Involuntary Loss of Employment (ILOE) Insurance - Is your business compliant?

What is ILOE Insurance?

The UAE's Involuntary Loss of Employment (ILOE) Insurance Scheme, introduced in 2022, aims to provide financial support to employees who lose their jobs involuntarily, ensuring a safety net during periods of unemployment. This comprehensive insurance scheme is mandatory for all eligible employees working in both the federal and private sectors, offering peace of mind and protection against unforeseen job losses.

ILOE Legislative Framework

The ILOE Insurance Scheme is established by Federal Decree Law No. 13 of 2022, which outlines the key principles and provisions of the scheme. The decree mandates participation in the ILOE insurance program for all eligible employees, irrespective of their nationality or employment contract type.

Purpose of Mandatory Implementation

The UAE's decision to make ILOE insurance mandatory stems from several key considerations:

1. Social Safety Net: The scheme aims to provide a safety net for employees who lose their jobs involuntarily, preventing them from falling into financial hardship.
2. Employment Stability: By offering financial support during periods of unemployment, the ILOE scheme incentivizes employers to retain their employees and invest in training and development, contributing to a more stable and productive workforce.
3. Reduced Reliance on Social Welfare: By providing financial assistance through ILOE insurance, the government can reduce its reliance on social welfare programs, ensuring a more efficient allocation of resources.

Who is exempt from the ILOE scheme?

The ILOE Insurance Scheme is mandatory for all eligible employees working in both the federal and private sectors in the UAE. However, there are a few exceptions to this rule:

1. Investors: Owners of companies they work at are exempt from ILOE insurance.
2. Domestic helpers: Domestic workers are exempt from ILOE insurance.
3. Temporary-contract workers: Temporary-contract workers are exempt from ILOE insurance, unless their total period of employment with the same employer exceeds 12 consecutive months.
4. Juveniles under the age of 18: Juveniles under the age of 18 are exempt from ILOE insurance.
5. Retirees who are entitled to a pension and joined a new job: Retirees who are entitled to a pension and joined a new job are exempt from ILOE insurance.

All other eligible employees, regardless of their nationality or employment contract type, are required to participate in the ILOE insurance program. You may not like this requirement, but at Prism 7 Corporate we believe it is a good thing and provides some security for people working in the UAE.

Is there a deadline for ILOE compliance?

The initial deadline for ILOE compliance was June 30, 2023. However, the Ministry of Human Resources and Emiratisation (MOHRE) has extended the deadline for new employees who began their employment after January 1, 2023. These employees have a grace period of four months from the date of their arrival in the UAE or change of visa status to enroll in the ILOE insurance scheme.

Therefore, the current deadline for ILOE compliance depends on whether you are a new or existing employee:

• New Employees: New employees who began their employment after January 1, 2023, have four months from the date of their arrival in the UAE or change of visa status to enroll in the ILOE insurance scheme.
• Existing Employees: Existing employees who were already employed on January 1, 2023, must have enrolled in the ILOE insurance scheme by June 30, 2023. (This has now been extended to October 1, 2023)

This extension was granted to give employers and employees more time to comply with the new ILOE requirements. It is important to note that there are penalties for non-compliance, so it is advisable to enroll in the scheme as soon as possible. If you think you may be non-compliant, don't risk fines, speak to our team today - contact us about ILOE Insurance.

Coverage and Benefits

The ILOE Insurance Scheme provides financial support to eligible employees who lose their jobs involuntarily, up to a maximum of 60% of their average basic salary for up to 3 months, providing the worker has contributed to the scheme for 12 prior consecutive months. The eligibility criteria include:

1. Employment: You must be an Emirati or resident who is an employee in the federal or private sector in the UAE.
2. Duration of Employment: Must have been employed for at least 12 months prior to the involuntary termination of employment.
3. Involuntary Termination: Loss of employment must be due to reasons beyond the employee's control, such as company restructuring, redundancy, or economic downturn.

Obtaining ILOE Coverage

Employees must enroll in the ILOE insurance program through their employers. Employers are responsible for paying 2% of the employee's basic salary, while employees contribute 1% of their basic salary. The enrollment process is straightforward, and employers are required to complete the necessary paperwork and provide employees with ILOE insurance certificates.

Partnering for ILOE Compliance

At Prism 7 Corporate, as well as a range of other corporate services we also provide HR solutions in the UAE, meaning we can assist employers in effectively managing their ILOE obligations. Our expertise extends to:

1. Seamless Enrollment: We streamline the enrollment process by guiding employers through the registration, employee information submission, and contribution calculation steps.
2. Automated Contributions: We integrate with the ILOE portal to automate the contribution calculations and payments, ensuring timely and accurate contributions.
3. Secure Certificate Generation: We generate and manage ILOE insurance certificates for all eligible employees, providing employers with readily accessible documentation.
4. Compliance Audits and Reporting: We conduct regular compliance audits to ensure employers are adhering to all ILOE requirements and maintain accurate records.
5. Expert Guidance and Support: Our HR consultants provide expert guidance and support throughout the ILOE process, answering any questions or addressing concerns.

By partnering with Prism 7 Corporate, employers can simplify their ILOE compliance responsibilities, ensuring that their employees are fully covered under the mandatory insurance scheme. Our comprehensive services and expertise empower employers to focus on their core business operations while maintaining a compliant and protected workforce.

Conclusion

We believe the UAE's Involuntary Loss of Employment (ILOE) Insurance Scheme provides a valuable safety net for employees, providing financial support during periods of job loss. The mandatory nature of the scheme reinforces the government's commitment to social welfare and stability in the labor market. By ensuring a safety net for its workforce, the UAE is fostering an environment conducive to economic growth and job creation.