Expat and Emirati employees across the UAE’s public and private sectors will now have a safety net in the event of a job loss thanks to the new unemployment insurance scheme, which will in turn prevent poverty and distress in the nation, experts told Arabian Business.
The UAE’s Ministry of Human Resources and Emiratisation has stated that the new unemployment pay programme – which was initially announced by the Dubai Ruler Sheikh Mohammed bin Rashid Al Maktoum in a post on Twitter – will be applicable to all UAE citizens and residents.
The unemployment insurance programme will offer each UAE resident the option to pay a minimum of AED 40 and a maximum of AED 100 per year into an insurance scheme.
In return, UAE workers who lose their jobs will be eligible to receive 60 percent of their basic salary, or up to AED 20,000, each month.
The CEO of Policybazaar.ae, Neeraj Gupta, said: “The scheme is likely to help alleviate the distress caused by unemployment. It will provide assistance to unemployed individuals, which could prevent them from falling into poverty and vagrancy.
“The phase of job loss adversely affects the disposable income of the families. It further erodes their purchasing power, diminishes the morale of the employee, and reduces the economy’s output.”
Gupta added: “From 2023 onwards, this unemployment insurance (UI) will provide a safety net for everyone. Unemployment insurance will not only improve their well-being but, also help the economy. It will tide off financial exigencies while maintaining long-term financial stability.”
Unemployment scheme to help employees through a ‘difficult period’
Like other types of insurance, unemployment insurance will help reduce stress and provide crucial aid at a time when people need it the most, experts said.
The chairman of Watania, Dr Ali Saeed Bin Harmal Aldhaheri, said: “The unemployment insurance scheme will help people get through a difficult period by enabling them to pay bills and take sufficient time to make the right decisions about their future.”
The new and innovative scheme is also likely to attract more workers and talent to the country and will boost trust in the UAE workplace.
“This law would also constitute one of the major components of the social security programme in the UAE region,” Gupta said.
Unemployment scheme to benefit businesses and the economy
Additionally, the unemployment scheme will also benefit employers by promoting the smooth and efficient operation of the employment market for Emiratis and workers from overseas alike, making the country a more attractive place to work.
Dr Ali Saeed Aldhaheri said: “The move is part of a dynamic expansion of the insurance market in the UAE, in which the government and the private insurance sector are committed to introducing imaginative new concepts and products to meet the evolving needs of the market for insurance for individuals as well as businesses.”
Extensive insurance coverage across diverse areas of activity is expected to underpin successful economic growth and development.
“The Islamic insurance (Takaful) sector in particular is embarking on a fruitful period of diversification and scaling-up, including though restructuring that will enable the sector to offer innovative and competitive new solutions to a wider base of policyholders,” Dr Ali Saeed Aldhaheri added.
The unemployment insurance scheme is the latest in the UAE’s set of reforms, which further cements it position as a hub for business and talents, following a slew of updated regulations around the long-term Golden Visas and Green Residency visas.
The head of Investment for MENA Equity at Franklin Templeton, Salah Shamma, said: “These reforms should support long-term economic growth by attracting new entrants into the market seeking to set up businesses or find employment in the emirates, all while increasing the stickiness of the existing workforce and by extension, overall population growth.
“We expect improving labour force flexibility and mobility, low tax rates, and improving economic fundamentals to strengthen UAE’s position as an attractive destination to live, work and invest.”
The changes will also build on 2020’s proactive policy measures which paved the way for a tourism rebound catalysed by the successful hosting of Expo 2020.
Dubai’s hotel occupancy rates reaching the highest level in 15 years in March, while room rates hit a 6-year high. Similarly, flight movements in Dubai rebounded to 85 percent of the comparable week in 2019 by the end of the quarter, despite global macro headwinds and surging ticket costs on the back of rising oil prices.
“We expect a fresh pool of talent in sectors such as technology, commerce, and finance to emerge which should have longer lasting effects on the UAE economy,” Shamma concluded.
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