The introduction of unemployment insurance in the UAE | PRO Partner Group
The introduction of mandatory unemployment insurance in the UAE
For employees, losing a source of income can be terrifying, especially for expat workers in a foreign country. Without a way to make money, it’s easy to fall behind on bills or take on unnecessary debt. For this reason, many industrialised countries have created policies and programmes to ensure workers are protected if they become unemployed through no fault of their own. Beginning this year, the UAE will join over 70 other countries that offer some form of unemployment insurance protection. Here’s everything you need to know to prepare for the upcoming implementation of the UAE’s new unemployment insurance scheme.
What is the Unemployment Insurance Scheme?
In September of 2022, the UAE launched its first unemployment insurance scheme (under Federal Decree No. 13 of 2022) as a part of the Worker Protection Program (WPP). The scheme will ensure that workers are provided with a portion of their income for a limited period should they find themselves unemployed as a result of workforce reductions or economic downturns.
The new law mandates that by June 30, 2023, all employees in the private sector, state governments, and federal government agencies must obtain unemployment coverage through one of the Central Bank’s approved and licenced insurance providers. Certain workers are excluded from this requirement including investors (owners of the businesses where they work), domestic workers, workers under the age of 18, and individuals receiving a retirement pension who have re-joined the workforce. These rules have since been extended to include free zones and semi-government employees.
Monthly premiums are extremely affordable for most workers and based on the workers’ basic salary. Category 1 workers include anyone who earns AED 16,000 per month. Workers who make more than AED 16,000 per month fall into Category 2. The monthly premium for Category 1 employees is AED 5 per month. Category 2 employees are required to pay AED 10 per month. Employees who are paid on a commission basis may choose either category based on their needs.
What responsibilities do employees and employers have?
Securing unemployment insurance coverage is the responsibility of each employee. The programme provides several easy ways to enrol including through a mobile application, ATMs, kiosk machines, an approved insurance company’s website, business centres, or through money exchange or telecommunication providers. Employees simply need to provide their Emirates ID number and their mobile number to enrol.
While employees are responsible for enrolment, the law requires employers to encourage their employees to enrol, provide information on the enrolment process, and notify employees of key enrolment deadlines or changes. Companies and organisations should work with their human resources department to determine the best way to communicate information regarding the unemployment insurance scheme to employees.
Benefits and Claims
Workers who become unemployed may file for unemployment insurance benefits as long as they meet all of the following criteria:
● All premium payments are currently up to date.
● The employee has been insured for a minimum of 12 continuous months prior to filing a claim for benefits.
● The employee has not been dismissed from their job for disciplinary reasons.
Claims must be submitted within 30 days of the last day of employment. Compensation is paid monthly at a rate of 60% of the insured employees’ basic salary up to a maximum cap established for each category level. Category 1 employees are limited to a maximum of AED 10,000 AED per month while Category 2 employees can receive up to AED 20,000 AED per month.
Unemployment insurance benefits end when the employee finds new work or once three months has passed, whichever is sooner.
Penalties for non-compliance
Employees who fail to subscribe to the unemployment insurance programme or don’t make the necessary premium payments will be subject to disentitlement from the scheme and fines. Fines up to AED 400 must be paid to the Ministry of Human Resources and Emiratisation (MOHRE). If fines or premiums are not paid, MOHRE may pursue collection through the Wage Protection System (WPS) by deducting the amount from the worker's end of service gratuity.
For expat workers, payment into the unemployment insurance programme is extremely important since new work permits will not be issued to workers who have outstanding fines.
Navigating the new unemployment insurance scheme
If you currently work in the UAE or are planning to work there in the future, you need to carefully understand the rules that apply to you when seeking employment in the UAE. The good news is that your employer should provide you with all the information you need to sign up for the latest unemployment insurance program. However, when establishing yourself in an unfamiliar country, it’s always best to get support and guidance from an expert who can help ensure you are following all employment rules and regulations.
How can PRO Partner Group help?
At PRO Partner Group we have built enduring relationships with key government bodies, and we have direct access to government departments, regulatory authorities and freezone authorities with our on-the-ground team of experts in each department.
We can advise you on the implications of the new unemployment insurance scheme as an employer or employee. If you need assistance with this or any other related onshore or offshore company setup, restructuring, local partner or PRO support matter in Abu Dhabi, Dubai, the wider UAE, Oman, Qatar or KSA, then please do get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, email us at email@example.com or complete the contact form below and we will be delighted to assist you.