Unemployment insurance (UI) provides protection for when an employee loses their job. As of January 1 this year, the United Arab Emirates (UAE) has officially enacted its federal law on UI. Despite maintaining a low unemployment rate — averaging 2.5 percent over the past decade compared to the Middle East and North Africa’s 6.8 percent — the UAE is still committed to providing financial security with its UI scheme.
The unemployment insurance program in UAE safeguards individuals during employment challenges. Furthermore, it exemplifies the government’s unwavering dedication to cultivating a secure work environment labor market.
What is unemployment insurance?
Unemployment insurance is a type of benefit for individuals who become unemployed through circumstances beyond their control. For instance, they may have involuntarily lost their employment due to layoffs. As a temporary safety net, it allows people to sustain themselves financially while actively seeking new employment opportunities.
According to Milan Vodopivec, formerly a lead economist with the World Bank, UI is the predominant public income support program for the unemployed in developed nations.
Until 1945, countries in the West were the only ones to implement such a program. In the ‘90s, the world saw more transition countries introduce it. In the past years, more developing countries have been following suit.
How does the unemployment insurance scheme in UAE work?
The UAE unemployment insurance scheme, introduced by the government in May 2022, became operational on January 1. Governed by Federal Decree-Law No. 13 of 2022 and Cabinet Decision No. 97 of 2022, the program mandates enrollment for all Emirati and expatriate employees in both public and private sectors.
As announced by the Ministry of Human Resources & Emiratization (MoHRE), this requirement has also been extended to employees in free zones and semi-governmental entities, excluding those in DIFC and ADGM, where enrollment remains voluntary. DIFC and ADGM stand for Dubai International Financial Center and Abu Dhabi Global Market, respectively.
The following are exempted:
- Investors or owners of the businesses in which they work
- Domestic workers
- Employees who have temporary contracts
- Juveniles below the age of 18
- Retired employees who have a new job
The scheme, operating through agreements with nine local insurance companies, offers compensation at 60 percent of an employee’s basic salary for up to three months. An employee can either belong to two categories:
Category A:
- Basic Salary: $3,400 or less
- Insurance cost per month: $1.36 + VAT
- Monthly compensation: Up to $2,700
Category B:
- Basic Salary: above $3,400
- Insurance cost per month: $2.72 + VAT
- Monthly compensation: Up to $5,400
Payment channels include the Involuntary Loss of Employment (ILOE) portal, its mobile application, Al Ansari Exchange, kiosk machines, telecommunication bills, bank ATMs and applications and business service centers.
Challenges of unemployment insurance in UAE
As of October 1, the program has around 6.5 million subscribers. According to recent figures, 14 percent of UAE workers are yet to enroll. While this initiative endeavors to provide financial security, it’s not without challenges. Here are some.
1. Limited duration
The maximum benefit duration for a single claim is three months. Compensation ends when you join a new company. Moreover, regardless of the number of your separate claims, the total aggregate claims are only capped at 12 months. This means that, throughout your employment in the UAE, you can only receive a maximum of 12 months’ compensation from the insurance scheme.
2. Long eligibility period
You must pay insurance premiums for at least 12 consecutive months before becoming eligible for compensation. On the one hand, such an extended eligibility period can be advantageous for securing a more stable and reliable insurance pool. However, it may also pose challenges for those who lose their job before completing the 12 months.
3. Payouts are deemed inequitable
The UAE has no federal minimum wage. And this becomes especially an issue in the fairness of the scheme’s payouts. Advocacy organization Migrant-Rights.org emphasized, “Because the payouts are based on a percentage of the basic salary, while the fees are fixed, low-income workers who pay the same amount into the scheme as the middle to higher-income are only eligible for a far smaller claim.”
4. The burden is on employees
Under the UAE unemployment insurance scheme, you, the employee, will pay the insurance premium. Your employer won’t have to pay any fee or cost. Note that you could pay fines for non-compliance and late payments. According to regulations, non-enrolment has a penalty worth $108. There will be an additional $54 if enrollees fail to pay dues after a grace period of 90 days. The fines will be deducted from your salary or end-of-service pay. Your policy will also be canceled. Furthermore, you may face potential difficulties when renewing work permits.
Read: Building a resilient labor market amidst growing challenges
Advantages of unemployment insurance in UAE
Though challenges remain, the country’s unemployment insurance scheme is a laudable effort. Here are its best perks.
1. Enhanced social protection
By giving substantial income support during periods of unemployment, the government underscores its commitment to looking after the overall well-being of Emirati employees — and even non-Emirate ones. This strategy not only facilitates a safety net for individuals facing job loss but also contributes to the broader objective of fortifying the resilience and adaptability of the UAE workforce. Providing financial security during transitional phases between employment allows subscribers to concentrate on pursuing other job opportunities.
2. Flexibility
With the option to pay monthly, quarterly, half-yearly or annually, you can choose a payment schedule that aligns with your preferences and circumstances. The relatively minimal premium of either $1.36 or $2.72 per month (plus VAT) is also reasonable, making it accessible to a broad spectrum of the workforce.
3. Efficiency
The country’s unemployment insurance program is unique because private insurance providers pay the compensation rather than the government. Like the UAE’s Workers Protection Program, the scheme operates through an insurance pool led by Dubai Insurance. This approach introduces efficiency and reduces bureaucratic processes, making it easier for subscribers to pay and claim.
4. Supportive of economic development
According to Dr. Abdulrahman Al Awar, “The new unemployment insurance law is an essential part of the legislative and legal structure that the government is keen to develop to meet the requirements of the national economy.” He is the minister of Human Resources and Emiratisation.
By offering financial support to the insured during periods of unemployment, the scheme contributes to economic stability and resilience. It also helps the country achieve a competitive knowledge economy by making its labor market more conducive, attracting and retaining international talent.
“This supports the UAE’s endeavors to be the next capital of the future and a global incubator for talent and companies and investments, which can be achieved through economic and social development and the empowerment of human capital,” added Al Awar.
How to claim unemployment insurance compensation in UAE
If you’ve subscribed to the UAE unemployment insurance program, follow this guide to claim your benefits.
Step 1: Ensure you meet the eligibility
The following are the requirements you must meet:
- Your subscription period shouldn’t be less than the past twelve (12) consecutive months.
- You must have paid all the insurance premiums.
- You must prove that unemployment was due to a reason other than resignation.
- You must not be dismissed from work for disciplinary reasons.
- You must not have an existing abscondment complaint.
- Your claim must not be made through fraud or deception, and the company you claim to work for should not be fictitious.
- Your loss of work should not result from non-peaceful “labor strikes or stoppages.”
- You must be legally present in the United Arab Emirates.
Step 2: File a claim
You must submit your claim within 30 days after termination or after the court releases its ruling regarding your labor complaint (if you submitted one). Your options for claiming include the ILOE portal, mobile app and call center (600599555). Alternatively, you can file it in any channels specified by MoHRE and the insurance pool.
Step 3: Receive compensation
Upon filing the claim, licensed service providers authorized by the UAE’s Central Bank to offer insurance policies must pay you the compensation within two weeks.
Final thoughts
As the country continues to diversify its economy, creating a more attractive and conducive labor market becomes essential. The unemployment insurance in UAE scheme is a landmark program that supports UAE workers during transitionary phases. While it poses challenges, it remains advantageous overall. With it, enrollees who meet the stated requirements can get substantial financial support while looking for another job.
Keep in mind that it is mandatory for public and private employees, whether they’re an Emirati or an expatriate.
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