Introduction

The United Arab Emirates (UAE) had taken a major step to protect its workforce by introducing a mandatory Unemployment Insurance Scheme, officially called the Involuntary Loss of Employment Scheme (“ILOE Scheme”), under Federal Decree Law No. 13 of 2022 Concerning Insurance against Unemployment, which came into effect on 1 January 2023.

The ILOE Scheme applies to both UAE nationals and expatriates across private and federal government sectors, providing up to three months of financial support for employees who lose their jobs. Importantly, it includes commission-based employees, ensuring broad coverage. By offering this safety net, the UAE strengthens worker confidence, supports livelihoods, and promotes economic stability.

Nearly three years on, the ILOE Scheme is firmly established and has become a key feature of the UAE labour market.

Overview of the ILOE Scheme

• The scheme provides financial support to employees terminated from private entities or federal government sectors, including commission-based workers (“Employees”).
• Enrollment is mandatory, and Employees become eligible for benefits after paying premiums for at least 12 consecutive months.
• Compensation equals 60% of the basic salary, up to a maximum of AED 20,000 per month, for up to three months or until the Employees secures new employment, whichever comes first.
• Cabinet Resolution No. 97 of 2022 sets out requirements for insurance companies (“Service Providers”) issuing policies under the scheme.
• Service Providers must align packages with the ILOE Scheme and UAE Central Bank regulations and obtain prior approval from the Ministry of Human Resources and Emiratization (MoHRE).
• The Federal Authority for Government Human Resources, in coordination with the Ministry of Finance, administers the scheme for federal government employees.
• Disputes under the ILOE Scheme are subject to the exclusive jurisdiction of UAE courts and governed by UAE laws and regulations.

Cost Structure

Enrollment in the ILOE Scheme is mandatory for the Employees and the payment terms of subscription are structured in accordance with the Ministerial Resolution No. (604) Of 2022 Concerning Unemployment Insurance Scheme:
 

Category	Basic Salary (in AED)	Monthly Premium (in AED)	Annual Premium (in AED)	Compensation (in AED)	Compensation Per month (in AED)
I	16,000.00 or less	5.00	60.00	30,000.00	10,000.00
II	Above 16,000.00	10.00	120.00	60,000.00	20,000.00

 

• Employees receive a Certificate of Insurance upon enrollment.
• Employees without a fixed basic salary (e.g., commission-based workers) may choose either category.
• Compensation is payable only if premiums have been paid for 12 consecutive months.
• Recent updates require premium payments for two years for full coverage.

Penalties for non-compliance:

• Failure to pay premiums for over three months leads to removal from the scheme and a fine of AED 200.
• Failure to enroll incurs a fine of AED 400.
• Penalties may be deducted from salary, end-of-service gratuity, or other sources determined by MoHRE.

Exemptions:

• Investors (self-employed)
• Domestic workers
• Employees on temporary contracts
• Juveniles under 18
• Retirees receiving a pension and returning to employment

Conditions for Compensation

Employees are not eligible if:

• Dismissed for disciplinary reasons or violations of UAE employment laws
• They make fraudulent claims
• They are absent from work and subject to legal proceedings
• They leave the UAE or reside illegally
• They secure new employment after termination
• They resign voluntarily

Claims process:

• Claims must be submitted within 30 days of unemployment or a court order.
• Service Providers must pay compensation within two weeks of receiving valid claims.
• Compensation is limited to three months or until new employment, whichever occurs first.

Reflections: Nearly Three Years On

The ILOE Scheme has already had a significant impact:

• As of early 2025, around 9 million workers have enrolled in the ILOE Scheme
• In 2024, over 10,500 workers received compensation, totaling AED 114 million

These figures show that the ILOE Scheme is actively supporting employees during unemployment, not just a theoretical safety net. Its design - mandatory enrollment, clear compensation rules, and strict compliance - demonstrates the UAE’s commitment to protecting Employees while maintaining accountability.

The ILOE Scheme also promotes stability for employers and the broader economy by providing predictable support during workforce transitions. Ongoing monitoring and awareness will be key to ensuring the scheme continues to meet the needs of a growing and diverse workforce.

Conclusion

The ILOE Scheme has become a cornerstone of workforce protection in the UAE. By covering both salaried and commission-based employees, it strengthens social security, facilitates re-employment, and enhances overall labour market stability.

Nearly three years after implementation, the scheme reflects the UAE’s forward-looking approach to labour market resilience. It provides Employees with financial security during career transitions while reinforcing the UAE’s position as a competitive and globally attractive employment market.

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