Losing a job in the UAE can lead to not only emotional discomfort and a drop in social status but also significant financial complications. For foreigners without the support of family and friends, unemployment is associated with additional stress – it’s hard to stay in a country with high living standards without regular income. Moreover, work visas are always tied to employment. If foreigners fail to find another job within 180 days, they must leave the Emirates. During the job search, living expenses are still necessary. Currently, the UAE has introduced unemployment insurance to support those who temporarily lose their jobs.
СThe insurance scheme is mandatory for both UAE citizens and foreigners. In this article, we will discuss how unemployment insurance works in the UAE, how to receive payments, and the responsibilities of employees regarding the refusal of insurance.
What is job loss insurance UAE?
The unemployment insurance scheme came into effect in the UAE on January 1, 2023. Despite the unemployment rate in the Emirates remaining consistently low at 2.5%, during the implementation of the program, the head of the Ministry of Human Resources and Emiratisation, Abdulrahman Al Awar, announced that the program equally protects the rights of workers of various qualification levels, regardless of their nationality. Unemployment insurance in the UAE entitles individuals to receive unemployment benefits amounting to 60% of their salary for three months. The payments are suspended if employment is found before this period ends.
The program aims to achieve several goals:
- Building a successful economy capable of attracting and retaining foreign skilled workers.
- Providing material support to people to meet their basic needs during a challenging period.
- Ensuring financial security for workers seeking employment, so they feel competitive in the market.
Who is eligible to participate in the program?
All workers, both UAE citizens and residents, employed in government institutions or private companies who unintentionally lost their jobs, for example, due to company liquidation, are eligible to participate in the program.
Exceptions apply to the following categories:
- minors under 18 years old;
- pensioners eligible for a pension;
- temporary workers whose contracts have ended;
- domestic staff;
- investors—company owners.
Important! Compensation is available to those who have worked for at least 12 months.
How the unemployment insurance scheme works in the UAE
The unemployment insurance program is regulated by Federal Law No. 13 of 2022 and Cabinet Resolution No. 91 of 2022. Registration in the program is mandatory for all employees in the UAE, including those working in Free Zones. Exceptions include the Dubai International Financial Center (DIFC) and Abu Dhabi Global Market (ADGM), where registration is optional.
To get compensation, each worker must subscribe to the program on the ILOE insurance pool website or another channel recommended by MOHRE. Monthly payments of 5 or 10 dirhams are required, depending on income and the expected compensation amount. There are two categories: A and B.
For example:
- employees earning up to 16,000 dirhams and paying 5 dirhams per month can receive a maximum payout of 10,000 dirhams for three months (Category A);
- Employees earning more than 16,000 dirhams and paying 10 dirhams per month can receive 20,000 dirhams monthly (Category B).
How to register unemployment insurance
To register for the insurance program, visit the official ILOE website and select the appropriate subscription category. To apply for unemployment insurance in the UAE, you will need the following documents:
- Passport or Emirates ID. These are the primary documents that verify your identity.
- Visa and work permit. If you are a foreigner, you must have a valid UAE visa and work permit.
- Employment contract or agreement. Certified copies of documents are sufficient.
- Salary certificate. This document confirms your salary, usually a bank statement or an official letter from your employer.
After registering in the program, insurance premiums can be paid monthly, quarterly, semi-annually, or annually. This must be agreed upon when signing the contract.
Policy duration
The minimum insurance contract term is 1-2 years. This means you can claim benefits only after working in a private or public company for at least 12 months. Throughout your career, you can claim no more than 12 monthly payments.
How to qualify for compensation
To be eligible for an insurance payout, you must meet the following conditions:
- be subscribed to the insurance program;
- pay insurance premiums on time;
- have worked in the private or public sector for at least 12 months, with all salary payments made through WPS.
Additionally, benefits are only available in cases of involuntary job loss for objective reasons not related to a breach of the employment contract by the employee. If an employee resigns voluntarily, they will not receive an insurance payout.
Benefit payments — who bears the responsibility
Employers are not responsible for insurance premiums and are not required to compensate them as part of the salary, similar to bank commissions. Employees must independently arrange involuntary loss of employment insurance and are responsible for complying with UAE legislation.
Unemployment compensation is paid by private insurers authorized by the Central Bank. The state does not participate in the payments but regulates the necessity for employees to obtain insurance.
Cost of UAE labour insurance
Insurance premiums are very affordable, almost symbolic:
- Category A insurance costs the employee only 60 dirhams per year or $16.30.
- Category B insurance costs 120 dirhams per year or $32.60.
By October 1, 2023, 6.5 million people had participated in the program, with about 14% of workers remaining uninsured. Given that the amounts, especially with monthly payments, are barely noticeable for the budget, the penalties for non-compliance are quite significant.
Unemployment insurance UAE fines for non-compliance
An employee who ignores the unemployment insurance subscription must pay a fine of 400 dirhams ($108.90). If the employee subscribes but does not pay premiums for more than three months, they are fined 200 dirhams, and their insurance policy is canceled. Fines are deducted from salaries or benefits. Additionally, if the policy is canceled, the government may obstruct the renewal of work permits.
How to receive benefits in case of job loss
The process of obtaining compensation is as follows:
- Ensure you meet the necessary criteria.
- Submit a claim for the benefit.
- Receive your benefits.
Compliance check criteria
When submitting a claim, consider the following criteria:
- Subscription period. You must be subscribed to unemployment insurance for at least 12 months.
- Timely premiums. All insurance premiums must be paid on time, without interruptions of more than three months.
- Claim submission period. You can submit a claim within 30 days from the day of job loss.
- Legal stay. You must be legally residing in the UAE with a valid visa and work permit.
- Exceptions. Insurance will not be paid to those who resigned voluntarily, for disciplinary reasons, or have employer complaints related to unexcused absences.
- Insurance Exclusions. Job loss cannot be a result of war, riot, rebellion, revolution, invasion, or other disturbances. Cases related to nuclear accidents, terrorist attacks, and company property expropriation are also excluded.
How to claim unemployment insurance
Within 30 days of job loss, submit a claim through the ILOE portal or channels recommended by by the MOHRE ministry. This initiates the process of verifying the legitimacy of your claim. It’s important to properly draft your claim to avoid rejection due to nuances such as possible insurance exclusions.
For legal consultation on this matter, we recommend reaching out to our specialists. This will increase your chances of a favorable court decision.
Receiving compensation
Obtain a court decision and contact your insurance provider. You will receive the first payment within two weeks. The monthly compensation amounts to 60% of your salary, but no more than AED 20,000 per month, and is paid for a maximum of three months from the date of income loss.
Advantages and disadvantages of the program
Advantages of the program
Among the program’s advantages is its affordable basic insurance coverage, available to citizens and residents with any income level, along with substantial compensation support. Many employees who have worked for companies for decades note that it’s great when you have a stable job. However, this is not always the case. It is better to have the option of receiving financial assistance than to panic about leaving the country. After all, losing a job means losing the ability to pay rent, maintain a home, pay for children’s schooling, and cover other important family expenses.
The UAE is genuinely striving to attract and retain top specialists. Following the example of developed Western countries, it has recognized the importance of this step to support the country’s economy. However, the unemployment insurance scheme in the UAE is still new and thus has several disadvantages.
Disadvantages of the program
- One condition for receiving compensation is continuous employment for 12 months. For young professionals who are laid off even a week early, returning to their home country becomes almost inevitable, as it is challenging to find a job without 1-2 years of experience while job hunting without benefits.
- The unemployment insurance period is quite short. You can only receive payments for three months, but not everyone finds a job that quickly.
- The program only provides two categories of payments. While the salary market is quite diverse, specialists with high incomes may find the maximum compensation insufficient to cover their expenses, whereas low-income workers might receive a relatively high reward. There is no legislated minimum wage in the Emirates.
- Employees are responsible for unemployment insurance in the UAE. Fines for failing to meet the obligations of registration and premium payments fall solely on them.
Conclusion
In this material, we introduced our blog readers to such an important legislative innovation in the UAE as unemployment insurance.
Since it is new and may still undergo multiple revisions, we recommend entrusting legal issues related to claims to specialists at Dynasty Business Adviser.
Firstly, this step will help you avoid unnecessary expenses and disappointments and assist in making timely and correct decisions: whether to claim compensation or take other actions. Secondly, even a well-written article cannot replace a live consultation with an expert who understands the nuances of the legislation and handles requests individually.
