Ensuring Financial Stability through Unemployment Insurance
The UAE government has introduced Federal Decree-Law No. 13 of 2022 to provide financial security to employees, who lost their job due to reasons other than resignation or disciplinary action. As the workforce in the UAE continues to grow, it is imperative for employees to keep on top of different regulations and benefits coming into place in order to avail them.
The scheme is applicable to all employees working in the private and government sector including free zones are required to subscribe, with the exceptions of Investors or owners of companies they work at, domestic workers, temporary contract workers, individuals under 18, pension-receiving retirees who have joined a new job and DIFC employees. So how does it work?
Insurance Cost, Due Date & Channels
There are two categories to consider: Category A and Category B. For Category A, the monthly basic salary should be AED 16,000.00 or less, while for Category B, it should be AED 16,001.00 or more. In terms of monthly insurance premium, Category A requires a payment of AED 5.00 + VAT, while Category B requires AED 10.00 + VAT.
Employers are not required to pay any premium, however it is their duty to inform their employees about enforcement of the unemployment insurance scheme. The Insurance premium amount can be paid monthly, quarterly, half-yearly or annually by employees themselves.
All existing employees must subscribe on or before 30th June 2023 and for those that entered UAE after 1st Jan 2023, they must subscribe within 4 months with employment permit or change of status. Employees can subscribe & pay through multiple platforms like: Insurance Pool Website, ILOE app, Al Ansari Exchange, Kiosk Machines, Telecommunication Bills (Du & Etisalat), Bank ATM & application, Business Services Centres etc.
Facilitating Tax Audits and Verification
To claim compensation, employees must pay the monthly premium amount for at least 12 consecutive months and must submit their claim within 30 days of termination from their job. The claim amount is payable within two weeks from the date of receiving claims for a period of 3 months or until employee find new job, depending on whichever is earlier based on the following guideline:
The compensation is payable to be 60% of last 6 months basic salary or subject to the maximum amount of AED 10,000.00 for Category A and AED 20,000.00 for Category B.
Penalties Involved
There are multiple forms of penalties involved depending on the situation. Some of them are:
1. AED 400.00 for failing to subscribe before the relevant due date depending on your situation
2. AED 200.00 fine for Non-payment of Insurance premium for more than 3 months from due date followed by the cancellation or termination of your insurance policy
3. If the Non-payment fine is not paid within 3 months of its due date, the amount will be deducted from employees salary through WPS / EOSB / or as MOHRE decides.
4. MOHRE will not issue new work permits for employees who has not paid the penalty imposed for non-subscription / non-payment of UAE Insurance scheme.
The unemployment insurance scheme in the UAE is divided into two categories based on which your monthly insurance premium is payable. Employers are responsible for informing their employees about the scheme but are not required to pay premiums themselves. Employees have access to multiple platforms to subscribe and pay the premium, choosing one of the permitted payment plans.
To claim compensation, employees must have paid the premium for at least 12 consecutive months and submit their claim within 30 days of job termination. Compensation is based on a percentage of the last 6 months' basic salary, alongside a cap on the amount depending on the employee's basic monthly salary. Penalties apply for non-compliance, including fines and potential work permit restrictions.
Are you and your employees are aware of the scheme? If not, make sure they are, and feel free to explore our Payroll Services and Management Consultancy service to know more
