Social Insurance in the UAE

Understanding social insurance in the UAE

Social insurance refers to government-mandated programs that offer financial protection and social benefits to individuals during periods of economic vulnerability. Its primary purpose is to reduce poverty, promote equity, and ensure that workers have access to essential support in times of need.

Jacob Thomas

Senior Associate, Corporate Accounting Services

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In the UAE, this system is particularly tailored to uphold national priorities, such as encouraging Emirati workforce participation while creating sustainable economic frameworks. For instance, the UAE’s social insurance scheme typically covers pensions, end-of-service benefits, and, more recently, unemployment insurance—a groundbreaking addition introduced to enhance economic resilience. These benefits underscore the system’s broader goal of not only protecting individuals but also fostering long-term economic growth by instilling confidence in the labor market.

In addition to basic salary, employment contracts in the UAE often include a range of benefits and allowances that are negotiated between employers and employees. Common benefits include:

Housing allowance: Many expatriate workers receive a housing allowance, which is either paid as part of the monthly salary or provided in kind through company-sponsored accommodation.
Transport allowance: Transport allowances are also commonly included to cover the cost of commuting to and from work. This is especially important in cities like Dubai and Abu Dhabi, where the cost of living can be relatively high.
Health insurance: Employers are legally obligated to provide health insurance for all employees. In Dubai and Abu Dhabi, this requirement extends to the employees’ dependents as well.
Workmen’s compensation insurance: This is a mandatory requirement for all companies. It provides coverage for legal liability to employees in the event of occupational injuries sustained during their employment, within the territorial limits specified by the Labor Law and the Workmen’s Compensation Ordinance.
Annual airfare: Many expatriates are entitled to an annual round-trip ticket to their home country, either for themselves or for their entire family. This benefit is standard for employees from outside the UAE and is typically provided once per year.
Gratuity payments: Under UAE law, employees are entitled to end-of-service benefits, commonly referred to as gratuity, after completing at least one year of service. When calculating the length of service, unpaid leave is excluded. Employers are also allowed to deduct any outstanding amounts owed by the employee from the gratuity payment. The gratuity is calculated at a rate of 21 days' wages for each year of service for the first five years, and 30 days' wages for every additional year thereafter.
Involuntary Loss of Employment Scheme: In the implementation of the Federal Decree Law No. 13 of 2022 concerning the Involuntary Loss of Employment (ILOE), this unique Scheme provides security for employees who lost their jobs due to reasons other than disciplinary action or resignation until they find a new job. The eligible employees will be compensated with a Monthly cash benefit up to 60 percent of their average basic salaries, 6 months prior to the loss of employment. Cash benefit shall be provided for a maximum 3 consecutive months for a claim only for the workers who pay the monthly premium for at least 12 consecutive months.

Legal framework governing social insurance

The UAE’s social insurance regulations are primarily governed by Federal Law No. 7 of 1999 on Pension and Social Security and its subsequent amendments, along with the recently enacted Federal Decree-Law No. 57 of 2023. Together, these laws establish the rules for pensions, contributions, and other social security benefits available to UAE nationals working in both government and private sectors.

Additional directives, such as Circular No. 1 and Circular No. 2 of 2017, mandate the obligatory registration of UAE nationals in the pension scheme, reinforcing the principle of comprehensive social protection for all eligible Emirati employees.

Federal Law No. 7 of 1999 on Pension and Social Security

This landmark legislation set the foundation for the UAE’s modern pension and social security system. It applies to Emirati employees across public and private sectors who were registered in the workforce before October 31, 2023. Key features of the law include provisions for retirement pensions, disability pensions, and death benefits, ensuring that UAE nationals are financially supported during life transitions or unforeseen circumstances.

Federal Decree-Law No. 57 of 2023 updates

Introduced to address evolving workforce dynamics, Federal Decree-Law No. 57 of 2023 brought significant enhancements to the existing social insurance system. Notable updates include:

For UAE nationals working in the private sector, the maximum pensionable salary was raised from AED 50,000 to AED 70,000 per month.
Pensions are now calculated based on the average monthly salary over the last six years of service, creating a more equitable approach for both government and private-sector employees.
Women, particularly mothers with five or more children, may benefit from reduced age and service requirements for early retirement pensions.
The law set a minimum retirement age of 55 and a required contribution period of 30 years to qualify for a pension.
Pensioners with 30 years of contributions may now combine their pensions with salaries from new jobs.
The total monthly contribution for pensionable salaries is 26 percent. This includes 11 percent from the employee, 15 percent from the employer, and an additional 2.5 percent subsidy by the government for private-sector employees earning less than AED 20,000 monthly.

The law also allows employees on unpaid leave for postgraduate studies or family care to maintain their pension contributions, subject to GPSSA’s terms and conditions.

General Pension and Social Security Authority (GPSSA)

As the central body overseeing the UAE’s pension and social security system, the GPSSA ensures compliance with laws, manages contributions, and administers benefits. Its responsibilities include:

Registering eligible employers and employees.
Ensuring timely collection of contributions from all parties.
Processing pension and benefit claims efficiently.
Providing guidance to employers and employees on compliance and policy updates.

The GPSSA plays a vital role in bridging gaps between policies and their practical application, particularly as new reforms are introduced. To comply with the UAE’s social insurance regulations, employers are required to register their Emirati employees with GPSSA. Employees, in turn, must contribute the designated percentage of their salaries to the pension scheme. Registration is mandatory for UAE nationals working in entities participating in the GPSSA system and ensures that employees are eligible to access benefits upon retirement or in other qualifying circumstances.

Employers face strict obligations to maintain accurate records and remit contributions promptly, reflecting the UAE government’s commitment to upholding social security rights.

Types of social insurance benefits

Pension Schemes

The UAE’s pension system primarily applies to Emirati nationals and other GCC nationals employed within the country. For UAE nationals, social security contributions are calculated based on a fixed percentage of the employee's gross salary.

In most emirates, a total contribution of 20 percent is required: 5 percent from the employee, 12.5 percent from the employer, and 2.5 percent from the government. However, in Abu Dhabi, the total contribution rises to 26 percent, with the employer’s share increased to 15 percent and the government contributing 6 percent. Contributions are subject to statutory minimum and maximum salary thresholds of AED 1,000 and AED 50,000, respectively.

For expatriates, many companies provide end-of-service gratuity payments, which serve as a form of retirement benefit. Some multinational companies also offer private pension schemes, but expatriates often choose to contribute to pension plans in their home countries or invest in private retirement plans.

In the Dubai International Financial Centre (DIFC), the introduction of the Employee Workplace Savings Scheme (DEWS) in 2020 marked a significant shift. Employers are now required to contribute monthly payments ranging from 5.83 percent to 8.33 percent of an employee’s basic salary, depending on the length of service, to regulated savings schemes. This replaces the traditional lump-sum gratuity system and aims to safeguard long-term employee savings.

Eligibility criteria

Eligibility for pensions in the UAE is generally restricted to UAE and GCC nationals. Employees must meet specific service duration requirements and age thresholds to qualify for retirement benefits. The criteria include:

A minimum number of years in service.
Meeting the prescribed retirement age, which varies depending on the employment sector and national regulations.

Unemployment benefits

The UAE’s unemployment insurance scheme provides financial support for workers who lose their jobs under certain conditions. The scheme applies to both Emirati and foreign employees in the private and public sectors, excluding specific categories such as investors, domestic workers, and minors.

Subscribers are categorized into two salary brackets:

Employees earning AED 16,000 or less pay AED 5 per month.
Employees earning above AED 16,000 pay AED 10 per month.

In return, qualifying employees receive financial compensation for up to three months, helping them manage living expenses while seeking new employment. When compared to global standards, the UAE’s unemployment insurance is relatively affordable and inclusive, catering to a diverse workforce.

Health Insurance

The UAE mandates health insurance coverage for all employees. Employers are required to provide health insurance as part of their obligations, ensuring access to necessary medical care. Coverage typically includes; general medical treatments, emergency care, and maternity services. For expatriates, health insurance is often provided through private schemes arranged by employers. In some emirates, such as Dubai and Abu Dhabi, health insurance is strictly regulated to ensure inclusivity.

Employers bear significant responsibilities under the UAE’s social insurance framework. They must:

Ensure accurate and timely contributions to pension and unemployment schemes.
Provide health insurance policies compliant with local regulations.
Manage employee expectations regarding end-of-service benefits and retirement planning.

Failure to comply with these obligations can lead to financial penalties and legal consequences.

Gratuity payments

Employees who have completed one year of continuous service are entitled to gratuity payments, which are calculated based on their final wage and years of service.

The DIFC Employee Workplace Savings Plan (DEWS) mandates that all companies registered in the Dubai International Financial Centre (DIFC) participate in the program. Employers must register for the scheme through a portal managed by Zurich and subsequently register their employees.

The DEWS contribution is calculated based on the employee's basic salary, which should not be less than 50 percent of their total salary. Contribution rates are determined by the length of service: for employees with less than five years of service, the employer contributes 5.83 percent of the basic salary, while for those with more than five years, the contribution increases to 8.33 percent.

Did You Know

Employees have the option to make voluntary contributions, which will be deducted from their salaries.

DEWS requires employers under DIFC to transition their End of Service Gratuity liability from a defined benefit structure to a funded, professionally managed defined contribution plan. Essentially, it works like gratuity benefits for employees.

Enrolment process

Companies registered under DIFC must enrol in DEWS and enrol employees after they complete their probation period.
If probation is successfully completed, employers must make back payments from the employee’s start date. If probation is not completed, no payments are required. However, if the employer made contributions during the probation and the employee is not confirmed, the employee is still entitled to those contributions.

Examples

If an employee starts probation on June 1 for 3 months and is confirmed on September 1, the employer must make retrospective contributions for June, July, and August by September 21.
If an employee is not confirmed after probation, no contributions are required.
If contributions are made during probation and the employee is not confirmed, the employee is entitled to those contributions.

Mandatory contributions

For employees with less than 5 years of service, the contribution rate is 5.83 percent of the basic salary.
For employees with 5 or more years of service, the contribution rate is 8.33 percent of the basic salary.
These contributions are in addition to the salary and should not be deducted from the employee’s pay.

Payment process

Contributions must be paid in USD, with the AED to USD exchange rate set at USD 1 = 3.6735 AED. Payments are due by the 21st of the month following payroll (e.g., contributions for January are due by February 21).

Pro-rata and leave

Contributions should be calculated on a pro-rata basis if an employee joins or leaves mid-month. If an employee crosses from less than 5 years of service to more than 5 years mid-month, contributions for the month should be divided accordingly (5.83 percent for the days under 5 years and 8.33 percent for the days over 5 years).

Contributions are also payable during unpaid or maternity leave, based on the employee's basic salary.

Involuntary Loss of Employment (ILOE) scheme

The Involuntary Loss of Employment (ILOE) Scheme is a progressive initiative introduced by the UAE Government to provide financial support to employees facing unexpected job losses. Designed for both Emirati nationals and expatriates, the scheme offers temporary monetary assistance to ease the transition to new employment, ensuring economic security during periods of unemployment.

The ILOE scheme was launched as part of the UAE’s broader labor reforms to enhance employee welfare. The initiative became operational in early 2023, reflecting the government’s commitment to addressing workforce challenges and aligning with international labor standards.

To benefit from the ILOE scheme, individuals must meet specific requirements:

Employees must have subscribed to the scheme for at least 12 consecutive months before filing a claim.
Claimants must be legal residents of the UAE during the claim period.
Applications must be submitted within 30 days of termination.

Who qualifies for ILOE benefits?

ILOE coverage is available to UAE nationals and residents employed in both public and private sectors. However, the scheme excludes:

Retirees receiving pensions who have resumed employment.
Domestic workers and individuals on temporary contracts.
Employees terminated due to misconduct or voluntary resignation.

Benefits structure

The ILOE scheme provides financial compensation based on salary categories and is structured to offer equitable support to all eligible employees:

Category A: For employees earning AED 16,000 or less, monthly benefits are capped at AED 10,000, equivalent to 60 percent of their basic salary.
Category B: For employees earning more than AED 16,000, benefits are capped at AED 20,000 per month, also calculated at 60 percent of the basic salary.

Duration of benefits

Claimants can receive benefits for a maximum of three consecutive months per claim. Over their lifetime in the UAE workforce, an individual can claim benefits for a cumulative total of 12 months. This ensures a balance between providing adequate support and maintaining the scheme’s sustainability.

Claim process

Filing a claim under the ILOE scheme requires adherence to specific steps:

Applicants must provide termination letters, Emirates ID, insurance certificates, and other relevant documents.
The Ministry of Human Resources and Emiratisation (MOHRE) evaluates the claim to ensure compliance with eligibility criteria.
Once approved, the insured receives monthly payments equivalent to 60 percent of their basic salary for up to three months.

Exclusions from coverage

The scheme excludes cases of dismissals for disciplinary reasons, voluntary resignations, and job loss resulting from force majeure, such as natural disasters, terrorism, or government actions.

Subscription and premiums

Employees must consistently pay monthly premiums to remain eligible for benefits. Premium rates are minimal, making the scheme accessible to a wide range of workers:

Category A: AED 5 + VAT per month.
Category B: AED 10 + VAT per month.

Flexible payment options—monthly, quarterly, semi-annual, or annual—allow employees to tailor contributions to their financial preferences.

Subscription process for ILOE insurance

Step 1: Determine eligibility
Ensure you qualify for the scheme by confirming you are not part of the excluded groups, such as domestic workers, retirees receiving pensions, or individuals under 18 years of age.

Step 2: Select insurance category

Category A: For employees earning up to AED 16,000, with a monthly premium of AED 5 plus VAT.
Category B: For employees earning more than AED 16,000, with a monthly premium of AED 10 plus VAT.

Step 3: Choose a subscription channel

You can subscribe through multiple methods tailored to different preferences:

ILOE portal or Mobile App: Accessible online or via app stores, providing seamless registration.
Exchange centres: Visit Al Ansari Exchange branches for assistance.
Business centres: Enrol at Tawjeeh or Tasheel offices for in-person guidance.
SMS registration: Etisalat users can subscribe by texting their Emirates ID to 2120.
Kiosks and ATMs: Use MBME Pay kiosks or bank ATMs equipped with the service.

Step 4: Complete registration

Step 5: Payment of Premiums

Decide how often you wish to pay—monthly, quarterly, semi-annually, or annually—and settle the premium using the method that suits you best (e.g., online payment, mobile wallets, or payroll deductions).

Step 6: Obtain insurance certificate

After successfully subscribing, download your insurance certificate from the ILOE portal or app. This document serves as proof of coverage.

To remain eligible for ILOE benefits, policyholders must maintain consistent premium payments. Non-payment beyond a three-month grace period can result in policy cancellation and a penalty of AED 200. Continuous contributions are crucial not only for retaining eligibility but also for ensuring financial security in times of need.