?Employees based in the United Arab Emirates (UAE) can now subscribe to the UAE’s new unemployment insurance scheme, the first of its kind in the country. This program offers some flexibility and stability to employees who are between jobs in the UAE and allows employers to hire employees who are already in the country and want to stay.
“There is a competition for talent amongst the Gulf states, so I think the introduction of the unemployment insurance scheme is another measure designed to attract and retain talent to the country,” said Joanna Matthews-Taylor, an attorney with Baker McKenzie in Dubai, UAE.
Who’s Covered Under the New Scheme?
The scheme covers all employees working in the federal and private sectors, with some exceptions, including domestic workers, employees on temporary contracts and workers under the age of 18. It also excludes employees working for companies in the UAE’s free zones, who make up a significant portion of the working population.
“It only applies at the moment to employees whose employers fall under the jurisdiction of the Ministry of Human Resources and Emiratisation, so if you are an employee in a free-zone company, at the moment, the scheme does not apply to you,” said Rebecca Ford, an attorney with Clyde & Co in Dubai. “I have had clients ask if their employees who are in a free zone can just apply for the scheme anyway, and my understanding is actually you’re not able to do it.”
It is unclear if the scheme will expand to include free-zone workers at some point.
The unemployment insurance scheme is available to employees who have paid into it for a year and have been terminated, but it is not available to employees who resigned or were dismissed for disciplinary reasons. There are also financial penalties for employees who fail to enroll in the scheme.
“It’s an initiative with teeth. If employees don’t sign up, there are financial consequences,” Matthews-Taylor said.
The terms of the scheme mean that employers may need to be more diligent about handling employment terminations. Because the nature of a dismissal can affect employees’ ability to collect unemployment, it’s important for employers to have sufficient documentation if they wish to dismiss an employee for a disciplinary reason.
“I think this is going to be, therefore, an area which will have an impact actually on employers, on the way they do certain things. … There may be occasions where an employer would seek to dismiss for a disciplinary reason, but they haven’t gone through a proper process or really properly documented the reasons for the dismissal,” Ford said. “I think that’s going to be clearly an area where if an employee feels that they should not have been dismissed for a disciplinary matter, they’re incentivized to fight back on it to claim the compensation.”
Benefits of the New Scheme
The new scheme will offer expatriate workers the chance to stay in the UAE and have some support between jobs.
“In the past, there was no concept of unemployment insurance” in the UAE, Matthews-Taylor said. “The new employment scheme provides a financial safety net, or comfort to employees who lose their job, by providing them with some financial support for up to three months from the date of termination of their employment.”
To be eligible for benefits, employees must apply within 30 days of the termination date, and they need to be in the UAE lawfully when making a claim, Ford said.
“As long as you make the claim promptly, then you do have some respite while you are looking for alternative employment, which goes back to the aim of the scheme,” she said.
Employers don’t have any formal obligations regarding the scheme, but they should raise awareness about it. “The scheme is very much focused on the employee, or on the individual, to apply and pay for the scheme,” Ford said.
Employers also stand to benefit from the scheme. Having employees enrolled and therefore able to remain in the UAE longer after they are terminated means that more potential hires will already be in the country.
“Employers may have a wider pool of talent available to them in the UAE,” Matthews-Taylor said. “As a result of the insurance scheme, expatriate employees who lose their jobs may be inclined to remain in the UAE for a longer period of time, rather than returning to their home countries.”
Katie Nadworny is a freelance writer in Istanbul.