UAE unemployment insurance – what do you need to know?

The UAE Unemployment Insurance Scheme (Scheme), announced in May 2022 is a one of its kind initiative for private sector and federal employees providing financial support for loss of employment (Compensation). This article covers what you need to know about the Scheme.

The Ministry of Human Resources and Emiratisation (MoHRE) has confirmed that the Scheme applies to all workers in the private and federal sector with a few exceptions, which include:

• investors and business owners who own and manage their business;
• domestic workers;
• temporary employees;
• juveniles under the age of 18;
• retired individuals who receive pensions and have joined a new employer; and 
• free zone employees. 

The MoHRE has released the Scheme as a mandatory requirement and all eligible employees can subscribe to the Scheme starting from 1 January 2023 and the deadline for subscriptions shall be 30 June 2023. However, employees commencing employment after 1 January 2023 will have a four months grace period to subscribe to the Scheme starting from the date the visa status change is applicable.

Free zone employees in the UAE are not able to subscribe to the Scheme as currently it only extends to onshore employees registered with the MoHRE. We await further clarification from the Federal Government on Free zone employees subscribing to the Scheme. 

As of today, the MoHRE has recorded over 60,000 subscribers to the Scheme with the numbers rising daily. 

Contribution to the Scheme

The Federal Decree Law No. 13 of 2022 introduced on 15 September 2022, sets out the contributions and subsequent entitlements of an employee subscribing to the Scheme. Under the Scheme, individuals are required to make either monthly, quarterly, half-yearly, or yearly contributions (Premiums) under the issued Insurance Policy (Policy). 

Employees shall be required to pay Premiums based on their monthly basic salary bands in order to subscribe to the Scheme. The Premium contribution corresponding to salary bands is set out below:

• Employees earning up to and including AED 16,000 shall pay a monthly insurance premium of AED 5, i.e., AED 60 annually. 
• Employees earning above AED 16,000 shall pay a monthly insurance premium of AED 10 per month, i.e., AED 120 annually.

The Premium paid shall be non-refundable and the insured employee has a 90-day period to settle the Premium payments that are due. An employee who fails to settle the Premium payments, from the date the Premium is due, may be disqualified from receiving Compensation under the Scheme.

Scheme subscription 

The MoHRE has announced several platforms from where individuals can subscribe to the Scheme. These may be subject to change as the Scheme develops, however employees may subscribe via:

• Insurance Pool website and mobile application from Dubai Insurance
• kiosks (UPAY) 
• business service centres (Tawjeeh and Tasheel)
• currency exchange (Al Ansari Exchange)
• bank ATMs (C3 PAY) and bank applications
• SMS and telecommunication bills (Etisalat)

Excluding the Insurance Pool website and mobile application, all the above listed subscription channels carry an additional service charge to be paid by the employee. 

Employees only need to provide their Emirates ID and their valid UAE mobile number to subscribe through these channels. The employee will be asked to submit an application to subscribe to the Scheme and a Policy will govern the terms and conditions between the insured employee and the insurer. The employee will be issued an insurance certificate under the policy.

As per MoHRE, Dubai Insurance Company (DIC) shall be the administrator of the Scheme and the authorised insurer to issue the Involuntary Loss of Employment (ILOE) policies on behalf of the ILOE Insurance Pool consisting of nine insurers.

Filing a claim

MoHRE sets out certain eligibility criteria for employees to claim compensation under the Scheme, for example: 

• minimum subscription period of 12 consecutive months;
• commitment to pay the Premium;
• evidence of unemployment due to reasons other than resignation, disciplinary reasons, non-peaceful protest and strikes, and force majeure incidents;
• employee should not have absconded;
• absence of fraud or deceit; and
• a UAE resident. 

A claim form must be submitted by the insured employee, along with the termination letter detailing the date and reason for termination, to DIC within 30 days from the date of termination or when the labour court rules on a complaint. The claim form can be submitted via DIC website, mobile application, or the call centre of the insurance pool. Additional supporting documents may be requested by the insurer to authorise compensation. 

Compensation payment

The insurer is required to make payment, within two weeks of receiving the claim form to the bank account of the insured employee.

Each claim is to be compensated monthly at a rate of 60% of the basic salary. The compensation limits are as follows:

• salary not exceeding AED 16,000: AED 10,000 per month.
• salary exceeding AED 16,000: AED 20,000 per month.

For each insurance certificate issued to the employee, the compensation period shall be three months. Once the three-month limit is exhausted during the insurance certificate period whether through one or several claims, then the insured employee must subscribe to the Scheme for 12 consecutive months before submitting a new claim. 

If the insured employee commences new employment within the three-month limit, the payment of compensation shall cease. 

Penalties and disputes 

In case of failure to subscribe to the Scheme, a fine of AED 400 shall be payable by the employee. Additionally, a fine of AED 200 shall be imposed in the event the prescribed Premiums remain unpaid for more than three months (subject to the payment plan selected). 

In the event of non-payment of fines, the amounts may be deducted from: 

• salary account registered under the Wages Protection System or any other alternative systems; or
• end-of-service gratuity or by using any other alternative system.

If the employee fails to pay the fines when they become due, they may not be eligible to be issued a new work permit by the MoHRE.

Other instances where penalties are imposed include: 

• inaccurate information regarding subscription salary, contractual relationship with employer, or circumstances of the termination; and
• collusion with employer to obtain unemployment insurance benefits.

Unemployment insurance disputes are subject to the jurisdiction of the UAE courts, governed by UAE laws and regulations.

The insured employee may take the complaint regarding the Policy directly to the insurer who must respond within five working days. After the expiry of that period, the insured employee has the right to file a complaint with the Central Bank and may also commence legal action.

The employer/ companies must encourage and direct their employees to subscribe to the Scheme, obtain the Policy and pay Premiums in a timely manner in order to remain compliant.