Khaleej Times, Saturday, Aug 13, 2022 | Muharram 14, 1444
How new law protects employees’ gratuity, end-of-service benefits
Emirates: The UAE has announced a new
resolution regarding bank guarantees from employers and employees’ protection
insurance scheme for the companies operating in the private sector.
The new law protects employees in the event of an employer becomes insolvent and
fails to pay end-of-service commitments to the employee.
operations manager at company service provider PRO Partner Group, shares the
details of the new resolution and its impact on employees and employers.
What is the new resolution all about?
Dr Abdulrahman Al Awar, Minister of Human Resources and Emiratisation, has
issued the Ministerial Resolution No. 318 of 2022 regarding bank guarantees and
employees' protection insurance scheme in the private sector.
What has changed in the new law?
Under the previous law, the company was required to put down a deposit of
Dh3,000 per employee to ensure that the employer made provision for the
end-of-service benefit for each employee. This new ministerial resolution
further clarifies this option to ensure that the rights and benefits of
employees are protected. Private companies can now pay a yearly sum directly to
the local bank for each employee or pay monthly instalments under an individual
insurance policy per employee.
Are there multiple options for employers?
Employers have two options. Under the first option, an employer can provide a
bank guarantee of Dh3,000 for each employee, valid for one year. The bank
guarantee is the written commitment from the bank to support the obligation from
the employer to the employee. The guarantee is automatically renewed for each
year of service. Under the second option, the employer sets a 30-month insurance
policy for each employee. The insurance policy is paid monthly at a value of
Dh137.50 for each skilled worker, Dh180 for each unskilled worker, and Dh250 for
each worker paid by higher-risk establishments that are not registered with the
Wages Protection System (WPS). The insurance coverage amounts up to Dh20,000 per
worker and will protect them if their employer fails to fulfil their
end-of-service commitments. In case of a claim, the proceeds may be used to
cover unpaid wages in the previous 12 months, end-of-service gratuity costs or
repatriation costs of the worker.
Does the new resolution protect workers?
Yes. Both options protect workers in the event of an employer being unable to
pay end-of-service commitments to the employee.
How does the new law help employers?
The second option under the insurance policy category allows companies to spread
the cost of employee benefits. This means they do not have to commit a large
upfront deposit for each employee. This improves companies’ cash flow as they do
not have large bank guarantees on their balance sheet – which can be significant
for companies with large numbers of employees.
Can companies reclaim their bank guarantees?
How can companies reclaim their bank guarantees?
The employer needs to submit a request to reclaim the employee’s bank guarantee
if the employee leaves the company.