Businesses usually have to make difficult choices in the UAE’s dynamic economic environment in order to stay sustainable and competitive. Layoffs and restructuring are two of these choices that are frequently made during times of organisational change or financial strain. Despite their apparent similarities, layoffs and restructuring have quite different effects, procedures, and results. Companies, workers, and stakeholders negotiating UAE employment legislation and organisational health must be aware of these distinctions.
Below we have a quick comparison of layoff vs restructuring in UAE. Read to find out more –
A Layoff: What Is It?
The phrase “layoff” describes the dismissal of workers, usually as a result of financial difficulties, job role removal, or economic downturns. In order to lower the size of the staff, the employer typically initiates a temporary or permanent separation without necessarily implying an organisational redesign.
- Reason: The reason for the employee’s termination is not their performance but rather the fact that their employment is no longer required. Courts frequently accept financial issues as a legitimate ground for restructuring, although appropriate evidence is necessary.
- Procedure: No particular legal consultation procedure exists for redundancy. The appropriate notice period must still be given by employers, and terminations must have a “valid reason” to prevent accusations of arbitrary dismissal.
Restructuring: What Is It?
Reorganising a business in the UAE to be more efficient is referred to as restructuring. It may entail various modifications to employment contracts and does not always lead to layoffs.
- Reason: A strategic, long-term business choice, restructuring aims to increase a company’s operational efficacy or financial success.
- Procedure: Any modifications to an employee’s contract must be approved by both parties. According to UAE labour legislation, employers are not allowed to make unilateral changes. The timetable and impacted positions should be covered in a comprehensive restructuring strategy.
Legal Framework for Layoff VS Restructuring
Layoffs and restructuring procedures are governed by the UAE labour law, which protects workers’ rights while enabling companies to handle staff changes ethically. The following are important legal factors:
- When laying off or terminating employees, employers are required to give good cause.
- Unless otherwise noted, adequate notice periods, typically 30 days, are required.
- Severance pay, which is usually determined by years of employment, is necessary.
- Additional government notifications may be necessary for mass layoffs and restructurings that impact large workforces.
- Workers on limited-term contracts are protected against being fired arbitrarily.
Prime Differences Between Layoff and Restructuring
Here is a quick overview of layoff vs restructuring in UAE –
| Aspect | Layoff | Restructuring |
| Purpose | Reducing labor costs | Improving organizational efficiency by restructuring |
| Scope | Limited to terminating employees | Involves multiple actions for a broader change |
| Duration | Temporary or can be permanent | Long-term process |
| Employee Impact | Direct layoff of employment | May lead to reassignment, reorder, or layoffs |
| Legal Requirements | Notice, termination, and explanation | Notifications from the government, notice, and severance if extensive |
| Business Approach | Reactive | Proactive |
When Does Layoff and Restructuring Apply?
Examples of Layoffs
- Following a post-pandemic drop in revenues, a retail company cuts employees.
- Because of project cancellations, a construction company fires employees.
- Brief layoffs are brought on by seasonal declines in business.
Examples of Restructuring
- An IT corporation realigns departments and combines with another enterprise.
- A manufacturing company switches from manual to automated procedures.
- Workflows are redesigned by a financial services company to enhance customer service.
What Is The Impact on Employees?
Employees who are laid off frequently experience abrupt job loss, financial instability, and mental distress. Legal safeguards and severance benefits offer some respite, but they cannot make the misery of unemployment go away.
Employees may be allowed to continue contributing under new conditions through restructuring, which may include role modifications, redeployment, or retraining possibilities. Affected employees, however, encounter the same difficulties as in separate layoffs if they are a component of restructuring.
How To Manage Layoff & Restructuring?
Here’s how to manage layoff vs restructuring in UAE –
In order to preserve their reputation and employee morale, employers in the UAE must manage layoffs and restructuring with tact and in accordance with the law. The following suggestions are for conscientious management:
- Openly discuss business ideas and issues with staff members.
- Provide aid in the form of retraining, job placement help, or counselling.
- Verify that all legal requirements, such as notice durations and severance, are fulfilled.
- Restructuring should be planned with employee participation to lessen opposition.
- Work together with legal counsel to ensure that actions comply with UAE labour law.
Even though layoffs do not require much professional assistance, restructuring might require intervention. This is where a professional company can come to your rescue. Xpert Advisory is one such experienced company in UAE that can help with a simple and seamless restructuring process. Trust our experts and call us for a quick consultation!
Final Words
Despite their occasional overlap, layoffs and restructuring are two independent approaches with varying applications and effects on the labour market in the United Arab Emirates. While restructuring aims for a more comprehensive corporate transformation that may or may not involve worker reductions, layoffs typically address immediate cost problems by decreasing employment. To preserve economic sustainability and safeguard employees’ rights, both procedures necessitate meticulous adherence to the law and moral leadership.
FAQs
Does the UAE require severance pay for all layoffs?
Severance pay is typically required and determined by the length of employment of the employee.
Is it possible to restructure without firing staff members?
Role adjustments, internal transfers, and process enhancements without layoffs are all possible aspects of restructuring.
How much notice must be given before a layoff occurs?
Unless the employment contract specifies differently, the minimum notice period is typically 30 days.
