Who gets unemployment benefits in UAE and other Gulf countries?

The GCC region has done relatively well in economic terms in the past decade, yet a section of its population remains unemployed. This problem was aggravated during the recent recession years as many companies resorted to cost cutting measures, which included reducing staff members and costs associated with human capital.

According to statics, the unemployment rate of nationals in the Gulf Cooperation Council States (GCC States) currently ranges between six and 14 per cent and this is even higher among the youth. Many of them are fresh graduates who have not been able to join the labour market.

This has prompted many governments in the region to look at financial assistance and unemployment insurance schemes, aimed to help those who are out of the job market.
Clyde & Co, in its latest employment newsletter, highlights the efforts made by the governments in the region.

“Until recently, Bahrain was the only member state to establish a mandatory and permanent unemployment insurance scheme. However, 2013 has witnessed the introduction of unemployment benefits programmes for unemployed nationals in several other GCC States,” say authors Wayne Jones and Elizabeth Williamson, experts in employment, pensions and immigration at Clyde & Co.

UAE

Let’s take a look at who gets unemployment benefits in the UAE. The lawyers at Clyde & Co highlight that in the UAE there is provision “for those who are genuinely unable to work”. But, “there is no unemployment insurance fund for those who are fit to work”.

“In May 2012 a draft federal law to establish a social security system, which supported the unemployed by allocating a monthly benefit payment to help them was rejected by the Ministry of Labour and Social Affairs. At present, the focus is very much on encouraging nationals into the workforce and in particular into the private sector, a programme which has been financed by the Khalifa Fund for Emiratisation Empowerment, and spearheaded by government organisations such as the Abu Dhabi Tawteen Council and Tanmia,” they say.

Saudi Arabia

The newsletter by the law firm states that on 1 July 2013, the Saudi Shura Council approved a Draft Law on Employment Interruption Insurance (Draft Law). The draft law is yet to be passed by the Council of Ministers and enforced through a Royal Decree of the King.

“We understand that this insurance will complement the social insurances currently provided to Saudi nationals. At present this comprises old-age retirement, survivors, long-term disability, and worker’s compensation benefits. The old-age social security pension scheme is applicable to all Saudi nationals, including those employed abroad not covered by the local social security system. Foreign nationals also benefit from the worker’s compensation programme and since 2011, Saudi national university graduates have been able to claim a benefit called Hafiz, which provides for SR2,000 a month for one year.”

“The Draft Law guarantees payments to unemployed ‘contributors’ (that is, those who have made the relevant contributions to the General Organisation of Social Insurance (GOSI), during their employment) and envisages a minimum income being provided for a period of up to six months where employment is interrupted for a reason outside of the employee’s control.”

As of now, retirement (as well as survivors and disability) benefits are funded by employer and employee contributions of nine per cent each. The minimum and maximum monthly earnings for the purposes of contributions and benefits are SR1,500 and SR45,000 respectively. The level of contributions that will be required to be made in respect of unemployment benefit has not yet been confirmed, explain the lawyers.

This benefit will become available to all Saudi national employees who are registered with GOSI and who are under the age of 59 when the Draft Law is implemented. As is the case across the GCC, employees who are nationals of other GCC states are covered by their country’s social insurance plan through a reciprocal arrangement, it adds further.

Kuwait

On 21 April 2013, Law No. 101 of 2013 (Unemployment Insurance Law), was published, providing all Kuwaiti nationals with an entitlement to an unemployment benefit, payable from a social security fund. The Unemployment Insurance Law builds on the existing unemployment benefits and extends cover to all Kuwaiti nationals working in the private sector (including the oil and gas sector).

A Kuwaiti national, on whose behalf contributions have been made for the requisite period, will be entitled to an unemployment benefit of 60 per cent of the salary upon which their pension is calculated under the Social Security Law (that is, currently their monthly salary up to a maximum of KD1,500).

Under the Unemployment Insurance Law, an employer must administer both employer contributions and employee contributions to the Public Institute for Social Insurance (PISI) on behalf of Kuwaiti national employees. A monthly contribution of 1.5 per cent of the employee’s monthly Remuneration (basic and complementary) is payable to the PISI in respect of unemployment insurance. The contributions are shared equally between the employee, employer and the Public Treasury. Deductions apply retrospectively from  May 1, 2013 for all Kuwaiti nationals employed in the private sector and registered with PISI from that date.

These contributions are in addition to the existing monthly contributions due to the PISI in respect of old age, disability, sickness and death insurance (currently 15 per cent of monthly remuneration basic and complementary)) and in respect of the Retirement Pensions Increment Fund (currently 3.5 per cent of monthly remuneration basic and complementary).

Bahrain

Established in 2006, Bahrain’s unemployment insurance scheme was implemented in 2007 and is financed by contributions of three per cent of the employee’s salary, shared equally between the employee, employer and the government.

Decree Law No. 78/2006 (Law on Insurance against Unemployment) differentiates between two important categories of unemployment benefits:

The first is called ‘Unemployment Aid Benefit’, and it is available to first-time jobseekers. It is payable for a maximum period of six months.
The monthly Aid Benefit amount is currently BD150 for those who hold a university degree and BD120 otherwise. The Aid Benefit is paid for up to six months.

The second group is the unemployment insurance benefit for insured employees who become unemployed. It is called the ‘Compensation Benefit’ and is payable for a period of up to six months.

The Compensation Benefit amount is currently determined as 60 per cent of the employee’s average earnings in the last 12 months, with a minimum monthly benefit of BD150 and a maximum of BD500.

In contrast to the schemes being introduced in Saudi Arabia and Kuwait, the Compensation Benefit is available to all public and private sector employees (regardless of nationality), whereas the Unemployment Aid Benefit is payable to Bahraini nationals only.

The entitlement to unemployment benefits is in addition to the benefits provided through GOSI in respect of old-age pension, natural disability pension, end of service benefit, survivor pension, death grant, marriage grant and funeral grant benefits for Bahraini national employees. GOSI coverage also provides for temporary work injury allowances and medical care and other compensation relating to work injuries which apply to employees of all nationalities.

GOSI contributions for a Bahraini national employee currently amount to 19 per cent of his/her wage with a maximum employee contribution of seven per cent of his wage (the employer must contribute 12 per cent and may contribute at a higher percentage). For non-Bahraini national employees, the GOSI contribution is currently four per cent of which an employee contribution of one per cent may be deducted from the employee’s salary. GOSI contributions are currently only applied against the first BD4,000 of wages.

 

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