Unemployment Insurance Scheme: What Do I Need to Know?

Retail & Consumer Focus

Unemployment Insurance Scheme: What Do I Need to Know?

Samir Kantaria
Partner,
Head of Employment & Incentives

Malavika Vijayan
Trainee Lawyer,
Employment & Incentives

In an effort to encourage greater flexibility and income protection amongst its public and private sector workforce, the UAE Government introduced an unemployment insurance scheme (the “Scheme”) on 15 September 2022. The objective of the Scheme is to provide individuals with a source of income, for a limited period, ensuring that employees are able to sustain a financial safety net in the event of a loss of employment.Does the Scheme apply to my employees?Enrolment in the Scheme is mandatory for all employees (including all UAE and other GCC national, and expatriate employees) in the federal government, semi-government and private sector (including employees based in free zones), with the exception of:

investors (owners or shareholders of companies);

domestic helpers;

temporary contract workers;

juveniles under the age of 18; and

retirees who are entitled to a pension and have joined a new employer.

The Scheme does not extend to employees based in the UAE’s financial free zones, namely the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM), as these are not subject to the UAE labour laws. Both the DIFC and ADGM have their own employment laws/regulations applicable to individuals working within them.What benefits will my employees get and how much will it cost?Subject to the payment of monthly insurance contributions for a consecutive period of 12 months and being enrolled for 12 months, employees will be entitled to payment equivalent to 60% of their basic salary under the Scheme. Eligible employees will receive payment for a maximum period of three months or until they find alternative employment (whichever is earlier).The insurance premium cost payable and the maximum compensation an employee can receive is dependent on the category of the employee: (a) Category 1: Employees earning a basic salary of AED 16,000 per month and under. A premium of AED 5 per month (+ VAT) and compensation of up to a maximum of AED 10,000 per month.
(b) Category 2: Employees earning a basic salary exceeding AED 16,000. A premium of AED 10 per month (+VAT) and compensation of up to a maximum of AED 20,000 per month.

Employees can opt to pay their premiums monthly, quarterly, bi-annually or annually.When do my employees receive payment under the Scheme?In order to be eligible to receive payments under the Scheme, an insured employee must:

be subscribed to the Scheme for a period of no less than 12 consecutive months;

be legally present in the UAE;

have submitted a claim for payment within 30 days from the date of job loss or settlement of any labour complaints referred to the courts;

have had no interruptions in premium payments for a period of more than three consecutive months; and

have paid or committed to pay the premiums that are due, on time.

When will my employees not receive payment under the Scheme? Employees are not eligible to receive compensation under the Scheme, if the reason for unemployment is due to resignation, termination for disciplinary reasons, labour strikes or other force majeure factors. An employee will also not be entitled for compensation if there has been fraud or deceit involved in their claim for compensation, or if the company they were terminated from is fictitious.How can my employees
register under the Scheme?All onshore based employees in the federal government and private sectors are required to register themselves under the Scheme via the ILOE website (www.iloe.ae), the ILOE mobile application or the Dubai Insurance call center. Alternatively, other subscription channels have also been made available including ATMs, business service centres, exchange houses, Du and Etisalat, and via SMS. What if my employees
do not register?All in-scope employees must register under the Scheme by 30 June 2023 and sanctions include:

Fine of AED 400 for failure to register by the deadline; and

Fine of AED 200 and coverage revoked where there is failure to make premium payments for three consecutive months;

Fines will be deducted directly through the Wages Protection System, end-of-service gratuity or any other alternative method. New or renewal of work permits will not be issued to the employee until fines are settled. What are obligations are
placed on employers? Enrolment to the Scheme and payment of premiums is the sole responsibility of each employee. Employers are under no obligation to register or to pay any of the premiums on behalf of their employees. However, there are several employers who are facilitating and undertaking registration on behalf of their employees, and paying the relevant premiums. One of the driving factors behind this is the need to ensure that no employee falls foul of the Scheme rules thereby ensuring that renewal of their work permits is not blocked, which may have a detrimental effect on operations.

For further information,
please contact Samir Kantaria.

^{Published in April 2023}