UAE’s unemployment insurance scheme comes into effect

Emirati and foreign employees in the public and private sectors must subscribe to the programme while free zone workers are currently exempt

The UAE’s new unemployment insurance scheme for Emirati and foreign employees in the public and private sectors comes into effect on January 1, 2023.

The social security programme, called the Involuntary Loss of Employment insurance scheme, will pay Emiratis and residents a cash sum for three months if they lose their jobs.

Employees working in the UAE's free zones are currently exempt from subscribing to the scheme.

First announced in May, the scheme aims to provide a decent life for workers in the UAE until they find another job, according to the programme’s website.

The insurance pool, which is represented by Dubai Insurance, is responsible for providing the service.

The Ministry of Human Resources and Emiratisation has signed an agreement with nine local insurance companies to operate and fund the scheme.

The deadline for registration for the unemployment insurance programme is June 30, 2023, according to the ministry.

“Unemployment insurance schemes are provided by a number of selected insurance providers in the UAE,” said Joanna Matthews-Taylor, employment partner at law firm Baker McKenzie.

“Employees can subscribe to the insurance programme in a number of ways, including through the insurance pool’s website and its smart application, the employee’s bank, ATMs, money exchange companies, business service centres, kiosk machines, du and Etisalat or directly with an insurance company.”

Compensation will be paid for a maximum of three months from the date of an employee’s job loss and will be calculated at 60 per cent of their basic salary over the most recent six months before the loss of employment for a maximum payment of Dh20,000 ($5,445) a month.

For example, if you earn a basic salary of Dh10,000 per month and you lose your job, you would receive 60 per cent of that for three months, or Dh6,000.

The insurance programme is divided into two categories.

The first covers employees who earn a basic salary of Dh16,000 or less every month. The second is for workers who earn a monthly basic salary of Dh16,000 or more.

The insurance cost for employees earning a basic salary of Dh16,000 or less has been set at Dh5 a month, or Dh60 annually.

Workers who earn a monthly basic salary of Dh16,000 or more will pay Dh10 a month, or Dh120 a year.

Employees will pay for the unemployment insurance themselves. This can be paid either monthly, quarterly, half-yearly or on an annual basis. The value of the insurance policy is also subject to VAT.

If an employee has not registered by June 30, 2023, they will be fined Dh400, according to Samir Kantaria, partner and head of employment and incentives at law firm Al Tamimi & Company.

"If the employee has registered but failed to pay their contributions for three consecutive months, they will lose the benefits under the scheme. They will be required to re-subscribe to the scheme, pay any unpaid contributions and pay a fine of Dh200," he said.

Employers are not required to register their employees in an insurance scheme, nor are they required to pay any contributions to the scheme, according to Baker McKenzie.

Employees are responsible for registering for the unemployment insurance scheme. However, employers are advised to remind their staff of their obligation to do so, said Aqsa Khan-Sadiq, senior lawyer with Baker McKenzie.

"It is almost like a savings account for employees, where they save a specific amount each month for a rainy day," she added.

UAE unemployment pay — in pictures

The unemployment compensation will depend on your monthly basic salary.

However, the value of the monthly cash sum will not exceed Dh10,000 for the first category of employees and Dh20,000 for the second category.

Insured employees must submit their unemployment insurance scheme claim within 30 days from their termination date.

They must submit their claim through three approved claim channels: the insurance pool’s e-portal, smart application and call centre within 30 days from the date of their unemployment.

Compensation will be paid within two weeks from the date of the claim and capped at a maximum of three months for each claim.

Benefits will cease from the date the employee secures alternative employment in the UAE, according to Baker McKenzie.

Employees are eligible for the jobless payment if they have worked and subscribed for at least 12 months to the insurance programme, as long as they have not been dismissed for disciplinary reasons or because they resigned.

Employees who work on a commission basis may also subscribe to the scheme.

However, insured employees are not eligible for the payment if they have left the country or have started a new job.

The insurance programme does not cover investors, such as owners of the establishments in which they work, domestic helpers, part-time employees, workers under the age of 18 and retirees who receive a pension and have joined a new job.

The insured person must submit the claim within 30 days from the date of job loss or the settlement of the labour complaint referred to the judiciary.

They should also not have an existing complaint related to absence from work, according to the insurance programme website.

The insured shall not be entitled for compensation if there has been fraud or deceit involved in his claim or if the establishment where they work for is fictitious.