Sign up for tax alert emails GTNU homepage Tax newsroom Email document Print document Download document | ||||||||||||||||
January 18, 2023 UAE implements mandatory unemployment insurance scheme
Executive summary Effective 1 January 2023, the United Arab Emirates (UAE) has implemented the mandatory unemployment insurance scheme. This is pursuant to Federal Decree Law No. 13 of 2022 concerning Unemployment Insurance Scheme (Unemployment Insurance Law) issued on 15 September 2022, which can be found on the Ministry of Human Resources and Emiratisation (MoHRE) website. Eligible employees must subscribe to the scheme by the deadline set and will be offered protection up to a maximum of three months’ cash compensation, provided the relevant criteria are met. Detailed discussion Background In May 2022, the MoHRE announced the launch of the mandatory unemployment insurance scheme to take effect in 2023. Emiratis and residents working in the private sector or federal government sector must subscribe to the scheme. The scheme aims to attract and retain talent while enhancing competitiveness in the labor market and providing social protection. Further guidance on the implementation of the scheme was issued and is detailed in Cabinet Decision No. 97 of 2022 and Ministerial Resolution No. 604 of 2022 issued on 14 October 2022 and 30 November 2022, respectively. The guidance can be found on the MoHRE website. Eligibility and deadline for registration Emirati and resident employees are required to participate in the mandatory unemployment insurance scheme. The Unemployment Insurance Law stipulates the following exempt categories:
Moreover, it is observed that the UAE’s Involuntary Loss of Employment (ILOE) website restricts workers/employees in the free zones from subscribing to the scheme. The deadline for employees to register for unemployment insurance is 30 June 2023. Eligible individuals employed from 1 January 2023 must register within four months from date of entry on employment entry permit or visa change. Subscription Employees can currently subscribe to the scheme with nine approved national insurance companies via the following options:
Cost of subscription The cost of subscription is based on the eligible employee basic salary levels. Insurance premiums for the basic insurance package are detailed below (employees can subscribe to additional benefits if they wish):
Based on the legislation, the subscription, compensation values and categories may be subject to amendments. Penalties Employees who fail to subscribe to the scheme by the deadline or fail to pay the premiums may be disqualified from receiving unemployment insurance benefits. In addition, non-compliance can result in fines of:
These penalties can be deducted by the authorities via various means, e.g., from salary account, end of service benefits, among others. Claiming insurance benefits To claim insurance benefits, the relevant conditions stipulated in the Unemployment Insurance Law must be met, including:
Payout The insurance providers will be required to make the insurance payout within two weeks of receiving the claim.
Insurance premiums can be paid either monthly, quarterly, half-yearly or on an annual basis. Implications Employers may wish to inform their employees about the enforcement of the unemployment insurance scheme and should consider the impact of non-compliance on the ability to obtain new work permits. In addition, employers may wish to assess equalizing such payments for international assignees who are currently on secondment to the UAE. ___________________________________________ For additional information with respect to this Alert, please contact the following: EY Consulting LLC, People Advisory Services, Dubai
EY LLP (United States), Middle East Tax Desk, New York
| ||||||||||||||||