2.5 million people in the UAE have subscribed to the Unemployment Insurance scheme since its launch in January 2023. Officially called the Involuntary Loss of Employment (ILOE) insurance, this mandatory scheme aims to provide UAE residents with financial security in case they lose their jobs due to reasons other than disciplinary action or resignation.
It is mandatory for all employees from the public as well as private sectors to sign up for the Unemployment Insurance in accordance with Federal Decree-Law No. 13 of 2022. The deadline for this Unemployment Insurance scheme is now extended to 1st October 2023, so employees who fail to subscribe for the insurance by then will have to pay penalties.
What we know so far
The mandatory unemployment insurance scheme came into effect on 01 January 2023, and it was made mandatory for employees in the UAE. If they lose their job at least 12 months after the start of their insurance subscription, they will receive 60% of their basic salary for up to three months.
Under this scheme, employees with a basic salary of less than AED 16,000 are required to pay AED 5 per month or AED 60 per year (plus VAT as a premium). They will be compensated with 60% of their average basic salary for three consecutive months. Employees earning over AED 16,000 are required to pay AED 10 every month, or an annual premium of AED 120.
However, employees cannot receive compensation if they are the ones to resign, if any fraud was involved, or if they got fired for disciplinary reasons under the UAE’s Labour Law or any other applicable laws. Those exempted from subscribing for the Unemployment Insurance comprise investors, owners of facilities (in which they work), domestic helpers, employees with a temporary employment contract, juveniles under 18 years of age, and retired persons who receive a retirement pension.
What’s new
A notice recently posted on the ILoE website was asking people working in semi-government entities and companies registered under freezones to also subscribe to the insurance scheme. It is now mandatory for freezone employees to also subscribe to the Unemployment Insurance to avoid any fines. The subscription rules and mediums remain the same.
How do you subscribe
You can subscribe to the policy through bank ATMs, kiosk machines, or MOHRE-approved financial institutions. If your employees use the C3Pay payroll cards, then they can simply subscribe to the Unemployment Insurance via the C3Pay app. As an employer, you can also Bulk Subscribe all your employees in one go through our Edenred payroll portal.
How to submit a compensation claim
From the date of their unemployment, employees have a period of 30 days to submit their claim to the ILOE Insurance Pool represented by Dubai Insurance. They will receive the compensation within two weeks. They will get paid for three months or until they find a job, whichever comes first.
If you are an employee, kindly note that you will be eligible for compensation only if you have paid the insurance subscription for 12 months and have legally been present in the UAE, since your unemployment. Your right to compensation will be forfeited if you cancel your residency and leave the country, or join a new job, within the processing period.
Fines and penalties
Unpaid penalties shall be deducted either from the employees’ salary or end-of-service benefits. Under ‘fines and collection methods’, the ministerial resolution states: “Workers or employees who fail to pay their fines for three months from the due date will have the fine amount deducted from their wages through the Wage Protection System, end-of-service gratuity, or any other alternative method deemed acceptable by the Ministry (of Human Resources and Emiratisation).”
Here are three penalties and violations as specified by the law:
- AED 400 fine: For employees who fail to subscribe to the scheme before June 30, 2023.
- AED 200 fine: For employees who fail to pay premiums for more than three months from the due date. This violation will also lead to the insurance certificate being cancelled.
- AED 20,000 fine: For employers who will be caught colluding with the insured, to get unemployment insurance benefits.
Employees can pay these fines via the MOHRE website, MOHRE app or any ministry-approved business service centre. It is also possible to apply for paying through instalments or request a waiver.
For more information related to your employees’ financial rights, WPS-compliant payments or salary cards for your employees, feel free to reach out to us on info.ae@edenred.com
