Unemployment Insurance in the UAE is expected to be fully implemented by the 1st of January 2023, with all government and private sector employees required to Opt In with their chosen insurance provider. The Unemployment Insurance Scheme, introduced by the Ministry of Human Resources and Emiratisation, is designed to assist workers during periods of unemployment by providing cash compensation if they face unemployment.
Unemployment insurance (also known as income protection) provides you with a monthly income if you are made redundant by paying into a monthly subscription whilst you are employed. Unemployment insurance does not fully compensate your salary and has a cap on how many months you will be compensated for. This varies from country to country and of course, which insurance provider you choose.
The UAE government announced on the 3rd of November 2022 that it has been working with 9 local insurance providers to introduce the new compulsory unemployment insurance scheme set to start on the 1st of January 2023. The scheme is mandatory for government and private sector workers employed in the UAE but there are criteria which you must meet to qualify for compensation:
The responsibility of the registration and making regular premium payments is mainly on the employees themselves. Employers are not permitted to register or make payments into the plan on behalf of their employees.
It could become a common practice for some employers to reimburse their employees for the premium amounts paid towards the plan, but that will be considered a voluntary perk, not a mandatory requirement for the business.
Note:FinFlx has added "Unemployment Insurance" as one of the perks available on the Employee Financial Wellbeing Program, available through the FinFlx App. The program is available for employers of all sizes at no cost. HR managers and business owners can create their organisation's account for free through the FinFlx Employer Portal
Employees earning a basic monthly salary of 16,000 AED or less will pay 5 AED per month (or 60 AED annually). Employees earning a basic monthly salary of more than 16,000 AED will pay 10 AED per month (or 120 AED annually).
You can choose to make the payment monthly, quarterly or on an annual basis.
If you are eligible, you will be compensated for 60% of your basic monthly salary for up to 3 months from the date of unemployment. This means for employees with a salary of 16,000 AED or less, the monthly compensation is up to 10,000 AED. For employees earning more than 16,000 AED, the monthly compensation is up to 20,000 AED.
Employees who fail to Opt In and make the necessary payments through the insurance pool portal will incur a monthly fine on top of the premiums that are late.
The amount of the fine is yet to be confirmed prior to the plan implementation and will be communicated to the public in advance.
If you are eligible, you can sign up to the insurance scheme via the insurance pool that will be made available to the public soon.
In the meantime, our team at FinFlx is working on a solution to support businesses of all sizes in educating their employees on the unemployment insurance plan and facilitating their enrollment.
If your organization is interested, you can always register your interest here.
You will become eligible to receive payments in the event that you are unemployed once you have completed 12 months of contributions to the scheme, in which case you will receive your first monthly compensation within 2 weeks of being unemployed.
The implementation of unemployment insurance is a major step in the right direction in terms of providing financial and social stability in the labor market. The concept of unemployment support is common in nearly all established economies and sometimes considered as one of the most essential social security benefits provided by some governments around the world to their citizens.
For the UAE workforce, that is particularly important. Having the assurance of income for a period of 3 months after the unforeseen termination event will provide individuals and families alike with a sense of safety in covering basic needs and essential payments.
Employees who have been in service for one year or more, will also be eligible for End of Service Gratuity payment. A benefit that has seen an increased level of protection by the new 2022 labor law. The new law mandates employers to make the due gratuity amount to the employee within 14 days of employment termination or face a hefty fine of 50,000 AED per violation.
It’s also notable that the UAE has recently changed the visa rules after employment termination or work visa cancellation to extend the stay period to 6 months without incurring any overstay fines giving them more time to find another work relationship without disturbing their personal commitments.