By Al Badri & Naif Al-Qari and Co. Advocates & Legal Consultants
The new Labour Law of Oman, promulgated by Royal Decree No. 53/2023, introduced substantial and transformative changes aimed at keeping pace with the evolving dynamics of the Omani labour market. It contains significant amendments to many of its provisions and introduces entirely new regulations that had no precedent in earlier labour laws.
ANQ Law Firm is honoured to have participated in this landmark legislative development as a member of the working group tasked with drafting and preparing the new Labour Law. We are particularly proud that our proposal to include specific provisions recognising economic grounds as a legitimate basis for workforce reductions was approved by the legislative authorities. Our firm was entrusted with drafting these legal provisions and integrating them into the final version of the law. This contribution stands as one of our notable achievements as a specialised and leading law firm in the field of labour law in Oman.
In this brief statement, we highlight some of the most important features of this reform:
I. Flexibility in Amendments to Keep Pace with Rapid Labour Market Changes
The new Labour Law reflects the legislator’s awareness that labour legislation must remain dynamic and adaptable to keep pace with the fast-changing nature of the labour market. To that end, the law significantly expands delegated legislative authority by empowering the Minister of Labour to issue ministerial regulations and decisions addressing specific matters that may require rapid and continuous updates.
Unlike amendments to the primary law – which must go through lengthy legislative processes – changes to ministerial regulations can be made far more quickly, often within a few months, enabling the legal framework to adapt efficiently to emerging circumstances.
The law identifies several areas for which such delegated regulations may be issued, including:
• Granting the Minister of Labour the authority to issue special regulations for specific categories of workers or sectors, exempting them from some or all provisions of the Labour Law. For example, a separate regulatory
framework already exists for domestic workers, whose employment relationship is often of a unique, personal nature, typically involving residence within the employer’s household.
Anticipated regulations in 2025 concerning workers in desert areas, recognising the sector’s unique conditions, such as work-related risks and the organisation of working hours and rest days in line with remote, challenging environments. These regulations are expected to diverge from the general Labour Law provisions in areas such as maximum working hours, rest periods, and leave entitlements.
II. New Provisions Absent from the Previous Law
- The new Labour Law also delegates to the Minister of Labour the authority to regulate part-time work and remote work. Recently, Ministerial Decision No. 13/2025, issued on 13 January 2025, introduced the new framework for part-time employment. Key provisions include:
➢ A clear definition of part-time work, restricted exclusively to Omani nationals.
➢ A minimum daily working time of 4 hours and a maximum of 25 hours per week.
➢ A minimum hourly wage of OMR 3.
➢ The right of either party to terminate the contract with a notice period of no less than three days.
We now await the issuance of the regulation governing remote work, which is expected to address contractual terms, monitoring mechanisms, and workers’ rights in virtual work environments. - The law also empowers the Minister to issue ministerial decisions identifying:
➢ Occupations and jobs subject to Omanisation (mandatory employment of Omani nationals).
➢ The minimum wage and minimum annual increment for private sector employees.
In this regard, Ministerial Decision No. 317/2025, issued on 18 June 2025, set out the minimum annual increment and the rules for its payment. Under this decision, Omani employees in the private sector are entitled to an
annual increment, payable in January, ranging between 2% and 5% of their salary, depending on performance appraisal results. The regulation also provides for the suspension or reduction of this increment under
specific conditions and criteria.
• Furthermore, Article 51 of the new Labour Law grants the Minister temporary powers to deviate from statutory provisions and regulate employment relations during exceptional circumstances, such as pandemics or other national crises. This includes the authority to reduce certain minimum rights prescribed under the law in a manner proportionate to the prevailing situation.
1. Protection Against Discrimination
The new law includes unprecedented protections against discrimination. Article 12(1) presumes dismissal to be arbitrary if proven to be based on gender, origin, colour, language, religion, social status, disability, or pregnancy. Additionally, Article 32 prohibits the advertising or promotion of employment opportunities in a way that categorises workers based on creed, colour, or any method that undermines human dignity.
2. Limiting Indefinite Reliance on Fixed-Term Contracts
Under established Omani legal principles, open-ended contracts offer workers greater stability and protection, as they cannot be terminated without a valid legal reason. The new Labour Law narrows the scope of fixed-term contracts — which are easier to terminate upon expiry — and expands the application of open-ended contracts.
The law imposes a maximum cumulative period of five years for employing a worker on a fixed-term contract with the same employer. Beyond this period, the contract automatically converts into an open-ended contract by force of law. Article 35 further specifies additional circumstances under which a fixed-term contract is deemed to have converted into an open-ended one.
3. Paid Time Off to Seek Alternative Employment During Notice Period
Article 39 grants employees who are under notice of termination the right to no less than ten paid hours per week to search for new employment opportunities. This provision aims to facilitate smoother career transitions and mitigate the adverse effects of job loss.
4. Expanded Grounds for Termination of Employment
Under the previous Labour Law, termination of employment was highly restrictive, often favouring the employee to such an extent that it adversely impacted the employer’s operational flexibility. In practice, termination was largely limited to cases of serious misconduct by the employee, making it difficult for employers to end employment in situations unrelated to the employee’s direct fault — for instance, when workforce reductions or operational changes were necessary.
The new Labour Law adopts a more balanced and comprehensive approach, recognising the legitimate needs of employers while maintaining safeguards for employees. Article 43, for example, expressly permits termination in cases of proven poor performance or low productivity — subject to procedural safeguards set out in the same article. It also allows termination where the employer needs to downsize the workforce due to partial closure, reduction in operations, or changes to the production system.
Importantly, Articles 44, 45, and 46 introduce economic grounds as a legitimate basis for workforce reduction. As defined in Article 1(22) of the law, “economic grounds” refer to a financial loss suffered by the employer for at least two consecutive years. Notably, the mere absence of profit, or the closure of an activity or branch due to lack of viability, does not in itself constitute a “financial loss” under the law.
Before an employer can proceed with dismissals on economic grounds, the law prescribes a set of mandatory procedures and safeguards. Chief among these is the requirement to submit a formal request to the Economic Committee — comprising representatives from the Ministry of Labour, Ministry of Commerce, the Oman Chamber of Commerce and Industry, and the General Federation of Oman Workers. The Committee is tasked with reviewing the request, verifying the existence of economic grounds, and exploring alternatives to layoffs. Such alternatives may include authorising temporary wage reductions for a defined period to help the employer overcome the financial crisis.
If, after careful review, the Committee concludes that layoffs are unavoidable, the law imposes additional protections for affected employees, including:
• A minimum notice period of three months (longer than the standard one-month notice in other termination cases) to give employees more time to secure alternative employment.
• Fair and objective selection criteria for identifying employees to be made redundant — for example, prioritising those with the lowest performance ratings in recent years rather than using arbitrary methods.
• Priority re-employment rights, allowing dismissed employees to return to their positions if the company recovers and resumes normal operations.
These provisions reflect the legislator’s recognition that redundancies on economic grounds are fundamentally different from dismissals for misconduct. Since the loss of employment in such cases is not due to any fault of the employee, the law ensures that fairness and social justice are preserved through meaningful guarantees and protections.
5. Workers’ Rights in the Transfer of Projects Between Companies
It is well known that when the management of a particular project is transferred from one company to another, numerous challenges arise regarding the status of the workers assigned to that project. This situation called for legislative intervention to ensure adequate protection for workers, safeguarding their continued employment and preserving their labour rights during the transfer from one employer to another.
The previous Labour Law addressed this matter in general terms, requiring that employees working on a transferred project move to the new employer with the same wages and benefits they enjoyed with the former employer. However, this approach created several practical challenges for project owners and companies taking over such projects. The obligation to maintain the same wage and benefits structure made it difficult to adjust contract prices — particularly in times of financial crisis — thereby affecting the sustainability of projects.
Additionally, it often led to internal issues for the new employer, as significant disparities would arise between the wages and benefits of the company’s existing workforce and those of the employees transferred with the project, raising questions about the application of the principle of equality among employees within the same establishment.
To address these challenges, Article 50 of the new Labour Law introduced a substantial amendment by linking the determination of transferred employees’ wages and benefits to the transfer agreement (the contractual arrangement between the project owner and the new project operator). Under this provision, the new employer is no longer bound by the benefits the employees enjoyed with the previous employer, but rather by those set out in the transfer agreement — which would generally reflect prevailing market conditions at the time of the transfer.
6. Procedural Safeguards Before Imposing Disciplinary Action
The previous Labour Law did not provide explicit procedural safeguards when an employer sought to impose a disciplinary penalty on an employee. As a result, employers were not legally obliged to confront the employee with the alleged misconduct or to give them the opportunity to respond, which often led to unfair disciplinary actions.
The new Labour Law rectifies this by mandating a written investigation before any disciplinary action is taken. The employee must be granted a fair opportunity to refute the allegations and present their defence. This is considered a fundamental safeguard, without which no modern labour law should be complete, ensuring fairness, transparency, and the protection of workers’ rights in disciplinary proceedings.
7. Non-Compete Clause
Despite the fundamental importance of non-compete clauses in the context of employment relations, the previous Labour Law contained no provision regulating this matter, leaving it entirely to judicial interpretation — which often varied from one court or judge to another.
The new Labour Law dedicates a specific article (Article 69) to regulate non-compete clauses. Recognising that such clauses are an exception to the general rule of freedom of employment, the legislator adopted a restrictive approach to prevent overreach. The law sets out several conditions for enforceability:
• The clause must be expressly written into the employment contract; it cannot be implied or applied automatically without agreement.
• Any restriction must be limited in scope, both in time and geography, not exceeding two years from the termination date and restricted to the geographical area where the employer conducts business.
• The clause applies only to employees whose job responsibilities give them access to trade secrets or sensitive business information.
• The employer may not invoke the non-compete clause if it is proven that the employee’s termination was unfair or arbitrary.
This explicit codification introduces much-needed clarity, ensuring that non-compete clauses serve legitimate business interests without unduly restricting workers’ rights.
8. Expansion of Employee Leave Entitlements
One of the most notable features of the new Labour Law is its expansion of existing leave entitlements and the introduction of new types of leave. Examples include:
• Sick Leave: Increased from a maximum of 70 days per year (under the previous law) to 182 days without jeopardising the employee’s position.
• Maternity Leave: Extended from 50 days to 98 days, with no limit on the number of pregnancies during the employee’s tenure with the same employer — unlike the previous law, which capped maternity leave at three occurrences.
• Bereavement Leave: Increased from 3 days to 10 days in the event of the death of a spouse or child.
• Paternity Leave: Newly introduced, granting fathers 7 days of leave, provided the child is born alive and the leave is taken within the first 98 days after birth.
• Breastfeeding Breaks: A daily one-hour break for working mothers for up to one year following maternity leave, with the employee having the right to determine the timing of this hour.
A key development in the leave framework is the integration of the new Labour Law with the Social Protection Law, under which the Social Protection Fund covers the cost of most leave entitlements, thereby reducing the financial burden on employers. In return, employers contribute a small insurance premium — 1% of the employee’s wage — to the fund.
Additionally, by 2028, the insurance branch covering end-of-service gratuity will come into effect. Under this scheme, entitlement to gratuity will be managed and paid by the Social Protection Fund in return for an employer contribution of 9% of the employee’s basic salary to the fund.
9. Dispute Resolution Mechanisms
A. Individual Labour Disputes
Under the Omani Labour Law, any labour complaint must first be filed with the Labour Dispute Settlement Department at the Ministry of Labour. This stage aims to facilitate dialogue between the parties and encourage an amicable settlement before any court proceedings can take place. The courts are not permitted to hear a labour dispute unless it has gone through this initial stage.
Previously, a major challenge arose in enforcing settlements reached before the Ministry. If one party failed to comply with the terms of the settlement, the other party would have to restart the entire process — returning to the Ministry, then proceeding through the judicial stages until a final judgment was obtained.
The new Labour Law provides a decisive solution to this problem by granting settlements concluded before the Ministry of Labour the status of an enforceable instrument, equivalent to a court judgment. Consequently, if either party breaches the terms, there is no need to re-litigate the matter; instead, enforcement proceedings can be initiated directly, following the same procedures used for final judgments.
Notably, the law now stipulates that a judge from the competent court be seconded to the Ministry of Labour during designated periods to formally ratify settlements, thereby streamlining the process and ensuring enforceability.
B. Collective Labour Disputes
Under the previous legal framework, collective labour disputes followed the same procedures as individual disputes. The new Labour Law introduces a distinct and specialised pathway for such disputes.
The process begins before the Collective Negotiations Committee at the Ministry of Labour. If no agreement is reached, the dispute is referred to a specially formed Arbitration Committee established for this purpose. Courts do not have jurisdiction over this category of disputes, marking a significant procedural shift and an advancement in the resolution of collective labour conflicts.
Conclusion
The new Labour Law represents a substantial step forward, making it far more aligned with the realities and demands of today’s labour market compared to its predecessors. While the legislation contains a wide range of reforms, this article has focused on selected changes we believe to be among the most impactful and progressive. These reforms not only modernise Oman’s labour legislation but also enhance its capacity to balance the rights and interests of both workers and employers.
