The New Omani Labour Law: Five things employers need to be aware of

After 20 years, the Cabinet of the Sultanate of Oman has issued a new Labour Law. Oman Sultani Decree No. 53/2023 (the New Labour Law) replaces the Old Labour Law (i.e. Oman Sultani Decree No. 35 of 2003) in its entirety and is already effective. The New Labour Law is subject to Implementing Regulations which have not as yet been published, but in the meantime, we look at five things we would advise an Omani employer to consider and prepare to implement.

1. Work is the “right” of Omani nationals

Nationalisation is at the top of the agenda of many countries in the region. In the same way as the Kingdom of Saudi Arabia (KSA), and more recently the United Arab Emirates (UAE), has increased the scope of the roles reserved for nationals, the New Labour Law in Oman strengthens the position of Omani national job seekers.

Whereas the Old Labour Law stated that an employer in Oman shall employ Omani nationals to “the utmost possible limit”, the New Labour Law now emphasises that work is the right of Omani nationals. 

The New Labour Law further sets out that an employer may only undertake to hire Omani nationals in accordance with the Omanisation percentages that will be issued separately by the Ministry of Labour. The New Labour Law provides that employers with 25 or more employees should employ and retain Omani nationals. There will be certain professions in which Omanis will replace non-Omani nationals based on a decision to be issued by the Minister. In addition, all employers with 40 or more employees must appoint Omani nationals with disabilities who are professionally qualified within the percentage to be determined by a further decision. 

2. Types of work and contracts

Types of work

The New Labour Law introduced new types of work which shall be further regulated by a decision of the Minister. These are (a) casual work that is not, by its nature, included within the activity of the employer; (b) temporary work; (c) part-time work; and (d) remote work. Whilst there is currently no further clarity in relation to the first three work models, remote work is defined in the New Labour Law as “a work regulation under which an employee performs all or part of his work or duties using information technology and communications within the Sultanate of Oman outside the establishment’s headquarters”. This differs from the definition of remote work in the UAE by expressly stating that remote work needs to be performed within the Sultanate of Oman.

Contracts

The New Labour Law still offers employers the option to conclude both unlimited and limited-term contracts. A limited-term contract may be concluded for a maximum duration of five years. If a limited term contract is concluded for an initial period exceeding five years or the original and the renewed contract periods together exceeds five years, the limited term contract will be considered an unlimited term contract. 

3. Types of leave

The New Labour Law has increased the duration of certain categories of leave and introduced new categories. The below table provides a summary of the key changes in relation to leave:

4. Working hours

The New Labour Law has reduced the maximum working hours from nine hours per day to eight hours per day. Employers in the Sultanate that are currently operating a nine-hour working day will have to quickly adapt to the reduced to the new working hours. The mandatory daily break time has been increased from 30 minutes to one hour. 

The mandatory weekly rest period remains at two consecutive days. 

5. Termination

If the competent Omani court finds that the termination of an employee was unfair or in violation of the New Labour Law, the court now has the discretion to find either that the employee should be reinstated in their previous position or order the employer to pay the employee compensation of no less than three months’ full salary and a maximum of 12 months’ salary for the termination. The actual compensation to be received by the employee will be determined based on the circumstances of termination and the employee’s period of service. In addition to any compensation for unfair dismissal, the employee remains entitled to statutory and contractual entitlements upon termination. 

The Old Labour Law prescribed compensation in case of unfair dismissal of not less than three months. In practice, the Courts have usually awarded compensation payments between three months and six months (and sometimes more) in cases of unfair dismissal. It now remains to be seen whether the compensation payments awarded to employees due to unfair dismissal will increase based on the New Labour Law.

The reasons for unfair dismissal are set out in the Labour Law and include but are not limited to, dismissals due to discriminatory reasons and the employee’s affiliation with a trade union. 

Next Steps

Whilst the New Labour Law repealed the Old Labour Law with immediate effect, and we are currently awaiting the Implementing Regulations to be issued, the New Labour Law already applies. Employers have six months to amend their situation and documents and in order to comply with the New Labour Law. It is therefore important that, notwithstanding the absence of further clarity by the Implementing Regulations, employers start to transition to the New Labour Law. 

It will be important, and a good opportunity, for employers to communicate with their employees regarding the way in which their employment terms will change over the next six months; many of the changes are positive and will be well received.  

If you would like further information on the New Labour Law in Oman, please contact one of the authors below. 

All Omani laws are issued in Arabic with no official translations. To draft this article we have relied on our internal translations and experience of the market.