Further visa reform on the horizon after UAE ‘ups its game’ with unemployment scheme: experts

The initiative will provide a “financial safety net”, encouraging workers to remain in the country while looking for their next role and thereby deepening the UAE’s talent pool.

Joanna Matthews-Taylor, the partner and head of employment at Baker McKenzie, said: “The UAE has further upped its game in the regional competition for talent and investment. The move will further enhance the UAE’s ability to attract talent by providing employees with a financial safety net should they lose their jobs and encourage expats to remain in country.”

“This will likely facilitate recruitment by providing employers with a greater pool of local talent to draw upon and reducing recruitment costs (more talent in the market will result in a reduced need to relocate new recruits and their families from overseas to the UAE),” she continued.

Going into effect on January 2023, the unemployment scheme could have implications on the UAE’s visa regime, which is sponsored by the resident’s employer, even as it complements the country’s latest initiatives towards enhancing its global business-friendly and investment ecosystem.

“It is reasonable to assume that some further reform of the current visa regime will be introduced to compliment the new unemployment insurance programme,” said Mathews-Taylor.

“At present, expatriate employees sponsored by their employers must leave the UAE or secure alternative sponsorship within 30 days of the cancellation of their residence visa. It will be interesting to see if an extension to the 30 day grace period will be introduced or perhaps an obligation for employers to continue to sponsor the visa during the period the employee is entitled to receive funds under the scheme.

“The announcement of the new scheme is the most recent development in a suite of measures designed to enhance the economy of the UAE. These measures include, for example, the introduction of new employment laws,  the switch to a Saturday- Sunday weekend and of course the introduction of an annual 2 percent Emiratisation rate in respect of highly skilled jobs in the commercial sector. Emiratisation is a key pillar of the UAE’s economic agenda and we should expect further developments in this space,” she continued.

While unemployment benefits are typically provided to a country’s citizens, the UAE has extended that to all the country’s residents, including expats, a move that Omar Al-Ubaydli president of the Bahrain Economists Society, called “extremely bold.”

“This is an extremely bold policy, because unemployment insurance (usually in the form of unemployment benefits) is typically only offered to the citizens of a country, or to a strictly controlled subset of expatriate workers.

In contrast, the UAE has one of the most open labour markets in the world, and so providing this sort of scheme to a potentially unbounded labour pool is likely without precedent. Given this, the policy will need to be monitored and adapted as data on its impacts materialises. There are two notably points to keep in mind,” he said.

“First, for the policy to be effective in a sustainable manner, there needs to be a strong link between policymakers and the research community, especially those working in labour economics. This is because analysing the complex and novel data that will be generated requires deep research experience in the fields of economics and applied statistics. It is critical that researchers be afforded access to the data, and to the policymakers themselves so that they can share ideas and have their queries answered. This will ensure the long-term effectiveness of the policy.

“Second, this is the latest in a line of bold policy initiatives undertaken by the UAE government, and reflects a commitment to flexibility and progressive thinking. The risks and potential rewards are both potentially large, which is why most politicians would not be willing to take such steps, but the UAE has consistently demonstrated a willingness to push the envelope in the domain of economic policy. This kind of forward thinking will surely serve it will as it confronts the challenges of the next 20 years,” explained Al-Ubaydli.