The UAE Government has recently announced legislation requiring employees in the Federal Government and private sector to register in an unemployment insurance scheme. The scheme is designed to provide financial support to employees in the event that the employee loses their job.
What do employees need to do?
Employees must register with an unemployment insurance scheme starting from 1 January 2023.
Unemployment insurance schemes are provided by a number of selected insurance providers in the UAE. There are a number of different ways an employee may use to enroll with an insurance scheme including via:
- Insurance booth website
- Employee’s bank
- ATM machines throughout the UAE
- Exchange centers
- Banking centers
- Du / Etisalat
- Directly with an insurance company
Once registered, employees must start paying monetary contributions to the scheme as follows:
- Employees earning less than AED 16,000 must contribute a minimum of AED 5 per month to their selected scheme.
- Employees earning more than AED 16,000 must contribute a minimum of AED 10 per month to their selected scheme.
Failure to register in an unemployment insurance scheme will result in a penalty of AED 400 being imposed on the employee. When employees fail to register in an insurance scheme and do not pay any contributions for more than three months, they will be fined an additional AED 200.
Benefits under the Scheme
Conditional upon the employee having paid contributions into the scheme for at least 12 months and meeting the eligibility requirements, on termination of employment, employees will be entitled to receive financial assistance from the scheme for a period of up to three months from the date of termination – equal to 60% of their monthly salary. Compensation is capped at AED 10,000 in respect of employees earning less than AED 16,000 per month and AED 20,000 for employees earning more than AED 16,000 per month. Scheme benefits will cease from the earlier of the date the employee secures alternative employment in the UAE or three months from the last day of employment.
Please note that employees who resign or who are dismissed for disciplinary reasons will not be entitled to benefits from the scheme.
Are employers required to register employees in a scheme?
No. Employers are not required to register their employees in an insurance scheme, nor are employers required to pay any contributions to a scheme. The unemployment insurance scheme is an employee requirement only. However, employers are advised to remind their employees of their obligation to register.
To speak to us in relation to the new Unemployment Insurance scheme, any employment law related matters, or issues more generally, please reach out to the Baker McKenzie contacts below.