Home / Business / UAE firms to get worker bank guarantees refund soon as low cost insurance system kicks in

UAE firms to get worker bank guarantees refund soon as low cost insurance system kicks in

The government Wednesday said it will start refunding this month bank guarantee given by companies and business owners for each worker, a move that is expected to inject an estimated Dh14 billion liquidity into the private sector.
A new low cost insurance system will replace the bank guarantee given by companies at the rate of Dh3,000 for each employee since 2001, it was announced yesterday.

The Ministry of Human Resources and Emiratisation said the new insurance system and bank guarantee refund will begin mid-October, following a Cabinet decision in June.
The guarantee is replaced by a new insurance policy that costs Dh60 annually per worker, providing a coverage of Dh20,000 per worker, covering their end of service benefits, vacation allowance, overtime allowance, unpaid wages, worker’s return ticket and cases of work injury.
The move is expected to secure workers’ rights in the private sector and reduce the burden on employers, while allowing businesses to recover approximately Dh14 billion.

The ministry, however, said companies recruiting new workers can buy the insurance policy at an annual cost of Dh60 or provide a Dh3,000 bank guarantee in accordance with the existing system.
Nasser Al Hameli, Minister of Human Resources and Emiratisation, said the new insurance “will further protect workers’ salaries through a six-fold insurance coverage compared to the existing bank guarantee system.”
The new scheme will also provide a new insurance to the domestic workers and reduce the cost of their recruitment, he said.

The bank guarantee refund will start mid-October on cancelling the worker’s work permit or purchasing of the new insurance policy upon renewal of the permit, the ministry said.
The announcement came following an agreement signed by the ministry with an insurance conglomerate led by Dubai Insurance Company in Dubai yesterday.
In order for companies to get their bank guarantees refunded, they must not committed any violations related to failure to pay salaries at least six months before the  renewal of the work permits.

Unpaid benefits

The insurance policy for private sector workers covers the workers’ unpaid benefits such as end of service benefits, leave allowance, overtime allowance, unpaid wages, travel ticket to the worker’s country, as well as work injury cases.
The domestic workers’ policies also cover the cost of replacing the worker in cases of interruption of work, health inefficiencies, or the domestic worker’s desire to cancel the work relationship, in addition to the unpaid wages and the worker’s end of service benefits, vacation allowance and overtime allowance if not paid by the employer,  a return ticket to his country as well as work injury cases.

Source: Gulf News

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