UAE: New health insurance scheme to improve employees’ productivity, decrease turnover

The UAE’s new mandatory health insurance scheme announced earlier this week will help employers attract and retain the best talent as well as improve employees’ productivity and decrease employee turnover.

However, this new scheme will also result in an increased cost of operations for many employers.

Starting from January 1, 2025, all employers in the UAE are required to provide and pay for the insurance of their employees – including domestic workers. Under the new rule approved by the Cabinet, employers will have to pay for the health insurance coverage of their employees while issuing or renewing their residency visas.

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Myra Bennett, principal consultant at Genie Recruitment, said this new scheme will bring peace of mind to employees as many workers don’t take insurance due to cost.

“If a company can bear the cost, then it will really ease off some of the financial pressures on employees. Insurance schemes can benefit employees by reducing financial risks related to health and well-being. This can result in improved employee satisfaction, productivity, and retention. An employee may feel more at ease and less stressed with the knowledge they have medical insurance in place in case anything was to happen to their health,” she said.

To have an edge over competitors, she said there are many other benefits that UAE employers could implement to attract top talent such as schooling, work flexibility, duvet days, bonuses etc.

Not all employers provide insurance

She added that not all employers provide health insurance, specifically to employees who are under family visas, or even their own freelance visa.” This is a rising problem as there are more ways to obtain a visa now. So this new rule would streamline the grey areas for many employers.”

However, some companies do provide medical insurance for all staff, including female workers who are on their husband or father’s visa, she added.

Increased cost for employers

Hatim Maskawala, managing director, Badri Consultancy, said the cost of health insurance is becoming the second largest expense of a company after employee salaries.

“This change would definitely mean an increased cost of operation for many employers in an economy where inflationary pressures are already affecting profitability. Employers will need to think how to get value out of it by improving their value proposition in the talent marketplace,” he said.

Myra Bennett said the company needs to review the terms and conditions such as the pricing as this might have an impact on the operations and cost.

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