Certain new reforms relating to private sector employees were approved by officials in a cabinet meeting recently. This was widely welcomed by experts as being beneficial for employers as well as employees in the private sector. We look at the changes that been approved as well as the impact they are likely to have:
The Dubai media office tweeted this to announce the changes that would be made. Essentially, the bank guarantee system that is currently in place for employees in the private sector is to be discontinued. This is to be replaced with low cost insurance that will cover employees and their entitlements.
It is expected that the change in policy will release about AED 14 billion back into the system and free up funds for private sector companies to utilise elsewhere. Legal experts have said that this will help employers save money by lowering the amount they have to pay upfront, but offering better protection and coverage for employee entitlements.
Analysts say that the new provisions will offer better protection to expat workers; particularly those from lower income brackets. If there is any misfeasance on part of the employer such as nonpayment of dues, the employee can register a complaint with the Ministry of Human Resources and Emiratisation. Subsequently the insurance would make a payment based on the claim.
Where employers were required to deposit a D3,000 by way of a bank guarantee per new hire, this requirement has been done away with under the new provisions. This will now be replaced with a Dh60 insurance policy. This will offer cover for emoluments such as end of service benefits, overtime, holiday allowances, return air ticket, compensation for work related injuries etc.
The current bank guarantee of Dh 3,000 is not enough to cover employee entitlements such as holiday perks, gratuity, compensation in lieu of notice and so on. However the insurance payout limit is to the tune of Dh20,000 which can cover for eventualities that the bank guarantee would not be adequate for.
The new insurance initiatives are meant to create a more competitive environment and to increase ease of doing business even more in this part of the world. This is a part of the bouquet of reforms recently announced to increase UAE’s global economic competitiveness, including the recent Visa policy changes and other new provisions.
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