The long-awaited new Oman Labour Law was issued on 24 July 2023 by Royal Decree 53/2023 (New Law). It repeals Royal Decree 35/2003 (Old Law) and comes into force the day after publication in the Official Gazette. The related implementing regulations to the New Law are expected to be issued within the coming months.

We set out below our initial analysis on 10 key changes under the New Law:

1. Termination for poor performance: An employer has the right to terminate an employee for poor performance, provided that the employee has failed to improve their performance within six months of notification by the employer of the areas for improvement.
2. Redundancy now recognised: Employers are now expressly permitted to terminate employment contracts for economic reasons. A committee with members from the Ministry of Labour, Ministry of Commerce, Industry & Investment Promotion, the Oman Chamber of Commerce and the General Federation of Trade Unions of Oman will review requests for redundancy and either approve or suggest "alternative solutions" to keep the business going without having to terminate employees. The New Law provides the following examples of alternative solutions: reducing working hours/days and salaries, and sabbaticals.
3. Sick leave: The New Law increases employees' entitlement to paid sick leave from 10 weeks for up to 182 days.
4. Fixed contracts: These no longer automatically become unlimited upon renewal. However, if the employment continues for more than five years, then the contract term becomes unlimited.
5. Parental leave: Maternity leave is increased to 98 days and paternity leave of seven days is introduced.
6. Cap on compensation for unfair termination: This is now capped at 12 months' pay. The Old Law provided for a minimum three months' salary without a cap.
7. Reduction of working hours: Daily working hours are reduced from 8.5 to 8.
8. Expat gratuity: The new Social Securities Law states that a "savings fund" shall be established. The Social Securities Law, which was also issued this week, provides that a Ministerial Decision will be issued regarding the effective date of this fund within no more than three years, so the effective date is not yet known. This is linked to the new gratuity/end of service benefit provisions in the New Law. Under the Old Law, expat employees were entitled to 15 days' salary for each of the first three years of service and then 30 days' salary for each following year when calculating end of service benefit. Now expats are entitled to a full month's salary for each year.
9. Non-compete clauses: A non-compete clause may be agreed if the employee has access to confidential information or the employer's clients. The New Law provides that the clause shall only be valid for two years and in the area where the employer's activities are conducted.
10. Carry forward of leave: Employees are allowed to carry up to 30 days of leave into the next year.

We will be publishing a series of alerts on the New Law as we continue to review it and gather insights from regulators.

In the meantime, please get in touch with a member of the Dentons Oman team should you have any queries relating to the New Law and how this might impact you.