Unemployment is no longer a stumbling block for Emiratis and UAE Residents

By Roxana Maroun

As the clock struck midnight on January 1, 2023, hundreds of laws worldwide came into effect as people celebrated the start of a new year. While some of these laws were in favor of individuals, others were harsh.

For instance, in the state of Missouri in the United States, a new law makes it an offence for the homeless to sleep or camp on public land in Missouri without permission. In the state of Oklahoma in US, the new law decreased the unemployment benefits, by reducing the allowable length of time for receiving unemployment benefits from 26 weeks to 16 weeks.

In the UAE, in order to solve the issue of unemployment, which  rated 3.4% for population by gender and age group in 2021[1], the legislator promulgated new law that ensured the availability of income for a limited period to the workers (the “Insured”), Emiratis and residents, working either in the private sector or in the Federal government sector, during the period of their unemployment and provided them with a social protection umbrella to ensure the sustainability of a decent life for them and their families until alternative job opportunities are available, by enforcing an Unemployment Insurance Scheme (“Scheme”).

[1] Based on the latest studies of the International Labor Organization (ILO).

Background

This Scheme was implemented under special terms and conditions laid down in Federal Decree-Law No. 13/2022 concerning Unemployment Insurance (the “Decree-Law”), in its implementing regulation set out in the Cabinet Decision No. 97/2022, and in the Ministerial Resolution No. 604/2022 (“Laws and Regulations”).

The Scheme is compulsory for all workers except the following:

1. investors (owners of the establishment in which they work),
2. domestic workers,
3. workers under temporary contracts,
4. juveniles who are under the age of (18) eighteen years,
5. nationals having fulfilled the pensioning-off conditions, or retirees who receive a pension and have joined a new job (“Exempt Workers”).

Insurance companies licensed by the Central Bank and that fulfil the conditions for exercising the activity of service of provision of Insurance against unemployment shall be permitted to provide unemployment insurance to workers (the “Service Providers”).

However, to understand the Unemployment Insurance Scheme comprehensively, it is important to delve deeper into the details of (1) the subscription to the Scheme, its deadlines, and the consequences of failure to subscribe, and (2) the conditions for entitlement to compensation and its value.

Subscription to the Scheme

Pursuant to the Decree-Law, all government and private sector workers individually are required to subscribe in the Unemployment Insurance Scheme as of January 1, 2023, by subscripting and purchasing an insurance policy, in which the employee insures himself against termination of his employment.  The insurance premiums may be paid monthly, quarterly, biannually, or annually, and are calculated on the basic wage/salary (“Basic Salary”) in either of the following two categories:

• First Category: Not more than (AED 5) five dirhams per month if the Basic Salary does not exceed (AED 16,000) sixteen thousand dirhams.
• Second Category: Not more than (AED 10) ten dirhams per month if the Basic Salary exceeds (AED 16,000) sixteen thousand dirhams.

In contrast, the workers on a commission basis (a percentage of sales or profits) may choose the subscription category, in cases where the basic wage is not specified in the employment offer or contract.

• While the Decree-Law came into effect on 1 January 2023, current employees (employed prior to 1 January 2023) are given until 30 June 2023 to subscribe to the insurance Scheme. Workers who were employed or recruited after January 1, 2023, the subscription deadline is (4) four months from the date of entering the country under an entry permit for work, or after they changed their status, or after the initial approval of their work permit by the Ministry in cases where a status modification is not required.

However, the subscription to the Scheme is not optional and in the event that the worker fails to commit to subscribing to the Scheme, or the Insured fails to pay the insurance premiums prescribed for a subscription for a period of (3) three months from the due date of the premium, the insurance certificate will be canceled, and the worker shall:

• not be entitled to benefit from the Scheme.
• be obligated to subscribe/re-subscribe by purchasing a new Insurance Policy that shall become effective from the date of purchase.
• be obligated to pay all amounts due in addition to a fine, to be collected by the Ministry:
  • amounting to AED (400) four hundred if the worker fails to subscribe to the Scheme.
  • Amounting to AED (200) two hundred if the Insured fails to pay the prescribed insurance premiums for more than (3) three months.
• not be eligible for a new work permit until all due fines are paid within three (3) months from the due date. The workers, who fail to pay their fines for three (3) months from the due date, will have the fine amount deducted from their wages through the Wage Protection System, end-of-service gratuity, or any other alternative method deemed acceptable by the Ministry.

Workers may subscribe to the Scheme through any Service Provider.

Making a Claim

The insured worker (Insured) shall submit the claim to the Service Provider through the approved channels designated by MOHRE (“Channels”) within (30) thirty days from the date of termination of the labor relation, by applying for benefiting from Unemployment Insurance, along with supporting documents proving the Insurer’s entitlement to compensation.

The Insured is entitled to compensation of the insurance coverage after the submission of the claim, or the decision on the labor complaint referred to the judiciary, if the following conditions are fulfilled:

• The period of the subscription of the Insured to the Scheme is not less than (12) twelve consecutive months.
• The Insured shall be committed to pay all insurance premiums according to the periodic schedule specified by him.
• The reason for unemployment is other than due to resignation or being dismissed for disciplinary reasons.
• The loss of job is not due to strikes or non-peaceful work stoppages, whether there is any damage.
• The Insured does not have a pending unemployment complaint.
• The Insured is lawfully present in the UAE.
• If the Insured has a complaint that has been referred to the judiciary related to the termination of the employment relationship, a copy of the final judicial ruling to the Service Provider must be submitted within thirty days (30) of the final judicial ruling.

To determine the Insured’s entitlements and benefits under the Scheme, the details contained in the application for the cancellation of the work permit approved by the Ministry regarding the termination of the work permit and termination of the employment relationship (dismissal or resignation) will be used. In addition, the employee must ensure, on his own responsibility, that the information included in the cancellation application is accurate prior to signing it.

Subject to the above-mentioned provisions, if the Insured asserts that the information contained in the cancellation application is incorrect, the Insured may submit a request to the unemployment insurance provider to obtain coverage, provided the following supporting documents are attached to the request:

1. An official letter of dismissal indicating the date and reason for the dismissal.
2. Any supporting documents approved by the Ministry.

Accordingly, the Ministry shall determine the validity of these documents and whether the Insured is entitled to benefits under the insurance policy.

No claims for compensation shall be made through fraud or deception, or if the establishment in which the employee works is fictitious. In this case, the penalties and sanctions stipulated in the Law on the Regulation of Labor Relations and any other legislation in force in the State shall apply to the establishment and the Insured.

Compensation Entitlement

In accordance with the eligibility conditions and criteria, the Service Provider must respond to the claim and pay the compensation within two weeks from the date of submission.

The compensation shall be paid on a monthly basis and shall be equal to (60%) of the Basic Salary (calculated on the average of the last six months preceding unemployment) for a maximum period of (3) three months for each claim from the date of unemployment, provided that the value of the monthly compensation does not exceed AED (10,000) ten thousand for the First Category, and AED (20,000) twenty thousand for the Second Category.

Notwithstanding the foregoing, the payment of the compensation shall be suspended if the worker joins another job during the period of entitlement to the Compensation.

The collective maximum period that any employee may benefit from the compensation under the Scheme during employment in the UAE is (12) twelve months. If the Insured exhausts the maximum compensation limit during the period of the insurance certificate, he/she is required to subscribe for another twelve consecutive months (12) to make a new claim.

Future Action

Save for Exempt Workers, all employees employed in the UAE prior to 1 January 2023, are required to subscribe to the insurance Scheme by 30 June 2023.

If you have any queries on this topic, please do not hesitate to reach out to us on the following email: contact@legalboutique.ae