For many companies, February/March is the time when HR teams are supporting management with the reviewing the annual salary adjustments, setting performance goals and identifying actions for low performers. Unfortunately, it’s also the time when HR teams are asked to terminate a low performing employee.
While local legislation provides employers with different options to terminate the employment relationship, companies are open to financial and legal risk if no or insufficient documentation is in place. And yet, HR teams are underestimating the importance of keeping complete and up-to-date personnel files and HR documentation.
Legal requirements. UAE Federal Law No. 8 of 1980 (as amended) or, in short, the Labour Law prescribes content an employer needs to keep in the employee’s personnel file. It’s mainly basic personal information, the salary history as well as any penalties, injuries/vocational diseases and details around the termination. In addition, the employer needs to keep records of 3 different leave types (annual leave, sick leave and other leave). The legal requirements can easily be fulfilled, although there are still HR teams that don’t have these fundamental records in place.
Financial risks. HR teams without proper documentation for the statutory requirements or in case of any disputes expose their company to fines and compensation. Financial fines vary as outlined in the labour law, other laws and statutes.
Dismissed employees may be able to claim for compensation if their termination is perceived arbitrary. To prove the decision was qualified, HR teams needs to present supporting written documents to the court when such a dispute is heard. Verbal presentation of such is not permitted. Should there be no documents, it’s an easier decision for the court to award compensation to the dismissed employee, payable by the former employer.
Legal risks. In addition to the financial risks, the courts may suspend the company’s operations or even imprison the HR Manager if no adequate documentation is available. Previous cases have shown the extend of personal liability of an HR Manager and it’s not worth the risk.
In the case of a disciplinary procedure, the company may issue warnings. The first warnings may be given verbally and, upon repeat of the unacceptable behaviour and/or actions, in writing. By not documenting the verbal warning or filing the written warning in a timely manner, HR teams expose the company when the dispute is brought up to the court. The same risk exists if an internal hearing has been held but the decision has not been communicated to the employee in writing.
Best practices. A number of global companies like IBM and Google have altered their approach to performance management and are moving away from the 2-3 formal discussions per year. Instead, the trend is focus on forward-looking skills improvements and immediate feedback. Although these companies may no longer demand lengthy evaluation reports, they still require managers to document the “feedback chats” in a short, yet, precise paragraph, often entered into an electronic performance management system or sent to a specific email. Who remembers what feedback they’d given to one of their 8 direct reports 7 months ago?
Companies are also spending substantial amounts on increasing their HR services and reducing delivery times through cloud-based systems like SuccessFactors and Workday, which support the HR team’s e-filing efforts. While not every organisation has the budget or the need for such a system, HR teams need to identify the following for their record keeping:
- What are you documenting? Besides legal requirements, consider performance, rewards and recognition, job changes, learning and development plans and outcomes, violations and warnings.
- How are you documenting? It should be factual, non-judgmental, objective and fit for purpose. Don’t forget to date and sign it.
- Where are you storing the documents? Consider whether it needs to be in paper-based personnel file or can be stored electronically, on company premises or in a secure offsite location.
- When are you documenting? Consider not only when you are creating the actual document (e.g. timely to the actual event) but also whether you’re filing electronic documents immediately or batch file paper documents on a daily basis.
Do you want to improve your documentation standards and procedure, be compliant with the labour law and save valuable time? Call us on +971-50-5516322 and learn how an efficient process can reduce your risk of being exposed to financial and legal risks.