UAE Unemployment Insurance Scheme

Effective from the 1st of January 2023, the federal government and private sector workers are compelled to subscribe to the UAE unemployment insurance scheme as part of the Ministry of Human Resource and Emiratisation (MOHRE)’s groundbreaking social security policy. Constitutional Decree Law Prop. 13 of 2022, given on 4 October (the Workers’ Compensation Law), and Decision Prop. 97 of 2022 on the mechanisms and limits for the rollout of the Welfare Benefits Scheme form the legal framework for the program statute, which was officially confirmed in May 2022. Primarily, the scheme establishes a fund into which workers in both the private and public sectors ought to pay a nominal premium during the phase of employment in exchange for the guarantee of unemployment benefits (security) in an event of loss of job. 

The Scope of the UAE Unemployment Insurance Scheme

The scheme applies to all workers in the private and federal sectors except: 

• Domestic workers
• Employees on a temporary basis
• Juveniles under the age of 18
• Retirees who receive a pension and have joined a new employer.
• Investors, business owners who own and manage their businesses themselves

What is the Subscription Cost for the Unemployment Insurance Scheme?

1. Employees earning less than AED 16,000 per year will be required to pay a monthly insurance fee of AED 5. The annual cost becomes 60 AED. In this case, a monthly salary of AED 10,000 is the most that may be paid out.
2. That earning above AED 16,000 per year in base salary will be required to contribute AED 10 per month or 0.3% of their income, the yearly cost is AED 120. The compensation for this category does not exceed a monthly amount of AED 10,000.
3. The employee has the option of paying the premium monthly, quarterly, semiannually, or annually. In addition to the aforementioned basic package, the covered worker may subscribe to extra benefits with the insurance company’s approval.

What is the Primary Objective of the UAE Unemployment Insurance Scheme?

Primarily, the objective of the unemployment insurance plan is to;

• Guarantee a stipulated amount of money to the policyholder once they leave work
• To raise Emiratis’ ability to compete in the job market
• Assist the unemployed in maintaining a minimum standard of living through social programs.
• To acquire the best international talent pool and to build a competitive knowledge economy in the UAE.

Remuneration Benefits and Amounts

Compensation pension contributions equaling 60% of a worker’s basic salary are available for up to three years after a worker loses employment. If the worker accepts a new position or leaves the country of employment within that period, they will no longer be eligible for compensation. Under Federal Law No. 33/2021, employees are only eligible for this benefit if they have been insured for at least a year and have not been fired for cause (the Labor Law). It is possible for a covered worker to negotiate for extra benefits with the appropriate insurance providers, per a clause in the Unemployment Insurance Law. 

Impact of the UAE Unemployment Insurance

The United Arab Emirates’ (UAE) commitment to improving workers’ rights and protections and creating a more secure and attractive employment market in order to recruit a huge talent pool across the world is evidenced through the formation of a social security plan, which is an encouraging development. Prior to the issuance of the statute, there was no surety / any form of insurance upon losing a job in the UAE. The income support legislation provides cash compensation for up to three months.

Seek the Expert Services of Top UAE Employment Consultants Today!

Have you subscribed to the UAE Unemployment Insurance Scheme? If not, kindly seek the expert services and guidance of adept HR consultants in UAE today. Trusted labor consultants offer top and efficient guidance to employees to seamlessly subscribe to the UAE Unemployment Scheme.