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Thu 4 Oct 2018 10:24 AM

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UAE's new low-cost hiring system to take effect this month

Sheikh Mohammed announced in June that AED14 billion held in employee deposits will be released back to companies in October

UAE's new low-cost hiring system to take effect this month
The scheme’s main objective is to ease the process of doing business in the UAE by lowering the cost of recruitment, with a two-year insurance policy costing AED120 per employee.

A new low-cost hiring insurance system, which removes the mandatory AED3,000 bank deposit for new employee hires, and replaced by a AED60 fee, will be implemented across the UAE starting on October 14, according to the country’s labour ministry.

The scheme’s main objective is to ease the process of doing business in the UAE by lowering the cost of recruitment, with a two-year insurance policy costing AED120 per employee.

Private sector firms will have their bank guarantees refunded upon the cancellation of a worker’s permit, or the renewal of a permit with the purchase of an insurance policy.

The new system, which will be set in place in collaboration with Dubai Insurance Company, will cover the cost of replacing workers in the case of contract termination or bad performance. It will also cover fees such as salaries, end of service benefits, return tickets and work injuries.

"With the new insurance scheme, the UAE will be the first country to guarantee wages of all workers in private and domestic sectors,” said H. E. Nasser Al Hamli, the UAE’s minister of human resources and Emiratisation.

The changes were first introduced by Dubai Ruler Sheikh Mohammed in June, when he announced that around AED14 billion which were held in employee deposits will be released back to companies this month to boost cash liquidity.

The new system also entitles employees to up to AED20,000 in pay outs.