Understanding Job Loss Insurance in the UAE: Claims and Penalties

Losing a job in the UAE can lead not only to emotional stress and a drop in social status but also to significant financial difficulties. For foreigners without family and friends’ support, unemployment brings additional stress – staying in a country with high living costs without a regular income is challenging. Moreover, work visas are directly tied to employment. Foreigners who fail to secure another job within 180 days must leave the Emirates. Living expenses persist during the job search period. To address this, the UAE has recently introduced unemployment insurance to support individuals temporarily out of work.

 

This insurance scheme is mandatory for both UAE citizens and foreigners. In this article, we’ll discuss how
unemployment insurance functions in the UAE, how to claim benefits, and the responsibilities employees face if they refuse the insurance.

 

What is job loss insurance in the UAE?

 

The unemployment insurance scheme was implemented in the UAE on January 1, 2023. Despite the Emirates consistently maintaining a low unemployment rate of around 2.5%, during the launch of the program, Abdulrahman Al Awar, the Minister of Human Resources and Emiratisation, emphasized that the program equally protects the rights of workers of all qualification levels, regardless of nationality. Under this insurance, unemployment insurance in the UAE receive benefits amounting to 60% of their salary for three months. Payments stop if employment is found before the three-month period ends.

 

The program aims to achieve several goals:

•  – Building a robust economy capable of attracting and retaining  skilled foreign workers.
•  – Providing financial support for individuals to meet their basic needs during difficult times.
•  – Ensuring financial security for job seekers, enabling them to remain competitive in the job market.

 

Who is eligible to participate in the program?

All workers, including UAE citizens and residents employed in government institutions or private companies, who involuntarily lost their jobs—for instance, due to company liquidation—are eligible for the program.

 

Exceptions include:

•  – Minors under 18 years old;
•  – Pensioners entitled to pensions;
•  – Temporary workers whose contracts have expired;
•  – Domestic workers;
•  – Investors (company owners).
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Important: Compensation is only available to individuals who have been employed for at least 12 months.

 

 

How the unemployment insurance scheme works in the UAE

 

The unemployment insurance program is regulated by Federal Law No. 13 of 2022 and Cabinet Resolution No. 91 of 2022. Registration is mandatory for all employees in the UAE, including those employed in Free Zones. However, employees in the Dubai International Financial Center (DIFC) and Abu Dhabi Global Market (ADGM) may choose to register voluntarily.

 

To claim compensation, employees must subscribe to the program through the ILOE insurance pool website or via another channel recommended by MOHRE. Participants are required to pay monthly contributions of either 5 or 10 dirhams, depending on their income and expected compensation amount. There are two categories of coverage: A and B.

 

For example:

•  – Employees earning up to 16,000 dirhams and paying 5 dirhams monthly can receive a maximum payout of 10,000 dirhams per month for three months (Category A).
•  – Employees earning more than 16,000 dirhams and paying 10 dirhams monthly can receive a maximum payout of 20,000 dirhams per month (Category B).
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How to register for unemployment insurance

 

To register for the insurance program, visit the official ILOE website and select the appropriate subscription category. To apply for unemployment insurance in the UAE, you’ll need the following documents:

•  – Passport or Emirates ID: These documents verify your identity.
•  – Visa and work permit: If you are a foreign employee, you must provide a valid UAE visa and work permit.
•  – Employment contract or agreement: Certified copies are sufficient.
•  – Salary certificate: Typically a bank statement or an official letter from your employer confirming your salary.

 

After registering, insurance premiums can be paid monthly, quarterly, semi-annually, or annually. The payment schedule must be agreed upon when signing the insurance contract.

 

Policy duration

 

The minimum duration for an insurance contract is 1–2 years. To claim benefits, employees must have worked at least 12 months in either a private or public company. Throughout their entire career, employees can claim no more than 12 monthly payments.

 

How to qualify for compensation

 

To be eligible for insurance payouts, employees must meet these conditions:

•  – Be subscribed to the insurance program;
•  – Pay insurance premiums on time;
•  – Have worked in the private or public sector for at least 12 months, with all salary payments made via the WPS system.

 

Additionally, benefits are available only in cases of involuntary job loss due to objective reasons unrelated to employee misconduct. Employees who resign voluntarily are not entitled to insurance payouts.

 

Responsibility for benefit payments

 

Employers are not responsible for insurance premiums and are not required to include these in salaries, similar to bank fees. Employees must independently arrange their unemployment insurance and comply with UAE legislation.

 

Unemployment benefits are paid by private insurers authorized by the UAE Central Bank. The government does not directly provide compensation but regulates mandatory employee insurance coverage.

 

Cost of UAE labour insurance

 

Insurance premiums are very affordable, nearly symbolic:

•  – Category A insurance costs the employee only 60 dirhams per year (approximately $16.30).
•  – Category B insurance costs 120 dirhams per year (approximately $32.60).

 

As of October 1, 2023, around 6.5 million people had enrolled in the program, with about 14% of workers still uninsured. Given that these amounts, particularly when paid monthly, are practically negligible for employees’ budgets, the penalties for non-compliance are notably significant.

 

Unemployment insurance UAE fines for non-compliance

 

Employees who fail to subscribe to unemployment insurance face a fine of 400 dirhams (approximately $108.90). If an employee subscribes but fails to pay premiums for more than three months, they incur a fine of 200 dirhams, and their insurance policy is canceled. Fines are deducted from the employee’s salary or benefits. Additionally, cancellation of the policy may result in the government blocking the renewal of the employee’s work permit.

 

How to receive benefits in case of job loss

 

The process for claiming compensation is as follows:

1. 1. Verify that you meet all necessary criteria.
2. 2. Submit your claim for unemployment benefits.
3. 3. Receive your payments.

 

Compliance check criteria

 

When submitting a claim, consider the following criteria:

•  – Subscription period: You must have been subscribed to  – unemployment insurance for at least 12 months.
•  – Timely premiums: All insurance premiums must be paid regularly, without interruptions exceeding three months.
•  – Claim submission period: Claims must be submitted within 30 days from the date of job loss.
•  – Legal residency: You must be legally residing in the UAE with a valid visa and work permit.
•  – Exceptions: Benefits are not paid if job loss resulted from voluntary resignation, disciplinary actions, or employer complaints regarding unexcused absences.
•  – Insurance exclusions: Job loss due to war, riots, rebellions, revolutions, invasions, civil disturbances, nuclear accidents, terrorist activities, or property expropriation is excluded from coverage.

 

How to claim unemployment insurance

 

Within 30 days of losing your job, submit your claim via the ILOE portal or through channels recommended by the MOHRE. This initiates the verification process for your claim’s legitimacy. It’s crucial to carefully prepare your claim to avoid rejection based on factors like specific insurance exclusions.

 

For further legal guidance on this matter, we recommend contacting our specialists to improve your chances of a favorable outcome.

 

Receiving compensation

Obtain a court decision and contact your insurance provider. You will receive your first payment within two weeks. Monthly compensation is set at 60% of your salary, up to a maximum of AED 20,000 per month, and is payable for a maximum of three months from the date of job loss.

 

Advantages and disadvantages of the program

Advantages of the program

One of the main advantages is the affordability of the basic insurance, accessible to both citizens and residents across all income levels, along with substantial compensation support. Many employees who have worked steadily for decades understand the value of stable employment; however, job stability is not guaranteed. Having the option of financial assistance reduces anxiety about potentially having to leave the country. Losing a job typically means losing the means to pay rent, household expenses, school fees for children, and other critical family costs.

 

The UAE is actively working to attract and retain skilled professionals, following the example of developed Western countries by recognizing the importance of unemployment support for the economy. However, the unemployment insurance scheme in the UAE is relatively new and has several limitations.

 

Disadvantages of the program

•  – A key condition for receiving compensation is continuous employment for at least 12 months. Young professionals laid off just short of this requirement may find themselves forced to return to their home countries, as securing employment without 1-2 years of experience is difficult, especially when job hunting without benefits.

 

•  – The insurance coverage period is short, lasting only three months, whereas many people might need more time to find suitable employment.

 

• – The program provides only two compensation categories. Given the wide salary range in the UAE, higher-earning professionals may find the maximum payout insufficient, while lower-income employees might find their compensation relatively generous. Additionally, there is no legally mandated minimum wage in the Emirates.

 

•  – Employees bear the responsibility for enrolling in unemployment insurance. Any fines resulting from failing to register or make timely premium payments fall entirely on the employees themselves.

 

Conclusion

 

In this article, we have provided an overview of the unemployment insurance program—a significant legislative development in the UAE aimed at protecting employees in challenging times.

 

Given that the program is relatively new and subject to further changes, we advise you to address all legal matters related to insurance claims with the professionals at B2BConsulting.

 

Engaging our experts will help your business minimize risks, avoid unnecessary expenses, and navigate the complexities of the claim process effectively. A personalized consultation ensures that your company can confidently make informed decisions regarding compensation claims and compliance with evolving UAE employment legislation.