Recently, one of our clients asked whether it was possible to assign employees from Company A to Company B without issuing a new six-month renewable work permit for Company B. Both companies are subsidiaries of the same holding group, operating in the same restaurant business. However, the answer is no.

Even though both entities belong to the same holding group and engage in the same business, they are not considered branches of one another under their trade licenses. As a result, each company is treated as a separate legal entity under UAE law, meaning that employees must comply with visa and work permit regulations specific to the company that sponsors them.

What is Secondment?

A secondment arrangement allows an employee to temporarily work for another company while still being legally employed by their original employer. In the UAE, secondments are particularly valuable due to strict visa and work permit regulations that generally require employees to work exclusively for the company sponsoring their visa.

Secondment provides a legal avenue to bypass these restrictions, allowing employees to work for another company without transferring sponsorship. This practice is especially common in industries like hospitality, where ownership and operational structures are complex, and flexibility in staffing is essential.

Legal Framework: Key Considerations for Secondments

In the UAE, every employee—except UAE nationals and GCC citizens—requires a residence visa and work permit to be legally employed. These documents are tied to the employer sponsoring the employee, meaning that the employee can only work for the sponsor at the sponsor’s registered place of business.

However, a secondment agreement offers a legal solution to this restriction. With this agreement, an employee can be temporarily assigned to work for another employer while remaining legally employed by the original sponsor. While secondment arrangements can provide much-needed flexibility, it’s important to remember that strict compliance with UAE labor and immigration laws is required.

Key Elements of a Secondment Agreement

1. Secondment Agreement Between Entities

A formal secondment agreement between the original employer (Company A) and the receiving entity (Company B) is essential. This agreement should clearly define the roles, responsibilities, and liabilities of both companies regarding the employee. It typically includes terms related to salary, benefits, performance management, and disciplinary actions.

2. Employment Contracts

The employee remains legally employed by Company A, while being seconded to Company B. The employment contract with Company A must reflect the terms of the secondment, ensuring continuity of employment while defining the temporary working relationship with Company B.

3. Visa and Work Permit Compliance

Despite the secondment agreement, UAE law requires that employees working at Company B must hold a valid work permit and visa under Company B’s sponsorship. Even if both companies are part of the same holding group, this legal requirement remains applicable. Fines of up to AED 51,000 (USD 14,000) per employee in violation may be levied for non-compliance, with total fines reaching AED 5 million (USD 1.4 million) in some cases.

4. Documentation and Transparency

Clear and thorough documentation is crucial to the success of a secondment arrangement. The agreement should specify the duration, location of work, reporting structures, and roles and responsibilities. Maintaining transparency across all parties helps prevent conflicts and ensures smooth operations.

Secondment in the UAE Hospitality Sector: A Case Study

The hospitality industry in the UAE provides a clear example of how secondment arrangements work in practice. Hotels often operate under an owner-operator model, where the hotel owner holds the property and the hotel operator manages the staff.

In many cases, key personnel, such as general managers and financial controllers, remain employed by the operator but are sponsored by the hotel owner for visa purposes. This creates a unique situation where the operator controls the staff operationally, but the owner holds the legal responsibility for their employment.

In such cases, secondment agreements allow the hotel operator to manage key staff without needing to transfer their employment entirely, maintaining the operational standards and service quality while complying with UAE immigration laws.

Benefits of Secondment Arrangements

1. Legal Compliance

Secondment agreements ensure that companies comply with UAE labor and immigration laws, particularly regarding visa sponsorships. This is critical for avoiding legal complications and potential fines.

2. Operational Flexibility

Secondment allows companies to effectively manage their workforce across different entities, without the need for complex hiring processes or visa transfers. This flexibility is especially important in sectors with intricate ownership and operational structures.

3. Risk Mitigation

By maintaining the legal employment relationship with the original sponsor, the receiving entity (Company B) minimizes its exposure to risks and liabilities related to employee management.

Practical Considerations for Implementing Secondment Agreements

When setting up secondment arrangements, businesses should consider the following:

• Duration: How long will the secondment arrangement last?

• Employee Management: Which company will handle the employee’s daily responsibilities and key matters such as performance evaluations and disciplinary actions?

• Termination: Can the secondment arrangement be terminated early? If so, what impact will this have on the employee’s visa and employment status?

• Communication: What systems will be in place to ensure clear communication between the original employer, the receiving company, and the employee during the secondment period?

Conclusion

Secondment arrangements are an effective solution for businesses in the UAE looking to optimize their workforce while remaining compliant with labor and immigration laws. Whether you're operating in the hospitality industry or another sector, understanding how to structure and manage secondment agreements is essential to maintaining business flexibility and competitiveness.

If you’re considering implementing a secondment arrangement or need advice on structuring one for your business, consulting a legal expert in UAE employment law is highly recommended to ensure compliance and avoid potential pitfalls.

Sources :

• Secondments in the UAE hotel industry

• Loi du travail aux EAU - MOHRE