As of January 1st 2023, all private sector employees will have to take mandatory unemployment insurance. The compulsory new insurance scheme will protect all private sector employees, in the event of job termination for reasons beyond their control, through a cash compensation. UAE employees , both Emiratis or expatriates – will face a financial penalty for not registering for the mandatory unemployment insurance scheme. Read on to know all the details.
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Mandatory Unemployment Insurance In The UAE
The Ministry of Human Resources and Emiratisation (MoHRE) signed an agreement with a group of nine local insurance companies, in line with the Federal Decree Law No. 13 of 2022 and the relevant Cabinet Resolutions.
Under the new insurance scheme employees in the private sector and the UAE’s federal government will be provided with a cash compensation for a limited period not exceeding three months, in the event of job termination for reasons beyond their control.
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Dr. Abdulrahman Al Awar, Minister of Human Resources and Emiratisation said, “The new unemployment insurance law is an essential part of the legislative and legal structure that the government is keen to develop to meet the requirements of the national economy. This supports the UAE’s endeavours to be the next capital of the future, and a global incubator for talent and companies and investments, which can be achieved through economic and social development and the empowerment of human capital.”
“We are keen to accelerate the implementation of the unemployment insurance law, through this agreement, which outlines the practical details of implementing its provisions on the ground, including employees in the federal government and private sectors, leading to a highly competitive and attractive labour market, while enhancing the stability of the workforce to be able to contribute to building the best and most active economy in the world.”
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Purpose Of Compulsory Unemployment Insurance
The aim of compulsory unemployment insurance in manyfold.
- Provide a safety net to employees
- Continue employee livelihood by relying on mechanisms that do not incur additional costs for employers ; and is paid by the employee themselves
- Provide a balance in the job market
- Continued money coming in, as the person looks for another job (for upto 3 months)
- Helps achieve the UAE’s strategic goal and support the continuity and growth of economic activities
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Types Of Unemployment Insurance, Cost & Compensation
There are two categories under the mandatory insurance scheme:
Category 1: Those with a basic salary of AED 16,000 and less
Employees with a basic salary of AED 16000 or less will have to pay AED 5 per month or AED 60 annually. The payment can be made on a monthly, quarterly, half-yearly, or on an annual basis. The value of the insurance policy is subject to value-added tax (VAT).
Compensation: The value of the monthly compensation will not exceed AED 10,000. The insurance coverage compensation is calculated on a monthly basis at the rate of 60% of the basic salary. The time duration is maximum of three months for each claim, from the date of unemployment.
Compensation will be paid within two weeks from the date of the claim and capped at a maximum of three months per claim. Compensation for an employee is eligible if they have worked and subscribed for at least 12 months to the insurance scheme. Those who have resigned or dismissed for a disciplinary reason cannot claim compensation.
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Category 2: Those Exceeding AED 16,000 In Salary
Employees exceeding a basic salary of AED 16000 will have to pay AED 10 per month or AED 1200 annually. The payment can be made on a monthly, quarterly, half-yearly, or on an annual basis. The value of the insurance policy is subject to value-added tax (VAT).
Compensation: The value of the monthly compensation will not exceed AED 20,000. The insurance coverage compensation is calculated on a monthly basis at the rate of 60% of the basic salary. The time duration is maximum of three months for each claim, from the date of unemployment.
Compensation will be paid within two weeks from the date of the claim and capped at a maximum of three months per claim. Compensation for an employee is eligible if they have worked and subscribed for at least 12 months to the insurance scheme. Those who have resigned or dismissed for a disciplinary reason cannot claim compensation.
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Exclusions Of Mandatory Unemployment Insurance
- Owners of establishments in which he or she works
- Domestic helpers
- Employees with a temporary employment contract
- Juveniles under 18 years of age
- Retirees who receive a retirement pension and have joined a new job
How To Apply For Mandatory Unemployment Insurance?
Employees must subscribe to the insurance scheme via any of the following options:
- Insurance Pool’s website
- Smart application
- Bank ATMs
- Kiosk machines
- Business service centres
- Money exchange companies – du and Etisalat
- SMS
