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What-happens-to-employees-when-a-business-closes-in-UAE

What happens to employees when a business closes in UAE

If you choose to sell or close your company and you’ve employed staff members in helping you run business operations, then you need to inform regarding what’s going to happen to them.

Obligations and options of the employees

As a business owner that will be closing the shop, you will have options but they are limited to the following:

  • If the business is going to be closed, then the business will have to let them go.
  • If the business is sold and will have a new owner, then the employees may be transferred onto the brand new business. Of course, this will mean it will end the employment to the business that has or is going to be sold.

There are several obligations an employer in the UAE has to its employees. This is to ensure that employees or staff members retreated with respect and fairly throughout the transition. The obligations we are talking about are as follows:

  • Finalizing payments;
  • Providing notices

The enterprise agreement which applies to the company may have policies related to the matter such as requiring consultation of the staff members or providing them with enough time and resources in looking for another place to work. It is, therefore, essential for a business undergoing change to check winding down or transfer of ownership policies.

What to do to employees prior to closing or selling a business

Here are the things you should do to your employees before you close or sell your company:

Communicate with the employees

Change can be extremely stressful and that applies to employees that may soon lose their jobs. This is the time wherein communication is key. A way in helping employees with the change that is coming is by giving them notice for as long as possible regarding the change. The meeting shall be conducted with all employees.

Provide notification

It does not matter whether the business will be closed down or sold. Any change will mean the position of the employees with the existing firm ends. It is, therefore, a must for a business to provide official notice as well as payments that may due to the employees.

If the business will have a new business owner prior to the notice period ends, then the business still has to pay the remaining notice period onto the staff members regardless of whether they are to continue working the new business owner or not.

Regardless of whether or not the employees will continue or cease employment when the business is transferred to the hands of the new owner, local legislation requires an employer to provide official notices to its employees in writing.

Let the staff members go

Whether you have closed down the business or you’re selling the company and the new business owner does not need the employees, it’s understandable for employers to find it hard to let their staff members go.

You may wish to talk to all the staff members directly in order to fully explain the situation to them. Effective communication is key during a time like this. It can help ensure the period of change will be easier not just for the employees but also for you.

Transfer employees

If you are selling the business and the staff members you have retained will be transferred to the new management, then you have to:

  • Notify the brand new business owner as to any leave, contractual, legal and/or financial obligations that you have with the employees;
  • Give updated employee records onto the new management;
  • Work out with your business’ new owner as to the obligations that he or she will be responsible for, as well as the obligations that the employees are to fulfill;
  • Offer employees with notice for ending employment with the previous management and let them be informed as to the fact that they would have to sign new agreements with the new management

Finalize the payments

Remember that there are payments you may still have to settle to the employees even as the business will close down or be transferred to new management. The payments can include employment termination payments, entitlement payments, and others.

For entitlement payments, the employees that will be transferred onto the new business will receive entitlements depending on the negotiation of the new and old owners of the business. A new owner of a business has to recognize some of the entitlements. However, there are those that do not. With a business owner that chooses to recognize the entitlements, the new business owner will settle the payments on behalf of the previous business owner.

The entitlements can be accrued leave and outstanding wages.

For advice on winding down in UAE or company liquidation, reach out to us and book a free initial consultation.