UAE extends subscription deadline for Unemployment Insurance Scheme

The subscription deadline for the UAE’s mandatory unemployment insurance scheme has been extended by three months from 30 June 2023 to 30 September 2023.

Introduced in January, the scheme now covers all Mainland, Free Zone and semi-government employees and is designed to ensure that employees in the UAE who are made redundant are provided with a portion of their previous income for a limited time period.

The unemployment insurance scheme is an employee requirement only. Unemployment insurance schemes are provided by a number of selected insurance providers in the UAE and employees can enrol themselves through a number of different channels, including mobile applications, ATMs or via an insurer’s website. To enrol, employees simply need their Emirates ID number and mobile number.

Employee Premium categories
The scheme divides employees into two categories, depending on their basic salary, to determine their monthly premium. Category 1 employees, who earn up to AED16,000 per month, are required to contribute a premium of AED5 per month. Category 2 employees, who earn more than AED16,000 per month, are required to contribute a premium of AED10 per month.

Employees with a commission-based salary are permitted to choose either category based on their needs. Unemployment insurance compensation is to be paid monthly at a rate of 60% of basic salary, with a cap of AED10,000 per month for Category 1 employees and a cap of AED20,000 per month for Category 2 employees.

Claim requirements
All employees in the UAE that meet the requirements are eligible to claim insurance benefits, as follows:

• The employee must have been insured for a minimum of 12 continuous months prior to making a claim.
• The employee’s premium payments must be paid up to date.
• The employee must not have resigned or become unemployed for disciplinary reasons.

Claim submissions
Employees being made redundant are required to submit a claim within 30 days of the date of their redundancy. The insurance company then has two weeks from receipt of the claim to transfer compensation into the account of the insured individual.

The compensation will be paid for three months, from either the date that they become unemployed or until they find employment again, whichever comes first.
Failure to register

As it is a mandatory insurance scheme, failure by an employee to register in an unemployment insurance scheme can result in a AED400 penalty being imposed on the employee. If employees fail to register in an insurance scheme and do not pay any contributions for more than three months, they can be fined an additional AED200.

It is essential that employees enrol and make the relevant payments. They will not be issued with a new work permit if they have outstanding payments or fines.

Employer responsibilities
Employers are not required to register their employees in an insurance scheme or to pay any contributions to a scheme.

However, employers are required by law to notify their employees that the insurance is available, to encourage them to enrol, to provide the enrolment information and notify them of deadlines or changes. Companies should therefore engage their human resources departments to communicate the details of the unemployment insurance scheme to their employees.

Sovereign PRO Partner Group support
Most recently it was announced that the mandatory insurance scheme had been extended to include freezones and semi-government employees, whereas previously it had only applied to those in the Mainland.

All employees currently working or seeking employment in the UAE should ensure that they understand and comply with the regulations. Your employer should provide all the necessary information for registration but, when establishing in an unfamiliar country it is best to seek expert support and guidance. Sovereign PRO Partner Group is able to assist.

“The new compensation system ensures social security and sustainable living for Emiratis and resident employees during their unemployment period. It also reduces business risks,” said Jim Swallow, PRO Partner Group Commercial Director UAE.

“The scheme enhances the competitiveness and attractiveness of the UAE’s job market for the best talents and contributes towards creating a globally competitive knowledge-based economy. The decree complements the legislative environment, by further safeguarding employee rights in the UAE.”