Impact to contractors of Qatar minimum wage and labour mobility laws reform

The new provisions will have a potentially significant impact on contractors tasked with building the infrastructure to enable Qatar to achieve its National Vision, of being "an advanced society capable of sustaining its development and providing a high standard of living for its people".

About the new law

Law No. 17 of 2020 on the Non-discriminatory Minimum Wage and Removing the No-Objection Certificate was published in Qatar's Official Gazette on 9 September and will take effect six months after publication, in March 2021.

The publication of the law followed an announcement about the reforms issued by the Ministry of Administrative Development, Labour and Social Affairs on 30 August. The law was initially expected to take effect in October 2020, but this was amended by way of Ministerial Decision No. 25 of 2020, issued on 20 September.

The new law removes the requirement for non-Qatari citizens to obtain a 'No-Objection Certificate' (NOC) from their employer to be able to transfer to a new employer. The NOC had been a component of Qatar's sponsorship framework applicable to foreign workers.

The new law also introduces a non-discriminatory minimum wage for all private sector workers, including domestic workers. The minimum wage is set at QAR 1,000 per month ($275) as a basic wage, QAR 500 per month ($137) allocated for accommodation expenses and QAR 300 per month ($82) for food, unless the employer already provides adequate food or accommodation for the employee or domestic worker. 

Impact on contractors

Construction companies operating as contractors in Qatar are among the businesses that are likely to be affected by the changes, including in the following ways:

• All employment contracts will need updated, where workers earn less than the minimum wage;
• The labour market will experience greater competition since employees can change employers, and employers can attract the best talent in the local market;
• Productivity rates on site could improve, associated with notions of independence, competition and increased incentives to perform;

• Potential increased cost to contractors of undertaking the work. 

Contractors should investigate whether the increased costs incurred as a result of the new law are recoverable under the 'change in law' provisions in their contract.

Change in law clauses

The contract should be reviewed to identify whether an 'Adjustments for Changes in Laws' clause was included and what it says. The standard FIDIC Red Book 2017 provision states that the contract price shall be adjusted to take into account any increase or decrease in cost resulting from a change in the laws of the country including the introduction of new laws.

The change must have been published after the 'base date' of the contract. The clause goes on to say that if the contractor suffers delay and/or incurs an increase in cost as a result of any change in laws, the contractor shall be entitled to an extension of time (EOT) and/or payment, subject to the claims regime being followed – i.e. notices being given.

Importantly, if there is a decrease in cost as a result of a change in law, the employer is entitled to a reduction in the contract price, again, subject to the claims process being followed. 

Considerations after quantifying the financial impact

Having conducted a contractual analysis and concluded there is entitlement to recover the additional costs, and/or potentially a decrease in price if there are financial cost savings, contractors will then need to organise the collation of records to enable them to sufficiently demonstrate the amount of the increase or decrease.

With the new law set to take effect next year, contractors should take immediate steps to assess their contractual entitlement, and if it exists, to ensure its finance team is alerted to the need to record the increase in costs clearly. The record of the costs should be produced in a report capable of being disclosed to the employer on an interim basis, to satisfy the interim claim update requirements in most standard claims clauses.

What about EOTs?

Other contractual or legal complexities may also arise, for example if the contractor is in delay as compared to the contractual completion date. In those circumstances, the contractor will need to establish its entitlement to recover any amount, including any increased minimum wage costs, in relation to periods of delay. The employer is likely to have strong grounds to argue there is no entitlement if the contractor's delays are proven to be its own liability. This is particularly so if the project was due to complete before the introduction of the new law but actually completed after its introduction.

It is possible, in such a scenario, that contractors will link new claims concerning change in law to other claims they may be advancing in relation to project delays.

The basis of the contractual entitlement and the contractor's position and reasoning on these matters, together with supporting project records, will need to be clearly set out in any claim submission. 

Where the project is in delay, the contractor may wish to internally analyse its position on the amount of money it is entitled to if the claim is "free standing" – i.e. independent of the delay claim – and if it is limited to the extension of time granted, to understand its exposure.