The Unemployment Insurance Scheme in the UAE
On 15 September 2022, the UAE government adopted the Federal Decree Law No. 13 of 2022 concerning the Involuntary Loss of Employment (“ILOE”) which later came into force on 29 September 2022. The UAE government aims to provide financial support to those who lose their jobs, as a result of termination by their employers.
The ILOE is an unemployment insurance scheme and is applicable all UAE national and expatriate workers in public and private sector, with the exception of the following:
- employees working in Free zones;
- investors(business owners who own the entire business and manage it themselves);
- domestic workers;
- contractual workers/employees on temporary basis;
- juveniles under the age of 18; and
- pension-receiving retirees who have joined a new employer.
As at 1 January 2023, the ILOE came into effect and in accordance to the Ministerial Resolution No. 604 regarding the ILOE, all employees (excluding those mentioned from (i) to (vi)) have a six (6) month grace period to subscribe and comply. Those hired after 1 January 2023 will have four (4) months starting from the date he/she landed in the UAE or change in visa status to subscribe.
The ILOE Costs
There are two (2) categories of employees:
- Category A; and
- Category B.
Employees that fall under Category A will be a person who receives a basic salary of AED 16,000 or below. This person shall contribute AED 5 + VAT a month; AED 15 + VAT per quarter; or AED 60 + VAT per year.
Employees that fall under Category B will be a person who receives a basic salary of more than AED 16,000. This person shall contribute: AED 10 + VAT a month; AED 30 +VAT per quarter; or AED 120 + VAT per year.
The compensation amount with vary from person to person and be based on his/her salary. However, compensations will not be paid for more than three (3) months from the date of unemployment.
For persons who fall under Category A will receive compensations of up to AED 10,000 per month, for no longer than three (3) months. Those who fall under Category B will receive up to AED 20,000 per month, for no longer than three (3) months.
For an employee to receive compensation, there are certain conditions and requirements which must be satisfied:
- The contribution period must not be less than twelve (12) months in a row.
- The employment dismissal must be in accordance with the provisions of the Labour Relations and Human Resources Law as well as any related legislation.
- The compensation claim shall not be done in bad faith.
- Should the person find another job (and hired) during the compensation period, the compensation will be suspended.
Failure to Subscribe to ILOE
For UAE eligible employees (mentioned earlier in this article) that fail to subscribe within the given grace period will be fined AED 400 and/or for those who fail to pay the required contributions for more than three (3) months will be fined AED 200 as per the Cabinet Resolution No. 97 of 2022 concerning the Procedures and Controls for Implementing Unemployment Insurance Scheme.