Oman's Employment Regulations and the New Labour Law: A Guide for Business Owners

Oman’s new labour law, promulgated by Royal Decree no. 53/2023. It came into force on July 31st, 2023, and was repealed 35/2003. It marks a significant shift in the country’s employment landscape. Designed to modernize workforce management, the law aligns with Oman’s Vision 2040 by fostering a fair, transparent, and competitive working environment. For business owners, understanding and complying with these regulations is critical to achieving operational success and building strong employer-employee relationships. This guide provides a comprehensive overview of the key aspects of the new labour law.

Introduction to the new Labour Law

Oman has recently introduced significant updates to its Labour Law, emphasizing employment contracts. These changes focus on contract structures, leave policies, working hours, and employee benefits. The new labour law replaces older legislation to address contemporary workforce challenges. It emphasizes employee rights, employer responsibilities, and mechanisms for dispute resolution, while also aligning with international best practices. Business owners must familiarize themselves with these updates to ensure compliance and maintain smooth operations.

Understanding Omanisation requirements

A cornerstone of Oman’s workforce strategy is Omanisation—a national initiative to increase Omani participation in the private sector. The new labour law reinforces Omanisation by:

• Setting industry-specific quotas for hiring Omani nationals.
• Introducing incentives for businesses that exceed these quotas.
• Imposing penalties for non-compliance.

Business owners should collaborate with recruitment agencies and training institutions to find, hire, and retain qualified Omani professionals.

Employers have to do the following:

• The Ministry requires an Omanisation plan to be submitted by employers through the online portal at the start of every calendar year specifying Omanised jobs and the entity’s efforts to substitute positions held by expatriates with Omani employees.
• Maintain a register detailing Omani employees, job vacancies, and Omanisation plans.
• Submit updated records to the Ministry of Labour annually.
• Develop training programs for Omani employees.
• Ensure transparency, labor law compliance, and Omanisation by giving exact data on Omani employees, job vacancies, and Omanisation plans, promoting Omani nationals’ employment and advancement.

Contract types and employment terms

The Labour Law outlines two types of contracts:

1. Fixed-Term Contracts: Concludes for a specified period or an indefinite period. Limited to a maximum of five years, its renewed extensions should be considered of the original term.
2. Open-Ended Contracts: Not restricted by duration but subject to termination notice requirements which should not be less than one month.

Key provisions include mandatory written contracts, clear job descriptions, and transparent terms regarding salary, probation, and notice periods. Employers must also ensure that contracts comply with both legal requirements and industry standards.

Termination Notice

The Labour Law mandates clear notice periods for termination:

• Employers must provide at least one month’s notice for employees paid monthly.
• For other employees, the required notice period is 15 days.

During the notice period, employees are entitled to time off to seek alternative employment opportunities.

Termination and end of service benefits

The new law outlines clear guidelines for termination:

• Termination must be justified, with documentation to support decisions.
• Employees are entitled to severance pay based on the length of service.
• The termination notice period shall not be less than 1 month in circumstances of termination by the employer
• Employers are permitted to terminate non-Omanis if it relates to the company’s Omanisation requirements and involves hiring an Omani as their replacement in the same role.

Key provisions regarding termination include:

• Fair Dismissal: Situations such as poor performance, Omanisation needs, or redundancy must adhere to established guidelines and require prior approvals.
• Unfair Dismissal: Employees dismissed arbitrarily may get compensation of up to 12 months’ wages.

End of Service Benefits:

Gratuity is calculated based on the length of service, and all dues must be promptly settled upon termination.

Work Hours, Leave Entitlements, and Holidays

The Labour Law standardizes work hours and leave policies, including:

• Work Hours: Daily working hours have been reduced from 9 hours to 8 hours (40 hours per week) excluding breaks.
• Annual Leave: The employees have been entitled to 30 days of paid annual leave, and the option to carry over up to 30 unused days.
• Parental Leave: Maternity leave has been extended to 98 days, and fathers are entitled to seven days of paternity leave within 98 days of childbirth.
• Sick Leave: The total amount of sick leave that employees are allowed to take up to 182 days of sick leave, with pay gradually reducing from full pay for the first 21 days to 35% after long periods.
• Public Holidays: Entitlement to official holidays, with provisions for compensation if employees are required to work on these days.

Social Protection Fund (SPF) and Other Benefits

PASI (Public Authority for Social Insurance) changed its name to the Social Protection Fund (SPF), Royal Decree 52/2023.

Key features for Omanis:

• Total contribution – 20.5%
• Employer contribution – 12.5%
• Employee Contribution: 8% of the basic salary.
• Employee Contribution: Additional voluntary savings are allowed.

Conclusion

Oman’s updated Labour Law represents a progressive step in creating a balanced employment framework. The improvements to employee rights and employer obligations aim to foster a more equitable and productive workplace. Employers should take proactive measures to implement these changes and create a compliant and thriving workforce. For business owners, compliance is not just a legal necessity but also a strategic opportunity to attract and retain top talent, foster employee loyalty, and enhance operational efficiency. Partnering with Bondoni can help businesses seamlessly integrate these regulations into their operations, ensuring both compliance and growth.

Bondoni has its own Practical summary of the 2023 labour law that focusses on the employment contract. If anyone needs a copy, please contact us.