The UAE announces major update to unemployment insurance

The Unemployment Insurance Scheme (the “Scheme”) came into effect on the 1 January 2023 and seeks to provide employees with financial support if they lose their jobs as a result of termination by their employer (save as where the termination is due to misconduct). For those registered with the Scheme, and subject to the payment of monthly insurance contributions for a consecutive period of 12 months, employees will be entitled to compensation equivalent to 60% of their basic salary for up to three months or until they find alternative employment whichever is earlier.

Employees earning less than AED 16,000 will be eligible to receive up to AED 10,000 per month, and those earning more than AED 16,000 will be eligible for a maximum of AED 20,000 per month.

The Scheme initially applied only to employees in the private sector and public sector whose employers were established in mainland UAE, with the exception of (i) investors; (ii) domestic workers; (iii) contractual working or temporary workers; (iv) juveniles under the age of 18; (v) pension receiving retirees who have joined a new employer.

However, the UAE government has recently announced a major update to the Scheme and has now confirmed that every employee including those based in freezones (with the exception of the ADGM and DIFC) and those who are employed by semi-governmental companies must register with the Scheme. As of the date of this alert, the Scheme is not mandatory for employees working in the ADGM or DIFC, however such employees may register voluntarily should they wish to do so.

Despite the recent decision to extend the Scheme to employees whose employer is based in a free zone and/or is semi-governmental, the deadline for employees to register and make the applicable subscription to the Scheme remains 30 June 2023. Failure to register by the deadline will result in fines and other penalties being issued to any non-compliant employees.

Although the obligation to register with the Scheme is the individual employee’s responsibility, it is recommended that employers notify their employees of the Scheme and highlight their obligations in order to ensure that penalties are not imposed against them.

How can we help?

Our Employment & Incentives practice would be happy to assist with preparing employee communications and frequently asked questions which can be shared with employees to explain the provisions of the Scheme including the purpose of the Scheme, how employees can register, the calculation of subscription amounts and how these can be paid, benefits to employees under the Scheme, how the insurance claims can be made and the consequences of non-registration.

If you require any support, or are unsure whether the Scheme is applicable to your employees, please do not hesitate to reach out to us.