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UAE job loss insurance: Companies can apply for scheme for employees; here's how

Under the newly-launched scheme, Emiratis and expat workers employed in the private sector must subscribe to the insurance scheme by June 30 to avoid a Dh400 fine

Employers in the UAE are not responsible to register their employees nor pay for the mandatory job loss insurance scheme, which came into effect on January 1, 2023.

However, in case the employers wish to do so as part of the benefits they offer to their employees, then the Involuntary Loss of Employment (ILOE) Insurance Scheme system can support their request by using their Establishment Card.

By law, the companies are responsible for the awareness, where they have to inform their employees of the importance of their subscriptions.

Under the newly-launched scheme, Emiratis and expat workers employed in the private sector and the federal government must subscribe to the insurance scheme by June 30, failing which they will be subject to a Dh400 fine.

Joanna Matthews-Taylor, partner, Baker McKenzie, said subscriptions are to be paid by the employees because a Certificate of Insurance for the coverage will be issued to the employees.

Naji Khairallah Senior Associate, Galadari Advocates and Legal Consultants, said with regard to the mechanism of collecting insurance premiums, Article (6) of the Resolution states there are no costs borne by the employer or the entity for which the employee works.

The scheme has been categorised into two parts. Employees earning a basic salary of less than Dh16,000 or below are required to pay Dh5 plus VAT per month. Meanwhile, employees earning a basic salary of more than Dh16,000 are required to pay Dh10 plus VAT per month. The payment can be made on a monthly, quarterly, semi-annually and annual basis.

The employees will be eligible for 60 per cent of their basic salary for three months in case of involuntary loss of job.

Currently only two categories have been introduced, and employees will have to choose either of the two.

12-month contribution must

Joanna further clarified that employees must have paid their contributions for at least 12 consecutive months in order to be eligible for unemployment compensation.

Naji echoed Joanna’s views, saying it is necessary to have completed the 12 months' payments to be eligible.

In addition, Cabinet Resolution No. (97) of 2022 stipulates that those who subscribe to unemployment insurance are granted compensation if at least 12 consecutive months pass, and the insurance programme compensates the insured with a cash amount for a maximum period of 3 months – provided he had not submitted a resignation or was dismissed for disciplinary reasons, Naji added.