• The Omani labor law provides that a trade union/labor federation/general federation have the right to freely practice their activity without interference in their affairs or exerting influence.
• No company/establishment can dismiss or otherwise punish a worker’s representative in the trade union/labor federation/general federation by reason of exercising trade union activities.
• In the event of collective negotiations being conducted between a company/establishment and the representatives of a trade union, the company is obliged to provide necessary data and information to conduct the negotiation.
• While the negotiation between a company and the representatives of a trade union are ongoing, any measures or decisions taken by the company shall be considered unlawful.
• In the event that a collective labor agreement is concluded between a company and trade union in accordance with Article 5 of Ministerial Decision 294 of 2006, it is the employer’s responsibility to display the collective labor agreement prominently at the work place.

On March 31, 2013, the Ministry of Manpower (MoM) issued a decision amending some articles of the Labor Law in order to speed up negotiations between employees and employers and avoid work stoppage due to strikes.

On October 26, 2011, Sultan Qaboos issued Royal Decree No 113/2011, amending provisions in the Labor Law to provide increased protections and rights to the private sector workforce including shorter workweeks, fully paid maternity leave, and increases in overtime pay. The business sector has expressed concern about the increased costs of implementing many of these changes. The changes are expected to primarily affect only Omani citizen workers; expatriate workers are often hesitant to assert their rights out of concern that their employment contracts might be allowed to lapse, requiring them to leave Oman.

The most important changes to the Labor Law after the 2011 “Arab Spring” include:

• If the ownership of a project partially or wholly changes hands, the new owner must continue to employ the previous Omani workforce at their previous salaries;
• Direct deposit receipt is the only proof of payment of salary;
• 30 days annual paid leave (up from 15) after six months continuous work (down from one year) and six days paid emergency leave (up from four). A worker may not waive his or her leave;
• Overtime begins to accrue after 45 hours of work in one week (down from 48) or more than nine hours in one day;
• During Ramadan, Muslim workers shall not be required to work more than 30 hours a week (down from 36) or 6 hours a day;
• Overtime day work will be paid at 25 percent above the normal salary rate; night work at 50 percent, if such work is performed during the weekly rest day or during the official holidays the employee shall, unless compensated with another day during the subsequent week, be entitled to double salary for such day, unless he is granted another day in lieu thereof within the following week.;
• Every worker must receive two paid days of rest (up from 24 hours) after five continuous days of work; (Note: Many service-based employers fail to comply with this provision, though local legal analysts report double pay or accumulation of annual leave is allowable in lieu of the second rest day.)
• Women may not be required to work between the hours of nine p.m. to six a.m. (previously seven p.m. to seven a.m.) (Note: This rule is subject to multiple exceptions as published by the Ministry of Manpower, such as health workers, transportation workers, and women working in certain petrochemical fields.)
• Paid maternity leave of 50 days up to three times per woman per employer (up from 42 days of unpaid leave);
• Unlawfully discharged workers (as determined by the courts) will receive a minimum of three months of their gross wage and any severance pay to which they were due in the original work contract;
• New penalties for failure to adhere to Omanization rates.

The minimum wage for Omani citizens working in the private sector, including salary and benefits, was increased by Royal Decree in February 2011 from RO 120 ($312) to RO 200 ($520) per month. Omani employees must also receive a monthly RO10 ($26) accommodation allowance and a RO10 transportation allowance. There is no minimum wage for non-Omanis. On January 30, 2012, the GoO issued Ministerial Decision 32/2012 requiring a yearly minimum increment of 3 percent for all employees with satisfactory performance who have been employed more than six months in order to ensure wages keep up with inflation. In August 2012, the MoM clarified that all employees, both Muslim and non-Muslim, must receive a salary advance before Eid due to enhanced family holiday obligations. On February 7, 2013, the MoM announced another rise in the national minimum wage for Omani workers, with the current rate of $520 per month rising to $845 as of July 1, 2013. In fact many companies were told to begin implementation right away for new hires, and the Oman Society of Contractors protested the move, calling for the government to reimburse unexpected increases in construction project costs. Many commentators believe this was an effort by the GoO to narrow the gap between private and public sector wages and encourage more Omanis to work in the private sector.

The 2015 edition of “Employment and Salary Trends in the Gulf”, released on March 17, 2014, by the online recruitment firm, GulfTalent, shows that Oman is leading the GCC in wage growth, with an 7.6% expected increase in average private sector wages for 2015. In its annual compensation and benefits report for Oman, Hay Group noted the rise in salaries has predominantly taken the form of an increment on basic salary which rose 5.7 per cent, on average, rather than adding to allowances such as housing, transport and education. Hay Group’s report noted 21 per cent of employees moved up a grade, and that pay rises stand well above inflation (officially reported at only 1.2 percent for 2013), indicating an increase in disposable income. According to the report, Oman's oil and gas sector had the highest pay rises in the region, an average of 7 percent. Hays’ Global Salary Guide stated Oman paid expatriate oil and gas sector workers about $12,000 more in 2012, taking salaries to $92,100, while locals in the petroleum industry were paid an average of $72,600, up by $4,600. However, the downturn in the local economy due to low oil prices may result in the stagnation of wage growth in 2016.

The remuneration of the directors of Omani joint stock companies is regulated by the Commercial Companies Law and the administrative decisions of the Capital Market Authority. The CCL has capped the annual remuneration of the chairman and directors including all allowances at RO 200,000 (USD 520,000). Further, in cases where companies do not make any profit or make a low profit that is not sufficient for allocating or distributing dividends to the shareholders, the annual remuneration is capped at RO 50,000 (USD 130,000). In respect of companies whose capital has eroded no remuneration is payable.

Participation in the Public Authority for Social Insurance (PASI) scheme is mandatory for all employers employing Omanis. Employees are covered for old age, disability, occupational and non-occupational injuries and death. The employer and employee are required to contribute 9.5 percent and 6.5 percent respectively of the basic salary to the fund every month and every employer must pay a further 1 percent as security against occupational injuries and diseases. For foreign employees who are not beneficiaries of PASI, End of Service Benefits (EOSB) are calculated per the Labor Law.

In late 2013 the MoM issued a Ministerial Decision permitting employers in the private sector for the first time to recruit Omani employees on a part time basis. The Ministerial Decision states that an employer may hire a part timer on the following conditions:

• the work hours should not exceed four hours per day;
• the wage per hour should not be less than RO 3;
• part time jobs are confined to Omani nationals;
• the part timer is also known as “job seeker” therefore those aged 16 are only permitted to work between 6am and 6pm; and
• part timers' ratio is not more than ten per cent of the Omanization ratio.

Employment on a part time basis is restricted to private institutions practicing activities such as sale of food commodities; petrol filling; hotels, restaurants and coffee shops; sale of electronic and electrical devices; stores; automobile agencies; farming; exchange agencies; child and elderly care; travel and tourism agencies; tour guides; driving; educational and medical services.

Terminating a worker for non-performance is difficult but not impossible. A major issue is that the worker must sign to acknowledge receipt of legally required warning letters. If the worker refuses to sign, two Omani male witnesses should sign a copy of the letter to state that they witnessed the worker’s refusal. Article 30 of the Labor Law states that a worker cannot be accused of a violation more than 15 days after the discovery of the refusal. The same provision also states that no disciplinary penalty shall be imposed on a worker after 30 days has elapsed from the date a violation is proven. The Courts will often rule against an employer based on a procedural breach of Article 30. Employers should also follow transparent disciplinary procedures registered in advance with the Ministry of Manpower, and ensure penalties are proportionate. The MoM has issued a template disciplinary procedure. Furthermore, Ministerial Decision 129/2005 sets out the maximum penalty allowed in respect of certain violations.

According to Article 40 of the Labor Law, an employer may dismiss the employee without prior notice and without end-of-service benefit in any of the following cases:

• if he assumes a false identity, or if he resorts to forgery to obtain the employment;
• if he commits a mistake which results in a material financial loss to the employer provided that the latter notifies the Ministry of Manpower of the incident within three days of the date of his knowledge of its occurrence;
• if he, in spite of being notified in writing, does not comply with instructions the compliance with which is necessary for the safety of employees or the workplace, provided that such instructions shall be written and hung in a conspicuous place and the contravention of which is likely to cause grievous damage to the workplace or to the employees;
• if he absents himself from his work for more than ten days without reasonable cause during one year or for more than seven consecutive days, provided that such dismissal shall be preceded by a written notice to him from the employer after his absence for five days in the former case;
• if he discloses any secrets relating to the establishment in which he works;
• if a final judgment is entered against him for an offence or felony for breach of honor or trust or for a felony committed in the workplace or during the course of his work;
• if he is found during working hours in a state of drunkenness or was under the influence of an intoxicating drug or mental stimulus;
• if he commits an assault on the employer, the responsible manager, or if he commits a grievous assault on any of his superiors in the course of the work, or if he assaults one of his colleagues in the workplace by hitting him which causes sickness or delay of the work for a period exceeding ten days; or
• if he commits a grave breach of his obligations to perform his work as agreed upon in his contract of work.

The Supreme Court has held that it is a justified, fair dismissal if an expatriate employee is replaced with an Omani national. On certain occasions, the Omani courts have held that it is justified for a company to lay off workers if the company is suffering heavy losses.

The approach of the Omani Courts is to only allow one fixed term contract per worker. Subsequent contracts, even if stated to be fixed term contracts, will in fact be treated as contracts of unlimited duration. Hence, it is advisable to leverage internships and trainee programs to the fullest extent in order to ensure extensive screening of potential employees. The Labor Law provides for, but does not require, a three month probationary period, in which either party may terminate the contract with seven days’ notice. For indefinite contracts, employment may be terminated by either party with 30 days’ notice (waived if compensation equal to the salary for the notice period is paid instead).

The government’s Omanization initiative, a non-codified quota system mandating hiring of specified percentages of Omani citizens, is a high priority for the government. Approximately 50,000 young Omanis enter the workforce each year. Most of these new entries seek government employment, and Omanis make up more than 80 percent of the public sector’s labor force while less than 20 percent of the private workforce is Omani. Organizations with more than 50 employees are expected to set aside the following “Omanized” positions for citizens: HR Manager, Security Officers, Secretarial / Administrative Clerks, Public Relations Officers, and Drivers. Omanization requirements increased after “Arab Spring” protests in 2011, and included an obligation to provide a minimum wage and more training programs for Omani employees. Omanization targets were again increased as of March 1, 2014.

As part of a package of incentives for foreign investors, Oman’s Free Zones allow for lower Omanization rates. The MoM will not issue expatriate labor clearances for companies that fail to hire qualified Omanis to meet the labor targets. If qualified Omanis are not available, the Ministry may issue labor clearances pending future availability of qualified Omanis to fill such positions. The Ministry also assists companies in training Omanis for high-demand positions if the companies agree to hire them once trained. U.S. companies are not exempt from Omanization requirements under the FTA, despite some exceptions for managers, board members, and specialty personnel. Private companies have expressed concerns about the work ethic of Omanis compared with expatriate staff, as well as absenteeism of local workers who are harder to dismiss because of the protections they enjoy under local employment laws. However the MoM is authorized to impose fines for companies that don’t achieve targets. These fines can reach up to 50 percent of the average of total non-Omani salaries making up the difference between target and actual Omanization rates, though they are rarely enforced if the company is making good faith efforts to recruit Omanis. In addition, harsh penalties, including deportation, are applicable for transferring employment visa sponsorship from one individual to another or working under tourist visa status.

In a 2011 ILO survey, 66 percent of survey respondents felt that current labor legislation is a constraint on enterprise growth. Only 13 percent of respondents believed that the local workforce has the necessary skills demanded by business, while only 9 per cent believed that Oman’s tertiary and vocational education system generally meets the needs of the business community. A 2012 Oman American Business Council survey similarly cited workforce quality as the top challenge to doing business in Oman.

In 2014, the MoM issued Ministerial Decisions tightening Omanization in certain professions including: carpentry, metalworking, brickmaking, janitorial services, construction, automotive, debt collection, cashiering, and shop-keeping. There were exceptions for establishments registered under the excellent grade and international grade categories, as well as local companies complying with labor laws.