UAE issues update to the mandatory unemployment insurance program

• The United Arab Emirates has extended the scope of individuals required to participate in the unemployment insurance program.
• Freezone workers (excluding Dubai International Financial Centre (DIFC) employees) should enroll for mandatory unemployment insurance before the 30 June 2023 deadline (with a four-month grace period for eligible individuals employed from 1 January 2023).
• Contribution to the unemployment insurance program is currently optional for DIFC employees.

Executive summary

Effective 3 May 2023, freezone workers can subscribe to the mandatory unemployment program by accessing the Involuntary Loss of Employment (ILOE) portal.

On 19 May 2023, the Dubai International Financial Centre Authority (DIFCA) issued an additional notification via email clarifying that contribution to the unemployment insurance program is not mandatory for DIFC employees.

The deadline for employees to register for unemployment insurance continues to be 30 June 2023, with a four-month grace period for eligible individuals employed from 1 January 2023.

Detailed discussion

Background

Effective from 1 January 2023, the United Arab Emirates (UAE) implemented a mandatory unemployment insurance program and required all eligible employees to subscribe. At that time, the ILOE website blocked employees in the free zones from subscribing to the program. Further details on the eligibility criteria, subscription cost, deadlines and rules for claiming benefits can be found in our previous alert).

Employees in free zones

As of 3 May 2023, the ILOE website has been updated. It now directs employees in the private sector, working for organizations not registered with the Ministry of Human Resources and Emiratisation (MOHRE), to subscribe under the "Non-Registered in MOHRE" section of the portal.

The DIFCA has subsequently issued additional guidance confirming that the ILOE program is not currently mandatory for DIFC employees.

Payment of unemployment insurance contributions

Employees are responsible for making their own unemployment insurance contributions. Employers may also facilitate payments on behalf of their employees and define a process to reimburse the contributions from their employees. However, at present, the ILOE allows this option only for mainland employers, because freezone entities are yet to be registered.

Implications

Employers should inform their employees about the enforcement of the unemployment insurance program and urge them to consider the impact that noncompliance could have on their ability to obtain new work permits.

Employers should also factor in the contribution costs and administrative process with respect to equalized assignees.

For additional information with respect to this Alert, please contact the following:

EY Consulting LLC, Dubai

• Xavier Delaunay, People Advisory Services
• Roman Gusev, People Advisory Services
• Neha Shah, People Advisory Services
• Anjana Joseph, People Advisory Services

Ernst & Young LLP (United States), Middle East Tax Desk, New York

• Asmaa Ali

Published by NTD's Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.