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Migrant workers to be included in UAE's new unemployment insurance scheme

On May 24, 2022

The UAE has announced a new unemployment insurance plan for public and private sector workers of all nationalities. The recently approved federal law will come into force next year and provide income support, for a limited duration, to workers while they search for a new job.

Dr Abdulrahman Abdulmannan Al Awar, Minister of Human Resources & Emiratisation, stated that workers will be required to contribute to the unemployment fund through insurance companies. According to local reports, annual contributions are expected to range between AED 40 (US$11) and 100 (US$27). Al Awar stated that in the event of job loss, the insurance plan will payout 60% of the worker's wages for a set period of time, up to a maximum of AED 20,000 (5,445 USD). However, the duration of the pay-outs remains unclear at this stage.

According to local reports, domestic workers and workers on temporary contracts will not be included in the scheme.

Without reforming some aspects of the Kafala system, the implementation of an unemployment scheme for migrant workers will run into contradictions; to be able to legally reside in the UAE, migrant workers must be sponsored by an employer; those who lose their jobs have a limited grace period of 30 days to find a job before their residency status becomes irregular, and they become subject to penalties and even deportation. [See Sidebar]

As previously reported, the case of Bahrain illustrates these issues: Bahrain is currently the only Gulf state that, on paper, includes migrant workers in its unemployment scheme. Migrant workers contribute 1% of their wages to the unemployment fund, and if they become unemployed, they should receive 60% of their basic wage from the fund, each month for up to nine months.

In practice, however, migrant workers rarely receive unemployment benefits as they only have 30 days to regularise their status by finding a new job, after which they will be considered irregular and thus ineligible for benefits. It can take up to two months to open an unemployment benefits claim, making it impossible for most migrants to access the benefits.

Due to these restrictions imposed by Kafala, migrant workers end up funding the Bahraini government by contributing part of their wages to the unemployment fund while getting nothing in return.

While initial reports might indicate that this is a positive step forward for workers' rights in the UAE, there are numerous questions that remain unanswered, and observers should be wary of praising the scheme before more details are revealed.