UAE Introduces Unemployment Insurance

UAE Minister of Human Resources and Emiratisation, His Excellency Dr. Abdulrahman Abdulmannan Al Awar has announced implementation of a new unemployment insurance scheme effective from early 2023 (“Scheme”), to provide a safety net for those who face termination from their work. The scheme aims to offer financial support to those affected by job loss and establish a stable and secure work environment for both Emiratis and non-Emiratis in the UAE. The Scheme is set to co-align with the new UAE Labour Law (Federal Decree-Law No. 33 of 2021), which came into effect on 2 February 2022 (“New Labour Law”).

As per the New Labour Law, where an employee faces termination under unlawful circumstances, the Labour Court may require the employer to offer compensation up to 3 months of remuneration. But this only applies to situations wherein the termination of employment of the employee by the employer occurred due to the reason of (a) the employee filing a serious complaint against the employer, or (b) a case filed by the employee against the employer having been successfully upheld. The concept of arbitrary dismissal which was held in the previous law has thus been removed.

With benefits to employees of both the public and private sector, and to people of all nationalities, H.E. Dr Al Awar asserts that the Scheme would increase and expand the boundaries for talented employees, boost the economic and industrial market of UAE for both local and international workers, improve the trust within a workplace, and overall offer a protective umbrella to those who face an unexpected termination of a contract. “The new Scheme will enhance our economy as the employees who lose their jobs will be supported through this Scheme without the burden falling on employers,” said Dr Al Awar. Employees are provided a maximum amount of AED 20,000, of which they are given 60% of their basic salary over a certain period of time, which remains unspecified.

The adoption of this new Scheme has been highlighted to be through insurance packages which ensure the availability of a steady supply of income to workers during their termination period, up until they are presented with alternative opportunities. The Scheme itself is said to be for a nominal subscription fee of AED 40 – AED 100 per year, for which the employees have to contribute. Furthermore, the UAE Ministry of Human Resources and Emiratisation [MOHRE] is said to play a crucial role in the operation, application, and any other necessary requirements for the proper functioning and managing of the Scheme. MOHRE will also regulate the insurance service providers associated with the Scheme so as to guarantee high-quality performance.

The new Scheme aims to ensure a healthy and sustainable work environment and economic growth in the country. With the ever-changing business world both within the country and globally, the Scheme allows flexibility to those suffering from unemployment and provides them stability during that difficult period of time till they find their next employment. Additionally, the Scheme also benefits expatriate employees and markets, considering the fact that foreign residents make up more than 80% of the UAE population. All in all, the Scheme provides various benefits for both employees and the overall business environment, promoting UAE as an economic and financial hub to the world.