The Ministry of Human Resources and Emiratization issued Ministerial Decision No. 318/2022 on the 27th of June, 2022 concerning the Bank Guarantees and Employee Protection Insurance. This decision issued is in line with the legislative framework that mainly aims to preserve workers’ rights, support the business community, enhance the competitiveness and stability of the work environment in the UAE and strengthen the reputation as an ideal and safe destination to build a life, work, explore and make investments.
The Ministerial Decision is an implementation of Article 8 Cabinet Decision No. 18/2022 which describes the Classification of Private Sector Establishments subject to the provisions of the Law Regulating Labor Relations. It states that all the entities that are subject to Federal Decree-Law No. 33/2021 on the Regulation of Labor Relation (hereinafter referred to as “Labor Code”) shall;
It offers the institutions the option of choosing between providing a bank guarantee or an insurance policy allowing them to choose what is most suitable for them which helps in reducing operational costs that enable the employers to fulfil their legal obligations towards their workers.
This is a major progressive move by the UAE to protect the rights of workers in the country, especially for the private sector workers and offers the greatest level of protection for the individuals with lower pay and arguably who are the most vulnerable segment of the workforce. According to MOHRE, the insurance coverage amounts up to Dhs20,000 and includes the wages of the worker’s last 120 working days in four cases where the employer may submit a request to reclaim the employee’s bank guarantee or the remainder therefrom:
This resolution is in line with the legislative framework that specifically aims to preserve the rights of the workers as well as to support the business communities.
The cases in which MOHRE reserves the right to refuse to reimburse the bank guarantee to the employer are wherein;
The Ministry has the right to deduct any/all amounts from the insurance or the bank guarantee in the event a judgment is issued ordering the settlement of any employee’s entitlements to the Ministry or such as covering the repatriation expenses of an employee to his home country.
All entities (technical, commercial, industrial, or other economic entities approved in the UAE, employing workers who are aiming to produce goods, market them or provide services, and are licensed by the competent entities) except the personnel of federal and local government entities, police, security and domestic employees, members of the armed forces that are subject to the Labor Code should comply with the provisions of the New Decision.
As all the private sector employees should benefit from the said provisions which aim to protect their legal rights, all the entities shall adjust their situations in line with the provisions of the New Decision. It’s also worth noting that there had been a requirement previously to have a deposit or a bank guarantee for employees associated with their work permits and quotas for mainland companies.
The deposits are refundable provided that certain conditions are met. If their company is in a Freezone, the Freezone Authority is contacted to understand if the implementing processes will be similar. At present whilst both mainland Private Companies and Freezone Private Companies (except for 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. In the event of any issues or legal non-compliance, employees of Freezone Private companies can seek support and submit complaints to MOHRE.
As all the private sector employees should benefit from said provisions which aim to protect their legal rights, all businesses need to adjust their situations in line with the provisions of this new resolution.
The Ministry of Human Resources and Emiratization also reserves the right to refuse to reimburse the bank guarantee to the employer in two cases namely;
This Ministerial Decision has been beneficial and has improvised the welfare of the employees in the market.
Therefore, the nation is playing an active role in the main agreements originating from the International Labour Organization by undertaking to guarantee and balance the rights of workers and employers which reflects national legislation. If you need any legal assistance regarding any employment issues you can reach out to the well-experienced employment lawyers at Fotis