New labour insurance scheme will delight companies and protect workers

Amid boom and downturn, reforms like this put welfare at the heart of the UAE's rapid development
Abu Dhabi, UNITED ARAB EMIRATES, June 22, 2014:  
Laborers rush toward their bus at the end of their shift, near new construction projects on Reem Island in Abu Dhabi as seen on Sunday, June 22, 2014.
(Silvia Razgova / The National)

Reporter: standalone 
Section: NA, BIZ
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In one decisive move on Wednesday night, the UAE Cabinet sent two powerful messages, marking a sea-change in what is expected of both workers and employers in the country’s private sector.

Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, announced the approval of new legislation that replaced the requirement for employers to provide a Dh3,000 bank guarantee for each worker they hire with a labour insurance system that puts welfare at its heart.

Firstly, the decision means Dh14 billion will be released back to those employers, providing what Sheikh Mohammed described as stimulus for the economy. It is expected that this freed up capital will now be used by businesses to invest in future growth. The removal of the bank guarantee requirement also lowers the cost of doing business, making the UAE more competitive. The decision highlights the importance of efficiency and reflects the Government’s belief that business owners should no longer be burdened with unnecessary and arguably outdated processes when a better option can be made available.

In this case it is a simple yet effective system that also provides peace of mind to roughly 466,000 skilled and unskilled labourers – most affected by this move – who are far from home and dream of making their families’ and their own lives more prosperous in the future.

The new insurance system provides up to Dh20,000 of cover for these workers’ end of service benefits, vacation allowances, overtime allowances, unpaid wages, return air tickets and work injuries. It means that whatever happens during the course of their employment in the Emirates – even if their employer suffers a difficult period – their own needs will be met and backed up by the full weight of the law. This last thing is the key point; how to bring that weight to bear, in reality, and on the ground.

In the past, that has not always been the case, even with the Government not shying away from tackling a number of issues around non or late payment of wages, outstanding medical expenses for those injured on the job and workers stranded in the country unable to go home after their employer absented themselves all responsibilities towards them. However, it has not always been easy to continuously monitor for abuses in a fast-growing economy and nation.

The new insurance system is an elegant solution to the difficulty of enforcing such legislation. It will not be unduly expensive for employers to adopt, with each policy costing Dh60 per worker, per year. Compared to a Dh3,000 bank guarantee, that’s not much at all to pay to ensure that someone’s dreams of a better life don’t take a turn for the worse.

The Government has been reforming the labour market for many years now, including the Wages Protection Scheme, which oversees and regulates the payment of salaries to all employees. Amid boom and downturn, such changes ensure that both workers' and employers' rights are taken into account within the UAE's rapid development trajectory, underpinned by the vision to establish the UAE among the world's best countries.

Sheikh Mohammed himself said on Wednesday night that “a strong economy drives us as a nation to be among the first and best”. He highlighted that remaining ever agile and flexible towards the needs of all private sector stakeholders, who will drive future growth in the UAE, is yet another sign of how this goal is being achieved.