Oman’s Labor Law is stipulated by the Royal Decree 35/2003, and is issued by the Sultanate of Oman regarding all laws pertaining to Labor and employment-related issues. Employment laws in Oman and any amendments are implemented through royal decrees and ministerial decisions, which reflects the constantly changing nature of laws governing employees and employers in Oman. For most types of workers Omani or non-Omani, the Omani Labor Law applies to all except for civil servants, military or domestic service employees.
Oman has implemented a policy of Omanization which regulates the employment of expatriate labor. Many systems and policies for employment in Oman places heavy restrictions on the number of foreign nationals employed, aiming to give priority for Omani workers, in addition to industry-specific quotas which require certain private sectors to have a significant proportion of Omani employees in the industry. Employers should be aware of these measures when employing in Oman.
The rules governing the Omani employment contract is outlined in the Oman Labor Law issued in accordance with the Sultan’s Decree no.35/2003. The contract of employment must be written in Arabic, or a translation must be formalized and notarized in Arabic. A written contract is not required, although the employee should prove his rights that such an employment relation has been entered into by all means of evidence.
The employment contract must contain the following:
An additional legal requirement for a valid employment contract is to respect the Islamic religion, laws of the country, customs and social traditions in Oman. All prejudicial activity against the security of the country is unlawful.
Types of Employment Contracts
Fixed contracts are legally valid for a fixed duration and are more applicable for situations where the employee is hired for projects that require a specific period of time to complete. The fixed contract automatically terminates on the date of termination or expiry date, although may be considered as renewed with the same terms of both parties continue the employment arrangement as if it were still in place.
Indefinite or unlimited contracts are agreed to be valid for an indefinite amount of time as long as both parties are continuing the employment arrangement. There is no expiration date for the indefinite contract, where termination requires given notice and a “reasonable and fair” cause to be provided if it is termination by the employer.
Employees are subject to probation for a period of three months or less for those who receive monthly salaries, and a one month probation period for those who receive salaries at other intervals. If the probationary period is successfully passed, it will be counted in the period of service.
A seven day notice may be provided from any party to the other to indicate the termination of the contract during the probationary period. An employer terminating the employee during his/her probation period must provide substantive, detailed reasoning in the form of a dismissal letter if terminating during the probation period.
Termination of employment and the provision of a notice period are explicitly covered in the Omani Labor Law for unlimited period contracts, which is thirty days’ written notice for employees receiving monthly salaries, and fifteen days for any other arrangements unless specified in the contract. Failure to provide a notice period will require the compensating party to pay the gross salary the notice period.
Termination of a fixed contract prior to the expiry date is generally not allowed until the project has been completed, except for the cases of grave violation of conduct outlined in Articles 40 and 41 of the Labor Law for employers and employees respectively. In these situations, a notice period is not required.
The following applies to those who are not under the provisions of the Social Insurance Law, which are typically non-Omani employees. Upon termination of the employment relationship that are not due to a violation of conduct under Articles 40 and 41 of the Labor Code, the employer is obliged to pay the employee an end of service gratuity based on the employee’s basic salary, equivalent to fifteen days’ salary for each year of service for the first three years, and a one month salary for each year for the following years.
For employers registered with the Public Authority of Social Insurance, the Omani employees are entitled to the pension fund if the total contributions made by the employer exceed the gratuity payment.
The employee is entitled to an annual leave with basic salary remuneration for a period of fifteen days once he/she has completed a full year of continuous service with the employer, and is entitled to thirty days of paid annual leave per year for subsequent years.
The employee’s annual leave may be scheduled by the employer according to work requirements, although may be delayed at the discretion of the employer for one year. Employees must take at least two weeks’ leave once every two years at the minimum. For any leave not taken by the employee, it may be compensated with the basic salary if agreed upon in writing. Employees who terminate their employment are also entitled to the basic salary of the remaining leave days if there are any outstanding annual leave days.
In addition, all employees have the right to a four day emergency leave with gross salary during the year, with each leave not exceeding two days.
The employee is entitled to the gross salary payable for any holidays of festivals or occasions determined by the Minister as an official holiday in Oman. Any holiday dates coinciding with an employee’s annual leave day does not allow for any additional compensation. The employee may also be asked to work on an official holiday under certain circumstances, and is entitled to at least a 25% excess payment of his/her gross salary, or substitute a work day for a rest day.
The employee, upon presenting a valid medical certificate showing delivery date, is entitled to six weeks’ leave before and after delivery.
Sick leave is subject to the provisions of the Social Insurance Law, and must be proven with a valid medical certificate stating the reason for sickness or absence, referable to the Medical Committee. Sick leave may not exceed ten weeks per year.
An employee is entitled to leave with gross salary for special circumstances, such as three days’ for marriage or a death in the family and fifteen days for religious pilgrimage or examinations.
The Omani Social Security System covers all Omani citizens between the age of 15 and 59 who have a permanent job contract and are employed in the private sector. Workers who come from another Gulf Cooperation Council (GCC) country are also covered by the scheme. The employee has 6.5% of their basic salary deducted, while the employer contributes an additional 9.5% to the government’s social security scheme. The employer must also contribute an additional 2% to the employee’s pension fund and an additional 1% as contributions to work-related injuries. The fund covers disability benefits, work accidents and occupational diseases among other benefits. Once a male employee reaches 60 or a female worker reaching 55, they are entitled to an old-age pension.
It must be noted that these state pension schemes do not apply to foreign employees. The Omani Social Security System does not cover paid sick leave or maternity benefits. It is recommended that foreign workers arrange a private pension plan with the employer, join any corporate pension plans, or continue contributing to the state pension plan in the home country.
The Labor Law stipulates that a maximum of nine working hours per work day in a five work day week applies to all employees, giving 45 hours per week maximum. During the period of Ramadan, there is a 36 hours a week maximum for Muslim employees at a six hour working day.
At least half an hour rest break from work must be given per day, and continuous work must not exceed six hours. In any given week, twenty four consecutive hours of rest is required.
Any work exceeding the regular work hours must attract at least 25% surplus to their ordinary salary, or permission to take absence in lieu of those extra hours worked.
Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Oman. For companies which intend to employ their staff directly through their incorporated Omani entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Oman.
As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Oman.
The Shield GEO solution is an attractive alternative where
the company is looking to employ staff quickly
the company doesn’t have an appropriately incorporated entity in Oman
the company wants to work within a defined budget
the company wants to limit its initial commitment in Oman
the company needs help with tax, employment, immigration and payroll compliance in Oman
Shield GEO can contract directly with the company to employ and payroll their staff in Oman. Shield GEO supplies local employment contracts for the staff which ensure that local statutory requirements are met covering issues such as termination, probation periods, leave entitlements and statutory benefits. Shield GEO is able to advise companies how to cover local employment regulations whilst still providing consistent global employment policies. Understand more about outsourced employment through Shield GEO.