In September 2022 the UAE launched for the first time an unemployment insurance scheme to become mandatory for all employees. Federal Decree No. 13 of 2022 concerning unemployment insurance forms part of the statutory framework for this new initiative.
The new law applies to all employees in the private sector, state government, or federal government except for investors (owners of the establishments in which they work), domestic workers, contractual workers, juveniles under 18 years of age, and pension-receiving retirees who have joined a new employer. It has further been clarified that the scheme does not currently apply to employees within the UAE free zones but may do so in the future.
IT is mandatory to contribute and the onus of subscribing and paying the contributions lies with the employee. All government and private sector employees are mandated to subscribe to the scheme. The scheme comes into effect from 1 January 2023 and employee enrolment must be undertaken by 30 June 2023. New employees employed after 1 January 2023 are required to enrol onto the scheme within four months of obtaining their initial work permit approval, receiving their entry work permit, or changing their status, as applicable.
Whilst the onus of paying and subscribing to the scheme lies with the employee, the law mandates establishments to encourage and direct their employees to subscribe to the scheme and pay their premiums on time.
What can employers do?
Whilst the obligation to obtain unemployment insurance lies with the employee, the law makes it clear that establishments must encourage and direct their employees to subscribe to the scheme and therefore prudent employers should educate their employee workforce of this new requirement and the timeframe for compliance, noting that failure to comply may have a direct impact on renewal of employee work permits, which in turn may result in an administrative disruption and burden to the employer.
Failure to subscribe or failure to pay the insurance premiums for a period of three months from their due date will lead to disentitlement from the scheme, and the employee will be required to subscribe / re-subscribe by purchasing a new policy, paying for such policy, and paying a fine of AED 400 in instances where the employee failed to subscribe (subject to any extension to the subscription timeframe being announced), or AED 200 where the employee failed to pay the premium for more than three months.
Contributions are currently set at AED 5 per month for employees earning a monthly basic salary of AED 16,000 or less (Category 1 contributions), and AED 10 per month for employees earning a monthly basic salary of more that AED 16,000 (Category 2 contributions). Employees on commission-based salaries may choose the category of subscription.