The UAE government has introduced a mandatory unemployment insurance program to protect employees working in the UAE in case of involuntary loss of employment. The scheme is a form of security net providing employees in the UAE financial support for a limited period of time, if they lose their jobs as a result of termination by their employers, until an alternative employment opportunity becomes available. The insurance premium is to be paid by the employee, no costs or fees are required from the employer.
Since January 1, 2023, workers in the UAE´s private and public sector have been able to register to the Involuntary Loss of Employment scheme (ILOE), and the deadline for the registration is June 30, 2023. Also Free Zone employees have been able to register through the ILOE portal since May 2023.
The employee must have subscribed to the insurance scheme for at least 12 consecutive months, before compensation can be claimed. The monthly compensation is calculated at the rate of 60% of the average basic salary for the most recent six months before unemployment and paid for a maximum of three subsequent months for each claim. The maximum aggregate period or total combined compensation period is 12 months during the insured´s employment in the UAE.
Unemployment insurance has two basic categories: Category A for workers with basic salary of AED 16,000 or below. The cost for an employee is 60 AED + VAT per year and maximum compensation is AED 10,000/month. Category B is for workers with basic salary above AED 16,000. The cost for an employee is 120 AED + VAT per year and maximum compensation is AED 20,000/month. Employee categories which are exempted from the mandatory insurance scheme are investors (owners of companies they work at), domestic helpers, temporary contract workers, juveniles under the age of 18 and retirees who are entitled to a pension.