in relation to such essential matters as salary and notice period, the standard form contract has to be consistent with both the offer letter and the service agreement, so as to avoid argument in the case of a contentious “parting of the ways” at some time in the future.

“let them go”).  Or it may be that company business is expanding and additional staff are required.

This article, including any advice, commentary or recommendation herein, is provided on a complimentary basis without consideration of any specific objectives, circumstances or facts. It reflects the views of the writer which may, in some cases, differ from those of the firm, especially in the develop jurisdiction of the UAE.