Tuesday, March 17, 2009

Employment Law

The Omani Constitution guarantees Omani nationals the right to work, prohibits compulsory labour (except for the
performance of public services for a fair wage), prohibits discrimination between citizens and generally addresses all
employment issues. The Omani Labour Law (the Law) (Royal Decree 35), 2003, governs specific labour and
employment-related issues. In addition to the Constitution and the Law, Ministerial Decisions issued by the ministry
of manpower (the ministry) and the Social Insurance Law also apply to the private sector workforce.

The Law does not apply to civil servants, military, security or police personnel, or domestic service/household
employees. Civil servants are covered by the Civil Service Law, and military and police personnel are covered by
the Military Service Law. Domestic service/household employees are covered by Ministerial Decisions.

The Law aims to enhance and safeguard the interest of employees and regulate the relationship between employees
and their employers in Oman. It contains various articles which provide for basic salary and associated minimum
benefits, as well as gratuities, contractual and other rights. Employers may also offer additional benefits and
generous terms of employment to their employees under individual contracts of employment.

Employee Rights
Article 35 of the Constitution provides that “every foreigner who is legally resident in the Sultanate of Oman shall
have the right to protection of his person and his property in accordance with the constitution.” Additionally, in
accordance with the laws and prevailing practice in Oman, employees are normally entitled to the following
minimum benefits:

 • basic salary;
 • accommodation, housing allowance and transportation;
 • paid leave, including annual, sick, special and maternity;
 • end of service gratuity and social insurance benefits; and
 • medical treatment.

Basic salary
This critical component of an employment contract is usually determined by the parties during negotiation.
However, in the case of some expatriates, their respective governments may stipulate the minimum basic salary
expected prior to their recruitment and employment in Oman. In the case of Omani nationals working in the private
sector, the minimum basic salary and associated benefits for certain categories and positions are set out in various
Ministerial Decisions released from time to time by the ministry.

The Law stipulates a maximum of nine working hours per working day, or 48 hours per week. In the event that any
additional hours are worked, the employee is entitled to receive overtime pay.

Accommodation, housing allowance and transportation

Although the Law is silent on the amount of allowance or rates to be paid to expatriate employees with respect to
accommodation and local transportation, there exists an established practice pursuant to which employers either pay
housing allowances and local transportation allowances, or provide the necessary local transportation and
accommodation. The manner and method of distributing such allowances is subject to mutual agreement between
parties as set out in the employment contract.

Paid leave
All employees, regardless of their nationality, are entitled to an annual leave of at least 15working days with full
basic salary after completion of one year of continuous service. This leave is then increased to 30 days for each
subsequent year of service. They are also entitled to sick leave, provided that a certifying medical note is obtained
from a physician or medical practitioner. Additionally, the employees are entitled to special leave for specific events
or occasions, such as marriage, death of a close family member, or a pilgrimage. All female employees are entitled
to a minimum of six weeks’ maternity leave, after the employee has completed one year of continuous service with
the employer.

End of service gratuity and social insurance benefits

Pursuant to the Social Insurance Law, the Public Authority for Social Insurance (PASI) will pay social service
benefit to Omani national employees who have subscribed to the national insurance scheme and have properly
vested in the scheme. Private employers are required to make monthly contributions (currently about 10.5 per cent)
towards the PASI Fund. Employees and the Omani government contribute the requisite balance into the insurance
fund. At the end of their service, Omani employees are entitled to receive social service benefits based on their last
drawn aggregate basic salary.

Pursuant to Article 39 of the Law, expatriate employees are generally entitled to an end-of-service gratuity payment
on the termination of their employment contract. The gratuities are calculated based on the final basic salary and
consist of 15 days’ salary for each of the first three years of employment with the employer, and 30 days’ salary for
each consecutive full year of employment thereafter. A pro-rata amount is calculated for any fraction of a full year
worked after the initial year. If the employer establishes and operates a provident fund scheme approved by the
ministry, then the expatriate employee may be entitled to receive the higher of the amounts payable under Article 39
referred to above or the provident fund payments, but not both.

Foreign companies operating in Oman or seconding employees to Oman should take steps to avoid possible “double
dipping” by employees. This could happen to an unsuspecting employer if an employee attempted to take advantage
of a pension scheme operated by the employer outside of Oman, as well as the benefits payable under Article 39.

Medical treatment
All employees, regardless of their nationality, are entitled to certain types of medical treatment at the employer’s
expense. However, dental, ophthal- mic, and maternity treatments are excluded from the provision of free services to
employees. Notwithstanding, all Omani nationals are entitled to receive free medical treatment at government-
owned hospitals and clinics.

Termination of Employment Contracts

The Law specifies two types of employment contracts: an employment contract for a specified duration and an
employment contract for an unspecified period (ie. a fixed-term or an indefinite term contract). In the case of a
fixed-term contract, neither the employer nor the employee may terminate the contract before its natural expiry,
except for the reasons listed under Articles 40 and 41 of the Law (generally, grave violations of conduct), or grave
violations of the agreed terms of the employment contract.

If either party terminates an employment contract contrary to the provisions of the Law or the contract, that party
may be held liable for payment of damages as a result of such unlawful or unjustifiable termination. For example, in
the case of unlawful or unjustifiable termination of an employee, he/she may be entitled to recover damages for loss
of salary for the remaining period of the employment contract plus compensation for the time when the employee
was in the services of the employer.

Where an employment contract is for an indefinite term and the employee’s salary is paid on a monthly basis, either
party may terminate the contract by serving 30 days’ notice in writing prior to the date on which the termination is to
take effect. If the employee’s salary is paid on a basis other than a monthly salary, then 15 days’ written notice must
be provided, unless a longer notice period has been mutually agreed. If a contract is terminated without regard to the
notice requirement, the party terminating the contract may be required to pay compensation equivalent to the full
salary payable but for the improper notice period.

Upon termination, an expatriate employee (an Omani employee would be governed by Social Insurance Law),
would be entitled to receive end-of- service gratuities for the entire period of his/her services at the rates referred to
above. If the period of employment service is less than one year, the expatriate employee may not be entitled to
receive any end-of-service gratuities.

The end-of-service gratuity is usually paid in addition to any compensation which the local court may award to an
employee whose employer’s action is adjudged to be unfair or abusive towards the employee.
Omani courts have jurisdiction to hear any employment related disputes which may arise between employees and
employers. Initially, disputes are referred to the Labour Dispute Settlement Division, which acts as mediator for the
employees and employers to reach an amicable settlement of the dispute. Failure to amicably settle could lead to
litigation before the Primary Court.

Ancillary issues
The Law encourages the recruitment of Omani nationals to the maximum possible extent, and in furtherance of this
objective, the ministry specifies the proportion of nationals that are required to be employed in each private sector.
Subject to compliance by a company of its own targets, it may recruit and employ expatriates. In the event that a
company fails to meet its targets, it is liable to the imposition of penalties and/or suspension of its rights to obtain
employment clearances for expatriate employees.

Any person employed in Oman contrary to the provisions of the immigration laws could expose the concerned
parties to imposition of monetary penalties and loss of residency rights. Expatriates may not be employed unless the
employer has obtained both a residency permit and employment clearance for the employee.

The Law permits private sector employees to form a representative committee to protect their interests, defend their
rights under the law, and represent them in all matters related to their employment affairs. A representative
committee has the authority to resolve employment issues, to support issues related to the recruitment of a target
number of Omani nationals, to develop and implement training plans, and to monitor company- level representative
committees.

All employers are required to retain a file for each employee at their premises, containing a signed employment
contract and other relevant legal documents, evidencing a proper employer-employee contractual relation- ship. The
files should be available for examination by the ministry.

In addition, all employers are required to maintain Personnel Policy Procedures (PPP) Manuals approved by the
ministry. Among other things, PPP Manuals must contain procedures for the resolution of employee grievances.