New UAE unemployment insurance scheme: How it will help workers

The new mandatory unemployment insurance scheme announced by the UAE government will provide workers with peace of mind and attract the best talents to the region, according to local experts.

Earlier this month, a federal law was announced which makes it mandatory for employees to have an unemployment support insurance in both the private and public sectors starting January 2023. This will provide workers, who lose their jobs under unforeseen circumstances, cash support every month for a limited period until they find an alternative.

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“For the working population, especially in a country like the UAE, unemployment insurance brings a level of economic stability to an individual and their family,” said Anselm Mendes, executive director, sales and technology, the Continental Group. “It provides them with the much-needed time to seek employment while helping them manage their financial obligations in the interim. This, combined with the various other reform measures by the government on the visa and labour front, will help make the UAE a much more attractive destination for talent.”

The redundancy payment will enable insured workers who suddenly lose their jobs to retrieve 60 per cent of their basic salaries with a maximum amount of Dh20,000 per month. The insurance package will cost workers an amount that ranges from Dh40 to Dh100 annually. However, employees will have the option to apply for higher insurance packages.

“An average worker will have peace of mind, knowing that they are working in an environment where their benefits and compensation rights are protected,” said Anurag Mathur, executive director of Compass Insurance Brokers. “Several developed countries like the US, UK and other European countries provide workers with comprehensive benefits. The current labour law in UAE already covers a large part of these benefits by obligating employers to take suitable insurances for the health and well-being of their staff. This recently announced scheme will fill in the gap by offering guarantee of the income replacement in the event of loss of job.”

A job loss insurance policy is currently unavailable in the UAE market, but it will be an easy one to put in place, according to Neeraj Gupta, CEO of Policybazaar.ae.

“With the government’s aim to improve the competitiveness of Emiratis in the job marketplace, as well as to pull in the best international talent to the UAE, it wouldn’t be difficult to implement a centralised or uniform unemployment insurance policy. I foresee that insurance companies will come up with plans which can be compared and purchased online within a few clicks,” he said.

Mathur agrees but warns there might be some challenges for insurance companies.

“As far as ease of subscribing to the plan is concerned, we are living in smart Dubai, where most of the government services are available thru a digital platform,” he said. “Considering this, I don’t see any challenges for residents to take the policy but yes, I can foresee challenges for the insurers to ascertain legibility of the loss of job claims.”

As Khaleej Times reported, both UAE citizens and expats will be eligible for the job loss insurance. However, investors, domestic workers, employees working under temporary contracts, juveniles under the age of 18 and retirees with pensions or new job opportunities will not qualify for the policy.

It has not been specified how the insurance scheme will be rolled out or whether employers have to assist their employees in applying for the programme. However, experts are sure it will have far-reaching effects.

“Typically, government-helmed unemployment insurances tend to have stringent conditions, favouring citizens and employees,” said Mendes. “The UAE’s scheme, however, covers expats and citizens alike. With proposed fees as low as Dh40 and payouts up to 60 per cent of base salaries, the stipulations are policy-holder friendly. This will create a stable labour market”

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“Stable labour markets are conducive to talent attraction and retention, which, in turn, enhances the overall competitiveness of the nation. For global companies, venture capitalists, and sovereign wealth funds, such conditions are an incentive to set up shop, increase their exposure to local markets, or make strategic capital deployments. Ultimately, residents are the beneficiaries because of the resulting job opportunities, employment security, and the increase in purchasing power.”