UAE issues resolution on bank guarantee and employee protection insurance

Under the new resolution, establishments may provide a bank guarantee, valid for one year, of no less than Dhs3,000 for each worker, paid through a UAE-based bank

by Zubina Ahmed

August 10, 2022

UAE Ministry issues resolution on bank guarantees and employees’ protection insurance

A new resolution on a bank guarantee and employee protection insurance scheme for the private sector in the UAE was announced on August 9.

According to state news agency WAM, under the new resolution, establishments may pursue one of the two options.

The first, establishments may provide a bank guarantee, valid for one year, of no less than Dhs3,000 for each worker, paid through a UAE-based bank. The guarantee can be automatically renewed and paid at the Ministry of Human Resources and Emiratisation’s demand, without any other restrictions.

The second option entails a 30-month insurance policy, at a value of Dhs137.50 for each skilled worker, Dhs180 for each low-skilled worker and Dhs250 for each worker paid by high-risk establishments that are not registered with the wages protection system.

The insurance coverage amounts up to Dhs20,000 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. In the event of the worker’s death, the costs of repatriating the body to his home country and other entitlements is also included.

HE Dr. Abdulrahman Al Awar, Minister of Human Resources and Emiratisation, issued Ministerial Resolution No. 318 of 2022 regarding bank guarantees and workers’ insurance in the private sector. Learn more via our website https://t.co/yCzNGe81xq #MOHRE pic.twitter.com/N4nqCKOSR9

— وزارة الموارد البشرية والتوطين (@MOHRE_UAE) August 9, 2022

The resolution also outlines four cases where the employer may submit a request to reclaim the employee’s bank guarantee.

These cases include, the event of cancellation of the employee’s work permit and providing proof of their departure from the country; employee’s death and providing proof of the body’s repatriation or burial in the UAE; employee’s transfer to a new employer; or any other case in which the employer provides proof of cancellation of the employee’s work permit and payment of entitlements due to the employee.

The Ministry of Human Resources and Emiratisation also reserves the right to refuse to reimburse the bank guarantee to the employer in two cases.

One, if the employer is a party to a collective labour dispute until the employee’s entitlements are settled or if evidence of due fines against the establishment is proven, or if the establishment’s work permits have been suspended.

The aim of this new resolution is to preserve worker’s rights, support the business community, enhance the stability of the UAE’s work environment and strengthen its reputation as a preferred destination to live, work and invest.

Matthew Tailford, director at Sovereign Corporate Services said, “This is another progressive move by the UAE to protect the rights of workers in the country. The new resolution is good news for private sector workers in the UAE and will offer the greatest level of protection for the lower paid and arguably most vulnerable segment of the workforce. In the event of a claim under the insurance option, the proceeds may be used to cover unpaid wages in the last 120 working days, end of service gratuity costs or repatriation costs. The Dhs3,000 bank guarantee may be refunded to the employer where it is demonstrated that all obligations and commitments to the employee have been met.”