An Insight into the Newly Issued Unemployment Insurance Scheme in the United Arab Emirates
In efforts to secure the availability of income, earlier of September last year the United Arab Emirates (“UAE”) issued the Unemployment Insurance Scheme pursuant to the Federal Decree Law No. 13 of 2022 (“Unemployment Insurance Law”), which came into force on the 29th of September 2022.
Overview of the Scheme
This law concerns employees working both within the governmental and private sectors who are obliged now subscribe to this scheme as of 1 January 2023. The Unemployment Insurance Law excludes from the scope of its application investors, domestic workers, employees under temporary contracts, juveniles (i.e.; under the age of 18) and pension receiving retirees who are still employed even though they have reached the age of retirement.
The Unemployment Insurance Law provides that employees are given the option of either a monthly, yearly, half yearly, or quarterly subscription with a fee that is dependent on their level of income. The law further provides that compensation to be received by employees who get terminated is limited to three (3) months’ salary from the date of unemployment and shall receive such amount from a UAE licensed insurance provider including Dubai Insurance Co, Abu Dhabi National Insurance Company, Emirates Insurance Co, and Al Ain Ahlia Insurance Co.
Mechanics of Insurance Scheme
Unemployed individuals are compensated pursuant to the unemployment insurance scheme upon the condition that the termination of employment is not due to disciplinary reasons. Compensation is received after three (3) months from the unemployment date provided that the individual is not employed during such period.
The Unemployment Insurance Law is mandatory in nature; as employees (and not employers) must subscribe to the insurance scheme as 1st of January 2023, and a failure of this subscription is penalised with a fine of AED 400 (Four Hundred UAE Dirham), and a failure of subsequent subscription payments for a period of three (3) months is fined at a rate of AED 200 (Two Hundred UAE Dirham), as declared by the UAE Ministry of Human Resources and Emiratisation.
The insurance scheme partitions employees into two groups depending on their income, as follows:
- Group 1
Employees earning a monthly salary of 16,000 AED or less, should pay a monthly subscription fee of 5 (Five UAE Dirham) (or may pay this at a quarterly, half yearly, or a yearly rate), with a 60% (sixty percent) unemployment insurance of their monthly salaries not exceeding AED 10,000 (Ten Thousand UAE Dirham) per month to be paid on a monthly basis for no more than three (3) months duration.
- Group 2:
Employees earning a monthly salary of more than 16,000 AED, should pay a monthly subscription fee of 10 (Ten UAE Dirham) (or may pay this at a quarterly, half yearly, or a yearly rate), with a 60% (sixty percent) unemployment insurance of their monthly salaries not exceeding AED 20,000 (Twenty Thousand UAE Dirham) per month to be paid on a monthly basis for no more than three (3) months duration.
This Unemployment Insurance Law represents the UAE’s financial and moral support for its workforce in a current period of global economic instability and inflation, granting its benefiters of nationals and expatriates alike the opportunity of a sustained quality of life.
The UAE Cabinet is yet to issue a full resolution depicting the full mechanisms and further conditions applying to this insurance scheme, but our firm shall keep monitoring closely new developments to this law and provide updates in the future.
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Author: Liana Rashid, Junior Lawyer