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New employee insurance scheme takes effect in UAE

Out-Law News | 19 Oct 2018 | 10:01 am | 1 min. read

A new low-cost employee insurance scheme began in the UAE this week, replacing a previous scheme which required expatriate workers to provide a AED 3,000 (approx. $816) bank guarantee when applying for a work permit.

Insurance policies will cost AED 60 annually per employee, and will be set up "electronically and instantaneously" when a new work permit is applied for on or after 15 October 2018. The policies provide coverage of up to AED 20,000 per private sector employee or domestic worker against unpaid wages and benefits, return airfare to the employee's home country and court-ordered compensation for workplace injuries.

Around AED 14 billion is currently held in bank guarantees, according to the Ministry of Human Resources and Emiratisation. The ministry will now begin refunding the guarantees to employers at the point that a work permit is cancelled or renewed.

Employment law expert Luke Tapp of Pinsent Masons, the law firm behind Out-Law.com, said that the new insurance scheme had been "extremely well received" by employers in the region since it was first announced.

"This is another positive move from the UAE authorities towards a more modern and mature arrangement for employee relations," he said. "It will also provide better protection for employees in scenarios where their employers are unable to cover exit payments, such as end of service gratuity and return air tickets at the end of employment, due to their financial position."

"The UAE economy and workplace is much more sophisticated and diverse than it was when the AED 3,000 employee deposit was first introduced, and replacing that arrangement with this insurance scheme of AED 60 per employee is much better suited to the types of workforces within the region. It is a positive move for employee relations and should also be a positive development for the local economy," he said.

The new scheme is available to employers of both private sector and domestic workers. Private sector employers registered with the ministry will be able to either buy an insurance policy when submitting a work permit application through the Tas'heel electronic portal, or to instead submit an AED 3,000 bank guarantee as under the current system. For domestic workers, an insurance document will be issued when the work permit application is submitted either through Tas'heel or at one of the ministry's Tadbeer service centres.

The new policies are valid for two years, which is the same length of time as a private sector or domestic worker employment contract. Private sector worker policies cover unpaid wages, end of service benefits, holidays and overtime, return airfare and court-ordered work injury compensation. Domestic worker policies cover the cost of replacing a worker deemed medically unfit or who decides to unilaterally terminate the employment relationship, as well as the items covered by the private sector worker policies.