UAE's new insurance policy to create more jobs and spur small businesses to reinvest in the economy
Entrepreneurs say policies will encourage investment and ease of doing business
The latest insurance and visa reforms are a boost for entrepreneurs and will attract small businesses to invest in the country.
Expatriate entrepreneurs said the resolutions approved by the UAE Cabinet last week would free up cash blocked in previously mandatory bank guarantees for workers with new incentives to reinvest these funds in growing businesses.
Mona Tavassoli, founder of Mom Souq and Mompreneurs, which caters to female entrepreneurs in the Middle East, described it as an exciting time for start-ups.
“This is a very positive and exciting move that will certainly encourage more people to choose this country as a destination to set up their businesses,” she said.
“This strategic move will lead to creating more jobs as more companies will be able to hire, they will have more budget to invest in marketing, product quality and customer service, and will lead to the overall strength in the economy in the long-run.”
On June 13, the Cabinet approved a low-cost insurance system as an alternative to a guarantee of Dh3,000 per worker provided by employers.
The new insurance priced at Dh60 per employee per year will cover end of service benefits, holiday allowance, unpaid wages, return air tickets and work-related injuries, for which the coverage amounts to Dh20,000 a person.
Aimed at reducing the burden on employers, it will allow businesses to recover about Dh14 billion in guarantees.
Ms Tavassoli said the decisions would motivate small and medium enterprises as well as entrepreneurs.
As part of the old system, a start-up with 10 employees would require Dh30,000 as deposit, which was “a considerable amount for someone starting a business,” she said.
“In most cases, the Dh3,000 per employee deposit was standing in the way for some start-ups to hire new employees. Entrepreneurs will now able to use this budget differently and more creatively. A medium size company with 100 - 300 employees will have Dh300,000 to Dh900,000 which they had budgeted for employee deposit but it can now be used as a dynamic budget instead of a static one. A lot more money will be circulated in the economy that was used as a deposit previously.”
The reforms also include a six-month visa to help those who have lost their jobs find new employment. Residents can renew visas without the need to leave and re-enter the country under the legislation.
The cabinet described the new system as one that "secures workers’ rights in the private sector and reduces the burdens on employers”.
The replaced bank guarantee for new hires will have great positive impact to the market, said Farook Kassim, vice chairman of the Sri Lanka Business Council and founder, managing director of Albogari IGL, a bullion export house.
“It will give relief to companies as so much of additional working capital will come into the market,” he said.
“The change will not be felt as an overnight reaction but it is a very positive note because it will bring relief to companies who have put in cash in deposits and their money will no longer be blocked with the bank.”
The reforms followed new residency visa rules, announced in May, to allow key professional workers to live in the UAE long-term. The Cabinet had approved a series of amendments including visas of up to 10 years for specialists working in the fields of medicine, science, research and technical fields, in addition to their families.
Updated: June 19, 2018 02:37 PM