Effect of Qatar minimum wage and labour reform laws on contracting companies
- 3 years ago
Employers in Qatar due to the new minimum wage guarantee labour law will have the option of attracting the best available local talent while employees will be free to change jobs without a NOC and demand salaries suitable to their ability and experience.
The new Law No. 17 of 2020 on the Non-discriminatory Minimum Wage and Removing the No-Objection Certificate which was published in Qatar's Official Gazette on 9 September 2020 will come into effect in March 2021.
Initially, publication of the law followed an announcement about the reforms, issued by the Ministry of Administrative Development, Labour and Social Affairs (MADLSA) on 30 August 2020 - as the reforms was expected to take effect in October 2020. However, this was amended by way of a Ministerial Decision No. 25 of 2020, issued on 20 September this year.
The above mentioned new law removes the requirement for non-Qatari citizens to obtain a 'No-Objection Certificate' (NOC) from their employer and offers them the liberty to change jobs and transfer to a new employer without any undue restrictions.
Earlier, the NOC had been an integral part of Qatar's sponsorship laws applicable to foreign workers and change of jobs for employees without prior permission from their current employer was a near impossibility.
Probably, the most significant impact of the new reforms will be felt by the construction industry who are tasked with building and maintaining the massive on-going infrastructure in the country keeping in line Qatar Vision 2030 which lays great emphasis on continuing to be an advanced nation with the capability of substantiating development and striving to provide a high standard of living for both its citizens and residents alike.
Therefore, local contracting companies would probably be most affected by the minimum wage and labour reform laws for a number of relevant reasons.
Firstly, contracting companies will now compulsorily have to amend/update the contracts of all their employees to ensure that the workers do not earn less than the minimum wage guaranteed to them under the new law. Furthermore, there will be greater competition among contractors as employers will be able to hire the best talent available in the local market.
Secondly, now that employees can change jobs they will opt for the companies that offer them the best wages suitable to their work and experience.
The overall effect would definitely be an expected increase in the total cost to employers undertaking the work and the company management will need to work out if the increased costs due to the enforcement of the new law are recoverable in the long run.
Last but not the least – greater competition will lead to extra productivity on the construction site, increased perks that will have to meted out to over-performing workers and a general atmosphere of well-being and adherence to strict HSSE rules and regulations that will be eventually become more of a stricter norm than just a usual practice.
Getting down to basic financial implications, employers will now have to figure out if the changes in the law has affected the contract price in a plus or minus manner and act accordingly to set new price terms and conditions. What needs also to be considered is - if there is an increase in the cost or delay in the time period due to the reform changes will there be a monetarily compensation and/or an extension of time given for the work to be completed.
On the other hand, a decrease in the overall cost due to reform changes will result in the employer being entitled to a reduction in the contract price subject to, of course the claims processes policy and procedures.
Management will have to right now (given the fact that the new laws come into effect technically in the second quarter of next year) instruct the financial team to conduct a thorough analysis of all contractual obligations to find out what is the direct impact on the bottom line, as a result of the increase in extra costs or a decrease due to cost savings that will eventually reflect in the balance sheet, as a result of the reforms.
The record of the costs should be produced in a report capable of being disclosed to the employer on an interim basis, to satisfy the interim claim update requirements in most standard claims clauses.
It is therefore obligatory for the finance team to keep the management updated in clear and proper disclosure statements, on a regular basis, on all that affects the company financials as a direct result of changes in the labour laws, so claims and counter claims can be acted upon in a timely and proper manner.
In face of all the above nitty-gritties affecting the financials, one important point refers to inordinate delays in executing the project on time due to the reform laws that may have come into being before the introduction of the new law but actually got completed after law was enforced
The new labour laws are a definite boon to the employer and the employee and given fact that the reforms have come in a timely and phased manner is truly both admirable and commendable.
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