How does the brand new worker insurance coverage have an effect on employees within the UAE?


Mohammed El Dakamawy, a lawyer with Dubai-based regulation agency Dr Mahmood Hussain Advocates and Authorized Consultancy LLC, said that the laws on financial institution ensures was issued in 2001, with the decision on worker insurance coverage being issued extra just lately.

He stated: “In 2001, the UAE enacted a collection of legislations that enforced an idea of a ‘financial institution assure’ that’s payable by employers. The financial institution assure was to be paid on the time of hiring a brand new worker or renewing a present worker’s labour card.”

Nevertheless, El Dakamawy added that the earlier laws supplied sure exemptions for the financial institution assure, together with however not restricted to organisations or corporations working within the oil, gasoline, mining, banking, insurance coverage, tourism and lodge sector, which had been solely or partially owned by federal or native entities.

The brand new decision – Ministerial Decision No. 318 of 2022 – now permits employers to both present a financial institution assure or enroll their workers in an insurance coverage scheme.

“The latter scheme was enacted to present employers an alternative choice to the cost of a financial institution assure, which was earlier necessary, in an effort to scale back the working bills and improve employers’ money liquidity. With the introduction of this scheme, employers now have the choice to both present the financial institution assure or pay an annual insurance coverage payment or premium per worker to fulfil their obligations,” El Dakamawy stated.

Whatever the choice employers select, El Dakamawy highlighted that employers ought to bear the associated fee for the financial institution assure or worker insurance coverage, and never deduct it from an worker’s wage.

With the introduction of this scheme, employers now have the choice to both present the financial institution assure or pay an annual insurance coverage payment or premium per worker to fulfil their obligations,” El Dakamawy stated.

– Mohammed El Dakamawy, lawyer at Dr Mahmood Hussain Advocates and Authorized Consultancy LLC

What’s a financial institution assure?

Based on Natasha Sood, a senior affiliate at Dubai-based regulation agency Motei and Associates: “A financial institution assure is a promise made by a lending establishment that the financial institution will step up if a debtor is unable to repay a debt.”

So, within the case of a financial institution assure for workers, the quantity paid by the employer to the financial institution ensures that the financial institution will step as much as cowl any prices which will come up throughout an worker’s time period of employment, as per circumstances laid down by the ministerial decision.

A financial institution assure is a promise made by a lending establishment that the financial institution will step up if a debtor is unable to repay a debt.

– Natasha Sood, a senior affiliate at Dubai-based regulation agency Motei and Associates

What does a financial institution assure cowl?

Sood said that if an employer opts for a financial institution assure, the quantity for every employee shouldn’t be lower than Dh3,000. The assure is deposited on the time of both making use of for the worker’s work allow or on the time of renewal of the work allow.

“The assure quantity shall be used to settle disputes involving the non-payment of wages if an organization collapses or if an expatriate accomplice flees, abandoning monetary commitments to its employees,” Sood stated.

Dh3,000

Minimal quantity of financial institution assure for every worker

When are quantities from a financial institution assure deducted?

Based on Sood, MOHRE might deduct any quantities from a financial institution assure within the following situations:
a) Bills for repatriation of an worker to his or her place of birth or another place agreed upon by the worker and the employer.
b) Quantities acknowledged by the employer or his consultant earlier than the Ministry as entitlements of the worker.
c) By advantage of a court docket judgment, to ship the worker’s entitlements.
d) Pursuant to a declare raised by the involved authorities within the nation, to reimburse bills incurred for repatriation of an worker to his place of birth or another place agreed upon by the worker and the employer in case of workers coated by the financial institution assure. Workers coated by insurance coverage protection are topic to the provisions of their insurance coverage insurance policies.
e) In all instances, it’s the employer’s accountability to reimburse the sums paid or full the sum of the financial institution assure.

What’s an worker insurance coverage?

The brand new choice that employers have as an alternative of depositing a financial institution assure is enrolling employees within the worker insurance coverage scheme. Whereas the financial institution assure is an annual cost, the insurance coverage scheme supplies the choice to make month-to-month funds.

Based on MOHRE, the scheme entails a 30-month insurance coverage coverage, at a worth of Dh137.50 for every expert employee, Dh180 for every low-skilled employee and Dh250 for every employee paid by high-risk institutions that aren’t registered with the Wages Safety System (WPS).

Worker insurance coverage – what does it cowl?

Based on MOHRE, the insurance coverage protection quantities to as much as Dh20,000, and supplies protection for the next conditions:

  1. The wages of the employee’s final 120 working days
  2. The tip-of-service gratuity
  3. The bills of returning the employee to their house nation
  4. Within the occasion of the employee’s demise, the prices of repatriating the physique to his or her house nation
  5. Different rights and entitlements that the employer is unable to fulfil, primarily based on a call by the Ministry or the involved labour court docket.

How do I do know if my firm has an insurance coverage coverage for me?

“An employer’s upkeep of a Financial institution Assure or enrolment into the Worker Insurance coverage Scheme is an obligation on employers. Failure of an employer to adjust to such authorized obligations would topic the employer to sanctions and penalties,” El Dakamawy instructed Gulf Information.

He added that additional particulars of the insurance coverage scheme haven’t been introduced, which can present readability on how worker can test the insurance coverage standing. Nevertheless, the worker at all times has the suitable to investigate concerning the insurance coverage scheme along with his or her firm’s HR division and search judicial treatment if she or he believes that they haven’t acquired any advantages they’re entitled to.



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