MOHRE issues new resolution for bank guarantees and employee protection insurance for private sector
His Excellency Dr. Abdulrahman Abdulmannan Al Awar, Minister of Human Resources and Emiratisation (MoHRE), has issued a Ministerial Resolution regarding bank guarantees and employees’ protection insurance scheme in the private sector.
Under the new resolution, establishments may pursue one of two options – the first, provide a bank guarantee of no less than AED3,000 for each worker, paid through a UAE-based bank, provided that the guarantee is valid for one year, can be automatically renewed and paid at the MoHRE demand, without any other restrictions.
The second option entails a 30-month insurance policy, at a value of AED137.50 for each skilled worker, AED180 for each low-skilled worker and AED250 for each worker paid by high-risk establishments that are not registered with the Wages Protection System (WPS).
Her Excellency Aisha Belharfia, Assistant Undersecretary for Labour Affairs at the Ministry of Human Resources and Emiratisation, said: “The UAE’s commitment to guarantee and balance the rights of workers as well as the employers reflect national legislations and highlight the nation’s active role in the main agreements originating from the International Labour Organization. Offering establishments the option of choosing between providing a bank guarantee or an insurance policy gives them the opportunity to choose what is most suitable for them and helps in reducing the operational costs, enabling employers to fulfil their legal obligations towards their workers.”
Sarah Brooks, Managing Director & Owner of Fikrah HR, said, “It’s worth noting that there had previously been a requirement to have a deposit or bank guarantee for employees associated with their work permits and quotas for mainland companies. I believe this overrules that decision.”
According to Brooks, HR managers and business owners need to check what category of company they are under MOHRE and which deposit or insurance is needed per work permit applications.
She added, “It will more than likely not affect businesses too much if they have already been providing similar but for some businesses, it maybe new and may well impact on their cashflow when considering recruitment.”
The deposits are refundable providing certain conditions are met. If their company is in a Freezone, Brooks recommends they contact their Freezone Authority to understand if they will be implementing similar processes. At present whilst both mainland Private Companies and Freezone Private Companies (with the exception of DIFC & ADGM) are obliged to follow the UAE Labour Law (Federal Decree 33 of 2021) only Mainland Private companies are immediately and directly governed by MOHRE. Employees of Freezone Private companies can now seek support and submit complaints to MOHRE in the event of any issues or legal non-compliance.
Bassel Boutros, Associate at BSA Ahmad Bin Hezeem & Associates, pointed out that all entities that are subject to the Labour Code should comply with the provisions of this new resolution with the exception of employees of federal and local government entities, members of the armed forces, police and security, domestic employees. He added, "We note that entities that are subject to DIFC and ADGM laws are excluded as well."
“All businesses shall need to adjust their situations in line with the provisions of this new resolution, as all the private sector employees should benefit from said provisions which aims to protect their legal rights,” Boutros commented.
According to the new resolution, the Ministry will have the right to deduct any amounts from the insurance or the bank guarantee in four situations such as covering the repatriation expenses of an employee to his home country, or in the event a judgment is issued ordering the settlement of any employee’s entitlements to the Ministry.