In its strategy to provide a safety net to its citizens and expatriate residents, the UAE Government recently issued Federal Decree Law No. 13 of 2022 (the “Law”) concerning the Unemployment Insurance Scheme (the “Scheme”).

Eligibility

The objective of the Scheme is to provide all employees in the private sector and public sector (save for certain categories) with income for a limited period of time during unemployment. The Scheme will not apply to (i) investors (business owners), (ii) domestic workers, (iii) employees on a temporary basis, (iv) juveniles under the age of 18, and (v) retirees benefiting of a retirement pension who have joined a new employment.

As part of the Scheme, insured employees will be eligible to receive compensation upon becoming unemployed, subject to having been insured for 12 consecutive months under the Scheme and provided that the employee has not been dismissed for disciplinary reasons.

Compensation

The amount of compensation payable under the Scheme will be 60% of the insured employee’s contribution salary, up to a maximum of AED 20,000 per month, for a maximum period of three months from the date of unemployment. The insured employee may mutually negotiate additional benefits with the insurance providers.

Compensation shall be suspended if the employee is once-again employed during the three-month period. Fraudulent claims for compensation may attract sanctions for both the insured employee and former employer.

Insurance Providers

In the context of the Scheme, insurance coverage will be provided by insurance companies licensed by the Central Bank of the UAE and that fulfil the conditions for providing unemployment insurance, as issued by the UAE Government from time to time.

Impact on Employment Rights

Unemployment compensation under the Law will not prejudice any other entitlements which the insured employee may be entitled to pursuant to other legislation in force in the UAE.

Ministry of Human Resources and Emiratization Launching the Framework of the Scheme

The Ministry of Human Resources and Emiratisation announced that it has signed an agreement with a group of nine local insurance companies (insurance pool), represented by Dubai Insurance Company, to launch the framework of the Scheme. Dr. Abdulrahman Al Awar, the Minister of Human Resources and Emiratisation, said, after the signature of the agreement by the Ministry, that federal government and private sector employees must subscribe to the Scheme from January 1, 2023.

The insurance program is divided into two categories – the first covers employees who earn a basic salary of AED 16,000 or less per month, and the second is for workers earning a monthly basic salary of AED 16,000 or more. The insurance cost for employees in the first category is set at AED 5 per month, or AED 60 annually, while workers earning the higher basic salary will pay AED 10 per month, or AED 120 a year. The insurance premium will be payable by employees either monthly, quarterly, half-yearly, or on an annual basis.

The value of the monthly compensation will not exceed AED 10,000 for the first category of employees and AED 20,000 for the second category and will be calculated at a rate of 60% of the basic salary. 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 center, 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 can subscribe to the insurance program in a number of ways, including the insurance pool’s website, smart application, bank ATMs, kiosk machines, business service centers, money exchange companies, as well as du and Etisalat or by SMS, the Ministry said.

Mandatory Effect of the Law

Employees should mandatorily comply with the provisions of the Law and arrange for the subscription to the insurance program of the Scheme. The role of the employer is merely to guide and motivate the employees to participate in the program.

The Ministry of Human Resources and Emiratisation announced that employees will be subject to a fine of AED 400 if they fail to subscribe to the insurance program under the Scheme, and to a fine of AED 200 if they fail to pay the insurance premium for a period of three months.

Conclusion

In a period globally marked by economic unpredictability, the Scheme represents a step forward in ensuring continued decent living for the unemployed and achieve a competitive knowledge economy by attracting and retaining best international talent.

We are waiting for the Cabinet resolution which will set out additional details as to the implementation of the Scheme and any other requirements. We will continue to monitor the position and revert on any developments as they occur.

If you have any further questions relating to this article, please feel free to contact our UAE partner Zainab Aziz.

This article, together with any commentary, does not constitute legal advice. It is provided solely for information purposes on a complimentary basis, without consideration of any specific objectives, circumstances, or facts. It reflects then current views of the writer which may modify in time and based on differing objectives, circumstances, or facts. Access to this article does not form any attorney- client relationship.