New scheme will safeguard workers and help firms

Changes to labour law will make the UAE a better place to work and boost the economy

Blue-collar workers will be better protected by the new laws. Reem Mohammed / The National

Balancing the often competing needs of employers and employees is a high-wire act for any government hoping to create the right conditions to stimulate growth. Now, with the introduction of a subtle change to employment law, the UAE's labour ministry has shown great adaptability by liberating companies from restrictive costs, while enhancing the welfare of workers.

Currently, companies must deposit Dh3,000 as a bank guarantee for every worker they take on, to ensure that employees will receive at least some compensation if their employer goes out of business. This is an essential social safety net, especially for blue-collar workers who are the most vulnerable when companies fail.

But a conspicuous question mark has formed over the effectiveness of this arrangement, in the shape of a vast mountain of largely untouched deposits – some Dh14 billion at the last count. That’s a lot of money, which, the government has concluded, could be put to far better use. Also, Dh3,000 per employee is also a lot for employers to find. But all that changes on October 15th, when the cost of taking on a new worker will be slashed.

Instead of bank guarantees, employers will now pay just Dh60 per worker into a national insurance scheme, which will cover each employee for unpaid end-of-service benefits, vacation allowances, wages and an air ticket home.

Anything that lifts a financial burden from employers is a welcome boost for the economy. The return of the Dh14 billion to the companies who contributed to the old system also represents a windfall to be reinvested in future growth. But it is the estimated half a million blue-collar workers in the UAE who will benefit most.

Instead of the Dh3,000 maximum payment under the old scheme, they now stand to receive up to Dh20,000 if things go wrong. This is a far more realistic sum that improves their long-term financial security and, in the process, better acknowledges their often unsung contribution to the nation’s economic success.

On October 15th the UAE will become a better place to do business, and a better place to work – two vital components of any successful economic formula.