Do I Need Involuntary Loss of Employment Insurance?

Employment Insurance

The UAE government introduced the Involuntary Loss of Employment (ILOE) insurance scheme in 2022 under Federal Law No. 13. This scheme aims to support both public and private sector employees by providing cash benefits if they lose their jobs involuntarily due to redundancy or other qualifying reasons.

What is Covered Under the ILOE Scheme?

Included in the ILOE scheme coverage:

  • Employees who have paid into the program for 12 consecutive months.
  • Involuntary job loss (not resignation or termination due to gross misconduct).
  • UAE-based employees in the private and public sectors.
  • Monthly cash payments for up to 3 months, equaling 60% of the average monthly salary.

Excluded in the ILOE scheme coverage:

  • Business owners or partners in the organization
  • Temporary contract workers
  • Domestic helpers
  • Retirees receiving pensions
  • Workers under 18 years old
  • Voluntary resignation
  • Termination due to gross misconduct
  • Workers on probation periods

Covered individuals who lose their jobs involuntarily can claim monthly cash payments for up to 3 consecutive months to support themselves financially while searching for new employment. The payout equals 60% of the claimant’s average monthly salary over the prior 12 months.

Monthly Premiums

Premiums are paid every month based on the salary band:

  • Category A:

Workers earning AED 16,000 per month or less pay 5 AED per month, or 60 AED annually.

  • Category B:

Workers earning over AED 16,000 per month pay 10 AED per month or 120 AED per year.

These premiums are subject to 5% VAT. Employees must pay 12 consecutive months of premiums before being eligible to claim benefits.

Claim Benefits of ILOE

Payouts are calculated based on 60% of the average monthly salary before job loss. Maximum payouts are limited by claim caps:

  • Category A: Up to 10,000 AED per month
  • Category B: Up to 20,000 AED per month

The scheme allows a maximum of 3 consecutive months of benefits per claim, with a lifetime limit of 12 total months of benefits regardless of the number of claims.

The Claims Process for ILOE

To receive benefits, covered employees must file their claim within 30 days of the job loss date. All eligibility criteria must be met, including having paid 12 consecutive months of premiums on time and not leaving employment voluntarily or due to gross misconduct.

Required documentation normally includes:

  • Proof of involuntary job loss
  • Employment contract
  • Payslips for the last 12 months
  • Passport and Emirates ID copies
  • Bank account details

Once approved, benefits are paid monthly to the claimant’s bank account until the maximum duration is reached.

Importance of Maintaining Continuous Coverage

Employees must pay their ILOE premiums each month on time to maintain eligibility. Even a gap of 1-3 months could restart the 12-month waiting period to be qualified to make a claim. Having continuous coverage guarantees access to benefits if needed.

Assessing Your Personal Need for Coverage

The value of ILOE insurance varies depending on individual circumstances. Those with substantial emergency savings, access to familial support, or incomes allowing rapid reemployment may benefit less. However, many UAE residents support their families and lifestyles solely through their employment income. For them, involuntary job loss could quickly spiral into major financial distress in the absence of ILOE benefits. Carefully considering your personal situation is vital when deciding to enroll.

Why Consider Enrolling in ILOE

This insurance can provide a valuable safety net for UAE residents vulnerable to unexpected redundancy or downsizing. For many, 3 months of 60% income replacement could make the difference between financial ruin and managing basic expenses while job hunting. With premiums costing just 0.03-0.06% of monthly income, it is affordable protection.

Who Might Benefit Most?

Employees in industries with higher turnover or instability may benefit most, as may specialized roles with niche skills that could require more time to match with a new position. Single-income households also have more to lose. However, anyone could unexpectedly lose their job and face hardship without company severance or personal savings.

For a small yearly investment, the peace of mind and temporary income support this insurance provides are priceless to many UAE workers. Understanding all aspects of the ILOE scheme allows UAE residents to make informed enrollment decisions, hoping to hedge against unforeseen unemployment events.