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Abu Dhabi, UAESaturday 17 November 2018

UAE's new low-cost employment insurance policy rolls out today

The Government scheme offers employees up to Dh20,000 in protection in the event of job loss or redundancy

The new insurance policy particularly benefits low-income employees. JeffTopping / The National
The new insurance policy particularly benefits low-income employees. JeffTopping / The National

A new low-cost insurance policy for private sector employment that offers employees up to Dh20,000 in protection on their workplace benefits takes effect today.

The Dh60 annual policy, payable by employers, replaces the Dh3,000 bank guarantee companies were previously mandated to deposit for each new hire. The scheme also applies to domestic workers, such as maids, drivers and cooks.

“The new regulation will be most beneficial for employers under the umbrella of the Ministry of Human Resources and Emiratisation (MoHRE), making it more cost-effective for companies to operate in the UAE mainland (outside of free zones),” said Marcin Kubarek, manager of knowledge and content at Fragomen Worldwide, which specialises in legal and immigration issues

“Since the employment of domestic workers falls under the competency of the MoHRE, the overall costs of recruitment of housemaids, private drivers, gardeners, etc will drop significantly, making the sponsorship more affordable for local and foreign families."

The new UAE Cabinet-approved legislation was first unveiled by Sheikh Mohammed bin Rashid, Prime Minister and Ruler of Dubai, in June. Earlier this month Nasser Al Hamli, Minister of Human Resources and Emiratisation, confirmed the changes will take effect from October 15.

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The insurance policy protects all UAE employee's workplace perks - such as end-of-service benefits, holiday allowance, overtime allowance, unpaid wages, return air tickets and cases of work injury – in the event of redundancy, a salary being withheld or a company going bankrupt. The maximum payout is capped at Dh20,000 per person.

Mr Kubarek said while the insurance premium costs Dh60 per year, the work permits issued by the MoHRE are valid for two years, meaning employers must pay Dh120.

Keren Bobker, an independent financial adviser with Holborn Assets and a consumer columnist for The National, said the new scheme was “a significant move as the Government is taking steps that should benefit both employers and employee".

“An issue I have seen repeatedly over the years is that employees on leaving service have not received what they are due as the company has a lack of funds, or cash-flow issues," she said.

“Even if the employee makes a case with the MoHRE and wins, there has been little done to enforce the payment of what is due and the ability to claim under an insurance policy in such cases should mean more people can get what they are owed in a shorter time frame.”

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According to the MoHRE, about Dh14 billion held in employee deposits will be released back to companies. Mr Kubarek said companies can only reclaim the bank guarantees already paid when an employment contract is terminated or when a work permit is renewed.

However, he expressed concerns that the protection may be inadequate in some cases.

"The maximum protection guaranteed by the insurance will not be enough to cover serious work-related injuries, or instances where employers owe greater amounts of money to their workers," he said.

Sara Khoja, a partner in the employment team at law firm Clyde & Co in Dubai, told The National this month that the scheme particularly benefits low-income workers, such as domestic staff, who previously had little or no protection.

“The 20,000, whilst a cap, is a significant improvement in providing some cover where there was none before," Ms Khoja said.

"The guarantee was only Dh3,000 and that was usually a nominal amount that could cover a ticket home.”