Labour Law Amendments and New Unemployment Insurance in UAE

31 January 2023

Labour Law Amendments and New Unemployment Insurance in UAE

The UAE recently introduced significant changes to its labor laws with the implementation of Federal Decree-Law No. 33 of 2021, replacing the Federal Decree Law No. 8 of 1980. The Labour Law introduced fixed-term contracts with a maximum duration of three years, which could be renewed for similar or shorter periods. In September 2022, the Ministry of Human Resources and Emiritisation (MOHRE) issued an amendment to the Labour Law (Federal Decree-Law No. 14 of 2022) that removed the three-year cap on fixed-term contracts, allowing companies to determine the terms of employment contracts at their discretion.

To meet the transition deadline of 1 February 2023, many companies have opted to include auto-renewal clauses in their three-year fixed-term contracts. The Labour Law requires a notice period of 30 to 90 days, so companies can either maintain a renewable three-year term or opt for longer terms.

The UAE government has also introduced the Federal Decree Law No. 13 of 2022 Concerning Unemployment Insurance Scheme, aimed at providing income for employees during unemployment. The scheme is mandatory for all employees in the private and public sectors, excluding investors, domestic workers, contractual or temporary workers, minors under 18, and pension-receiving retirees who have joined a new employer.

Under the scheme, employees will be eligible for compensation after being insured for 12 consecutive months, receiving 60% of their basic salary during unemployment. The subscription fee and maximum compensation depend on the employee’s salary, with two categories:

(1) basic salary of AED 16,000 or less, with a monthly subscription of AED 5 and a monthly compensation of AED 10,000

(2) basic salary over AED 16,000, with a monthly subscription of AED 10 and a monthly compensation of AED 20,000 for a maximum of three months or until new employment is found.

Employees can enroll in the scheme through various channels, including the Insurance Pool’s website, bank ATMs, business service centers, money exchange companies, Du and Etisalat, SMS, and other channels designated by MOHRE.

Compensation will not be available for employees who are dismissed for disciplinary reasons, such as gross misconduct, or if there is any fraud or deceit involved in the insurance claim. The specifics of the scheme will be issued separately by the Cabinet, with the scheme set to commence in 2023.

If you need help navigating the changes in labor laws or the new unemployment insurance scheme, our team at Guildhall is available to assist you. Contact us for more information.

31 January 2023

Labour Law Amendments and New Unemployment Insurance in UAE

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