News and developments
Bank Guarantees and Employee’s Protection Insurance Schemes
The Federal Labor Law aims [1] to ensure the efficacy of the labor market in the UAE, and aims to determine the employment relations and rights and obligations of both the employer and employee, in a balanced manner.
To achieve this aim, the Federal Labor Law has implemented a number of changes that enhances the flexibility and sustainability of the labor market in the UAE. One such change can be seen implemented pursuant to the issuance of the Ministerial Resolution No. 318 of 2020 concerning bank guarantees and employee protection insurance, which was issued and came into force on 27th June 2022.
The Ministerial Resolution No. 318 of 2020 was issued pursuant to Article 8 of the Cabinet Decision No. 18 of 2022 which states:
Ayesha Zia Senior Associate Dr. Mahmood Hussain Advocates & Legal Consultancy LLC.
[1] Article 2 of the Federal Labor Law [2] Defined in the Federal Labor Law as “Every technical, industrial, commercial, or other economic unit approved in the State, employing Workers, aiming to produce goods, market them or provide services, and is licensed by the competent entities.” [3] https://www.mohre.gov.ae/en/media-centre/news/9/8/2022/ministry-of-human-resources-and-emiratisation-issues-resolution-on-bank-guarantees-and-employees-protection-insurance-scheme.aspx [4] Established pursuant to the Cabinet Decision No. 46/2022 On the Establishment of a Collective Labour Disputes Committee [5] Defined in the Federal Labor Law as “Every dispute between an Employer and his Workers, the subject matter of which is related to the common interest of all Workers or a group of them.” [6] Article 3(b) of the Ministerial Resolution No. 318 of 2022
- “Establishments subject to the aforementioned Federal Decree-Law No. 33/2021 shall pay a bank guarantee of AED 3,000 for each worker or insure each worker, in accordance with the mechanisms approved by the Ministry of Human Resources and Emiratization.
- As an exception to Paragraph (1) of this Article, establishments that are classified by the Ministry of Human Resources and Emiratization as high-risk shall insure each worker in accordance with the mechanisms approved by the Ministry.”
- First option: An Employee shall be insured in accordance with the procedures prescribed by the guide issued by the Undersecretary of Human Resources Affairs in this regard.
- Second Option: A Bank guarantee shall be paid through any of the banks operating in the State, provided that it is valid for one year from the date of its issuance.”
- A bank guarantee; or
- Insurance coverage.
- Procure a bank guarantee, which is duly issued from a bank operating in the UAE, equal to or not less than AED 3,000 for each employee. The validity of the bank guarantee shall be one (1) year from the date of its issuance; or
- Insure each employee in accordance with the mechanisms approved by the Ministry of Human Resources and Emiratization. As per the Ministry of Human Resources and Emiratization, the option to “insure” “entails a 30-month insurance policy, at a value of AED137.50 for each skilled worker, AED180 for each low-skilled worker and AED250 for each worker paid by high-risk establishments that are not registered with the Wages Protection System (WPS). The insurance coverage amounts to up to AED20,000, and includes the wages of the worker’s last 120 working days, the end-of-service gratuity, the expenses of returning the worker to their home country, and in the event of the worker’s death, the costs of repatriating the body to his home country, and other rights and entitlements that the employer is unable to fulfil, based on a decision by the ministry or the concerned labour court.” [3]
- Article 2 of the Ministerial Resolution No. 318 of 2022, to allow for the payment of repatriation of an employee, payment of the employee’s entitlements acknowledged by the employer or as confirmed by a judgement rendered by any of the UAE Courts etc.
- Article 32(3) of the Cabinet Decision No. 1 of 2022, Article 7 of the Cabinet Decision No. 46 of 2022 and Article 12(1) of the Ministerial Decision No. 47 of 2022, to allow the protection and settlement of the rights of the employees emanating from Collective Labor Disputes[5].
- Cancellation of the employee's work permit and proving his departure from the UAE.
- Employee’s death and provision of an evidence of the body's repatriation or burial in the UAE.
- The employee’s transfer to a work for a new employer.
- Any other cases in which the employer provides a proof of cancellation of the employee’s work permit and the payment of entitlements due to the employee.
- If the Employer is a party to a Collective Labour Dispute, until the employee’s entitlements are paid.
- If it is established that there are due fines that are owed by the Establishment or in the event that work permits thereto have been suspended.
Ayesha Zia Senior Associate Dr. Mahmood Hussain Advocates & Legal Consultancy LLC.
[1] Article 2 of the Federal Labor Law [2] Defined in the Federal Labor Law as “Every technical, industrial, commercial, or other economic unit approved in the State, employing Workers, aiming to produce goods, market them or provide services, and is licensed by the competent entities.” [3] https://www.mohre.gov.ae/en/media-centre/news/9/8/2022/ministry-of-human-resources-and-emiratisation-issues-resolution-on-bank-guarantees-and-employees-protection-insurance-scheme.aspx [4] Established pursuant to the Cabinet Decision No. 46/2022 On the Establishment of a Collective Labour Disputes Committee [5] Defined in the Federal Labor Law as “Every dispute between an Employer and his Workers, the subject matter of which is related to the common interest of all Workers or a group of them.” [6] Article 3(b) of the Ministerial Resolution No. 318 of 2022