UAE employees must subscribe to new unemployment insurance scheme from January 1

Insurance cost has been set at Dh120 a year for employees earning a basic salary of more than Dh16,000 a month

Federal government and private sector employees must subscribe to the UAE's new social security support programme from January 1, 2023, the Ministry of Human Resources and Emiratisation said on Wednesday, after signing an agreement with nine local insurance companies that sets up the framework for the Unemployment Insurance Scheme.

The insurance programme is divided into two categories — the first covers employees who earn a basic salary of Dh16,000 or less per month, and the second is for workers earning a monthly basic salary of Dh16,000 or more, state news agency Wam reported.

The insurance cost for employees in the first category is set at Dh5 per month, or Dh60 annually, while workers earning the higher basic salary will pay Dh10 per month, or Dh120 a year.

The unemployment insurance payments will be made by employees either monthly, quarterly, half-yearly, or on an annual basis and the value of the insurance policy is subject to value added tax (VAT), Wam 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,” said Dr Abdulrahman Al Awar, Minister of Human Resources and Emiratisation.

“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.”

In May, Dr Al Awar announced the new federal law covering the programme, which is mandatory and will pay Emiratis and residents in the private and public sectors a cash sum for a maximum of three months if they lose their jobs.

The aim of the new system is to provide a social security programme that ensures the sustainability of a decent life for Emiratis and resident employees during their unemployment period and will reduce business risks, the ministry said at the time.

“It also creates a safety net that supports employees in their career path and ensures their livelihood by relying on mechanisms that do not incur additional costs for employers and is paid by the employee,” Wam said.

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, and will be calculated at a rate of 60 per cent of the basic salary, the ministry said.

Insured employees who lose their job 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 unemployment.

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

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.

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

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, will not be covered by the insurance programme.

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UAE unemployment pay — in pictures

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  The UAE has introduced a new programme that means people who lose their job can receive a basic cash payment each month. All photos: Getty Images

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  If an employee loses their job they will receive a monthly payment of 60 per cent of their salary, up to Dh20,000.

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  Domestic workers, anyone working on temporary contracts, under 18s and retirees are exempt from the new policy.

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  The monthly payment while unemployed is to help people pay their basic living costs.

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  If the terminated employee does not find another job after a certain amount of time, the financial support will stop.

The unemployment insurance scheme framework agreement was signed in the presence of Dr Al Awar and Butti Obaid Al Mulla, chairman of Dubai Insurance Company. It was signed by Khalil Al Khoori, undersecretary for Human Resources Affairs at the Ministry of Human Resources and Emiratisation and Abdul Latif Abu Qura, chief executive of Dubai Insurance Company.

“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,” Dr Al Awar said.

In recent years, the UAE — the Arab world’s second-largest economy — has undertaken several economic, legal and social reforms to strengthen its business environment, increase foreign direct investment, attract skilled workers and provide incentives to companies to set up or expand their operations.

The government’s overhaul of a number of visa programmes has also boosted opportunities for foreign workers to live and work in the UAE, including the 10-year golden residence programme to simplify eligibility criteria and expand the categories of beneficiaries.

The green visa was also introduced to provide five-year residency to skilled employees without the need of a sponsor or employer.

Employees can subscribe to the insurance programme in a number of ways, including the insurance pool’s website, smart application, bank ATMs, kiosk machines, business service centres, money exchange companies, as well as du and Etisalat or by SMS, the ministry said.