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Monday, May 27, 2024

UAE launches unemployment insurance scheme


Workers based in the United Arab Emirates (UAE) can now enroll in the UAE’s new unemployment insurance scheme, the first of its kind in the country. The scheme offers some flexibility and stability to employees seeking employment in the UAE, and allows employers to hire employees who are already in the country and wish to stay.

“There is competition for talent among the Gulf countries, so I see the introduction of unemployment insurance schemes as another measure aimed at attracting and retaining talent,” said Joanna Matthews-Taylor, a lawyer at law firm Baker McKenzie in Dubai. United Arab Emirates.

Who is covered by the new plan?

The scheme covers all employees working in the federal and private sectors, with some exceptions, including domestic workers, temporary contract employees and workers under the age of 18. It also does not include employees working for companies in the UAE’s free zones, which constitute a significant portion of the workforce.

“It currently only applies to employees of employers who are within the human resources and emirate jurisdiction, so if you are an employee of a free zone company, the scheme does not currently apply to you,” said Rebecca Ford, a lawyer at law firm Clyde & Co in Dubai. “I’ve had clients ask if their employees in the free zone can apply for the scheme and my understanding is actually you can’t.”

It is unclear whether the program will at some point be expanded to include free zone workers.

Unemployment insurance benefits are available to employees who are terminated after one year of contribution, but not to employees who leave the job or are fired for disciplinary reasons. Employees who fail to enroll in the program are also subject to financial penalties.

“It’s a compelling initiative,” Matthews-Taylor said. “If employees don’t sign up, there are economic consequences.”

The terms of the program mean that employers may need to be more diligent in handling terminations. Because the nature of the termination can affect an employee’s ability to receive unemployment benefits, if an employer wishes to terminate an employee for disciplinary reasons, the employer must have adequate documentation.

“So, I think this is going to be an area that will actually have an impact on employers, on the way they do certain things. … There may be cases where employers will seek to fire for disciplinary reasons, but they haven’t. Go through the proper process or really properly document the reason for the dismissal,” Ford said. “I think that’s going to be a clear area where if employees don’t think they should have been fired for disciplinary reasons, they’re going to be incentivized to fight back and demand compensation.”

Benefits of the new program

The new scheme will offer expatriate workers the opportunity to stay in the UAE and receive some support between jobs.

Matthews-Taylor said the UAE “had no concept of unemployment insurance in the past”. “The new employment scheme provides a financial safety net or comfort for unemployed workers, providing them with some financial support for up to three months from the date of termination of employment.”

To be eligible for benefits, employees must apply within 30 days of the termination date and they must be legally in the UAE when they make their claim, Ford said.

“As long as you file your claim in a timely manner, then you do have some respite as you look for alternative work, which gets back to the purpose of the scheme,” she said.

Employers do not have any formal obligation to the scheme, but they should raise awareness of it. “The program is very focused on employees or individuals applying and paying for the program,” Ford said.

Employers will also benefit from the scheme. Getting employees to register and thus be able to stay in the UAE longer after they are terminated means more potential employees are already in the country.

“In the UAE, employers may have a broader talent pool,” Matthews-Taylor said. “Expatriate employees who lose their jobs due to insurance schemes may be inclined to stay longer in the UAE rather than return to their home countries.”

Katie Nadworny is a freelance writer based in Istanbul.


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