Introduction –
The United Arab Emirates has established itself as a major economic center, fostering a thriving environment for businesses and new ventures. As the job market expanded, it created numerous opportunities for local citizens, expatriates, and residents. However, the economic impact of the COVID-19 pandemic led to significant job losses globally, affecting the UAE’s economy as well.
The U.A.E’s federal government planned on introducing a scheme which will allow citizens and residents to be financially stable in case of involuntary job loss, providing employees in the region with insured income for a limited time during their unemployment.
The Involuntary Loss of Employment scheme (ILOE) was introduced in 2022, and was implemented in the U.A.E from 1st January 2023. The scheme primarily aimed at providing financial security to employees in the country (citizens and residents) in case of involuntary loss of employment. The insurance scheme was designed in a way that ensures financial security for a limited period to private and public employees if they lose their jobs, however there are requirements and conditions to claim the insurance premium through this scheme.
Scope and eligibility of this scheme –
This insurance scheme applies to all employees in the federal and private sector except- investors, business owners, temporary employees, juveniles (under the age of 18), domestic employees and retirees who receive pension.
In order for the employee to be eligible for this social security plan, the employee should be paying the monthly premium cost of this insurance scheme for at least 12 consecutive months.
Cost of subscription –
This insurance scheme is of two types, catering to employees who earn a basic salary of a) below AED 16,000 (monthly) and b) above AED 16,000 (monthly)
- a) Employees earning a basic salary of below AED 16,000 (monthly) should pay a monthly insurance premium of AED 5 or AED 60 annually. The compensation for this category must not exceed a monthly amount of AED 10,000.
- b) Employees earning a basic salary of above AED 16,000 (monthly) should pay a monthly insurance premium of AED 10 or AED 120 annually. The compensation for this category must not exceed a monthly amount of AED 20,000.
Employees can also chose to pay the insurance premium on a monthly, quarterly, half-yearly or on an annual basis.
Process to claim loss of job compensation –
The employee must submit their request for the claim within 30 days of their unemployment or involuntary job loss.
Once submitted the documents to request the insurance claim, the respective insurance company now has 14 days to transfer the compensation amount to the employee, once approved.
The monthly compensation claim amount will be paid for a maximum of 3 months or until the claimant finds a new place of employment.
Any breach to the terms and conditions of the insurance claim by the insurance companies will be reported to the MOHRE.
Suspension of insurance compensation –
Any employee, insured under this insurance scheme will no longer be eligible under the following circumstances –
– If they were dismissed from their job due to disciplinary reasons according to the U.A.E’S labor law for the private sector (Federal Decree Law No. 33 of 2021 Regarding the Regulation of Employment Relationship and its amendments)
– If the claimant has taken part in any fraudulent activities to receive the compensation
– If the establishment presented by the claimant to claim the insurance compensation is discovered to be a fictitious organization.
Penalties pertaining to the insurance scheme –
Claimants of the involuntary loss of employment scheme can be penalized under the following circumstances –
– If an employee has failed to subscribe to this insurance scheme before the 1st October 2023, he/she will be fined AED 400.
– If an employee defaults his insurance premium payments for more than 3 months, then he/she will be fined AED200.
– If the employee fails to settle any debt or fine pending against this insurance scheme, the said amount will be deducted against their basic salary through the Wage Protection System (WPS) or their end of service benefits or any other method approved by the MOHRE.
The involuntary loss of employment scheme is governed by the following Laws –
- Federal Decree Law No. 13 of 2022 Concerning Unemployment Insurance Scheme
- Cabinet Resolution No. 97 of 2022 Concerning the Procedures and Controls for Implementing Unemployment Insurance Scheme
Drafted by – Mohammed Shoaib
Reviewed by – Hussam Al Ghofari
