30/09/2020

How To Get Unemployment Insurance In UAE

Unemployment can happen to any employee and for many reasons. It is much more than the loss of income. Our jobs give us status, purpose, social benefits and identity. Over the last few months, I have seen many examples of charity within the Dubai expat community. Partly because it is the right thing to do and partly because so many of us feel that it could so easily happen to ourselves. The UAE does not have a social security system for expats. Therefore the government will not provide you with unemployment benefit. This means expats must provide unemployment insurance for themselves. Recently, unemployment has been a grim reality for many. Whilst this post may be too late for them this time I hope, it will be helpful for others. Here are a few ideas which should help with the financial consequences of job loss.

Emergency Fund

One of the reasons financial advisers go on about an emergency fund is that it enables you to pay the bills if anything were to happen to your regular income without dipping into your long term investments. Many people in Dubai, even those on good salaries, live a ‘hand to mouth’ existence. They spend every penny they earn every month. This is a recipe for disaster.

An emergency fund is a form of self-insurance. Effectively providing you with 3-6 months of unemployment insurance. You may not earn any interest in the bank but it is not there for investment purposes. It is a strategic allocation to cash for family/self-protection. It protects your standard of living whilst you seek new employment or relocate to another country.

Redundancy Avoidance

The pace of change in the modern world is fast. For businesses to remain competitive they need to keep up with changes in the industry and evolve with the times. This means they will demand new skills and knowledge from their employees. This should make a career more interesting but means employees need to continually educate themselves in order to remain relevant. Redundancy occurs when the job is no longer required by the firm or the economy takes a dip and the demand for the company’s services or product falls. Whilst those with up to date skills are not immune to potential redundancy, companies will be keen to retain them over those who have not kept their skills up to date.

Ill-Health

Whether a person is employed or self-employed, their health plays an important role in their ability to earn. UAE Labor law is not very generous when it comes to paying employees sick pay. The basic benefit varies according to whether you work in a freezone or onshore. The typical arrangement is 15 days half-pay.

Of course, many companies offer more than this but it is at their discretion. Where you become long term sick, your employer is unlikely to keep you on the books indefinitely. There is a form of unemployment insurance called Income Protection which will provide you with a regular income if you are unable to work due to illness. It pays out regular income until you are fit to return to work, reach an agreed age (e.g. retirement) or die.

Early Retirement / Career Change

I will finish on a positive, for some, unemployment is an opportunity. They use the experience to change their lifestyle. To get out of corporate life and follow a passion. Where they have managed to build up sufficient assets, income can be generated to support them through this transition.

Summary

Short term accident, sickness and involuntary unemployment policies are rare in UAE. You can see an example of one here. There is action you can take yourself without resorting to unemployment insurance as described above.

If you have any questions, book a call with me by clicking this link, or complete our contact me form; or call 050 594 5217 for a free, no-obligation review of the options.

ABOUT STUART

Stuart Porter - Expat Financial Advisor UAE
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