Involuntary Loss of Employment Scheme

Involuntary Loss of Employment Scheme

4 May 2023 - The Involuntary Loss of Employment (ILOE) Scheme was initially introduced on 12 October 2022 and became mandatory for employees in the private and public sectors in the United Arab Emirates (UAE) mainland on 1 January 2023. The scheme provides financial security for employees who lose their jobs for reasons other than disciplinary action or resignation.

As of 3 May 2023, the ILOE scheme has been extended to employees working in Free Zones and semi-government entities in the UAE, thus expanding the scheme's reach to a wider audience. It is important to note that all employees, including UAE citizens and expats, are required to subscribe to the scheme.

To be eligible for compensation, employees must contribute AED 5 or AED 10 (+VAT) per month into the scheme, depending on their salary. Payment is made for one year in advance through the government portal or subscription channels. Employees must pay into and subscribe to the scheme for at least 12 consecutive months to be eligible for a pay-out.

In the event of involuntary job loss (for valid reasons per ILOE guidelines), the scheme provides a monthly cash benefit of up to 60% of the average basic salary of the six months before employment loss, for a maximum of three consecutive months. The compensation amount does not exceed either AED 10,000 or AED 20,000, depending on the relevant plan that the employee subscribed to.

Deloitte’s view

Employees must act soon as the grace period for registering ends on 30 June 2023. Failure to register and keep up with payments may result in fines and penalties. It is crucial for employers to inform their employees of the ILOE scheme's requirements and importance to avoid any legal issues.