Unemployment Insurance Scheme – commences 1 January 2023

Unemployment Insurance Scheme – commences 1 January 2023

DIFC Employment Solutions

A substantial move in helping to prevent financial hardship and anxiety in cases where employees find themselves unemployed through no fault of their own has been unveiled recently.

The UAE’s Ministry of Human Resources and Emiratisation (MoHRE) and nine local insurance companies have come together to give protection for employees in the private sector and the UAE’s federal government to provide them with cash compensation for a period not to exceed 3 months per claim in the event that their employment is terminated for reasons beyond their control (i.e. not because of resignation or disciplinary action against the employee) .

The scheme excludes owners of establishments in which he or she works, domestic workers, employees with a temporary employment contract, individuals under 18 years of age, and those who receive a retirement pension.

There are 2 categories to the scheme – employees with basic salary of AED 16,000 or less (premium will be AED 5 per month or AED 60 per annum), and those with a basic salary over AED 16,000 (premium will be AED 10 per month or AED 120 per annum). Premiums can be paid monthly, quarterly, half-yearly or annually and VAT is charged on the premium.

Compensation is calculated at 60% of the basic salary from the date of termination (for up to 3 months) but shall not exceed AED 10,000 per month in the first category and AED 20,000 per month in the second category.

Claims are made through 3 approved methods – the insurance group’s e-portal, smart application or call centre and must be made within 30 days of employment commencing. Claims are subject to the insured having worked and subscribed to the scheme for at least 12 months and should be processed within 14 days of the claim.

Payment into the scheme will be mandatory for eligible employees, and it is understood that a more comprehensive coverage may also be negotiated with the insurers for increased premiums.

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