|14 October, 2018

Low-cost insurance initiative for workers in UAE starts on October 15

The new low-cost insurance is expected to pump Dh14 billion back into the private sector.

Image used for illustrative purpose. Customers make transactions at Emirates Bank in Dubai

Image used for illustrative purpose. Customers make transactions at Emirates Bank in Dubai

REUTERS/Mohammed Salem

The new low-cost insurance system, which takes effect today, will ensure long-term employee protection and enhance companies' capital across the country, experts have said.

Starting Monday, the Ministry of Human Resources and Emiratisation (MOHRE) will start refunding bank guarantees of Dh3,000 per worker to employers, replacing it with a new insurance policy that costs Dh60 per worker.

The new low-cost insurance, implemented based on a cabinet decision made in June, is expected to pump Dh14 billion back into the private sector.


While officials said the ministry had taken necessary measures to begin issuing insurance documents and refunding bank guarantees to the employers, companies wait for the process to be applied smoothly. Industry professionals said the major cash liquidity would not only enhance their capital, but also ensure employees' rights are upheld.

Manerker Sarvottam, finance manager at Emirates Logistics LLC in Dubai, said spending Dh3,000 as bank guarantees out of the budget had taken a toll on the company's accounting. "We had no account over what was spent, which was a hurdle. But now, this new system secures the future of workers even more," said Sarvottam.

With more than 250 employees in the free zone area, Emirates Logistics expects about Dh750,000 to be refunded to its accounts. Sarvottam said the huge amount could be invested in granting workers other types of benefits, such as a better medical insurance plan or better accommodation services.

"The budget can also be allocated for the overall business development and expansion," he said.

With the Dh60 that will be paid to insure each worker annually, the system will offer a coverage of Dh20,000 per worker to include their end-of-service benefits, vacation allowance, overtime allowance, unpaid wages, worker's return ticket, and cases of work injury.

"This will be of direct benefit to workers and will give them justice, even in the long run. The old system applied wasn't directly linked to their rights," he said. "However, the most important thing about the system is the actual documentation and implementation."

Meanwhile, Hisham Khalil, Human Resources Manager at Team Engineering Enterprises in Dubai, said the new system frees companies from the burden of guarantees deposited to the bank annually. The system is expected to bring over Dh4.3 million back to their company that operates with 1,460 employees.

"Such an amount can be used in investing in employees that are the company's biggest gain. It will provide better healthcare, safety on our sites, and improved accommodation camps," said Khalil.

He added that the government made a "great call" in introducing the new system that will allow the private sector to benefit from the amounts usually deposited and kept at the bank without providing much advantage to the industry.

Khalil said his company would avail of the new scheme, which will automatically appear on the ministry's platforms. Private firms will be able to apply for the policy immediately by typing in the work permit application.

A guide to the new insurance scheme

>Dh60-Amount that companies will pay for each worker's insurance starting on October 15; instead of depositing Dh3,000 as bank guarantees per worker

>Dh14B-Amount of bank guarantees that will be refunded to the private sector

>Dh20K-Each worker's coverage per the new scheme

For private workers, it covers end of service benefits, vacation and overtime allowances, unpaid wages, return air tickets and work injuries

For domestic workers, the policy covers the cost of replacing the worker in cases of interruption of work, health inefficiencies, or the domestic worker's desire to cancel the work relationship, in addition to the unpaid wages and the worker's end of service benefits, vacation allowance and overtime allowance if not paid by the employer, a return ticket to his country as well as work injury cases

Establishments registered with the ministry will have two options:

Buy insurance that can be issued immediately when typing the work permit application at Tasheel or other establishments that can complete their own applications using the Tasheel e-service

Submit a Dh3,000 bank guarantee on behalf of the employee, as per the rules and regulations of the current bank guarantee system

Safety net

Sara Khoja, partner at the law firm Clyde and Co. in Dubai, said the new insurance scheme would stimulate cash flow for businesses.

She added that the Dh20,000 coverage would serve as a safety net for employees in case they didn't receive their salaries on time or their employer went bankrupt.

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