UAE employee insurance 2022: When do employers need to provide a bank guarantee?

Every person you hire must be protected by a bank guarantee or an employee insurance programme if you own a small business in the UAE. Recently, the Ministry of Human Resources and Emiratization implemented this requirement (MOHRE).

However, if you decide to go with the bank guarantee option, which entails paying a minimum of Dh3,000 when a work permit is given or renewed, it’s crucial for a business owner to consider when you can recoup this expense.

Here is all the information you require regarding the employee bank guarantee.

What is the bank guarantee?

The bank guarantee provided by the employer is intended to serve as a promise that the bank will take action to cover any costs that may occur during an employee’s term of work, according to the terms set forth by the ministerial resolution.

The new MOHRE regulation, Ministerial Resolution No. 318 of 2022, requires companies to provide a bank guarantee of at least Dh3,000 or enroll employees in an insurance programme.

If a business fails or an international partner departs, leaving behind financial obligations to its employees, the guarantee will be utilized to resolve issues surrounding the non-payment of salaries.

Although the possibility to pay for some employee expenses through an insurance plan was recently disclosed, bank guarantees have long been necessary; the UAE’s legislation went into force in 2001.

An employer pays the guarantee to one of the banks designated by the State to keep such guarantees. Additionally, the bank guarantee must be renewed yearly in order to maintain its efficacy and sufficiency to reach the legal minimum.

Also Read: A complete guide to UAE bank timings in 2022

When can an employer recover the bank guarantee?

The Ministry of Human Resources and Emiratization (MOHRE) of the UAE issued Ministerial Resolution No. 318 of 2022 in August of that year, which states that if an employer wants to recover the cost of the bank guarantee, they may only do so if the employee’s work permit is revoked or the employee has changed jobs. In addition to highlighting the circumstances under which an employer may recover the cost of the bank guarantee, Article 3 of the decree also lists those under which MOHRE may decline to refund the employee for the bank guarantee.

In accordance with the first sentence of Article 3 of Ministerial Resolution No. 318 of 2022, the following situations may give rise to a request from the employer to obtain the whole amount of an employee’s bank guarantee:

1. The employee’s work visa must be canceled, along with proof of their departure from the nation.
2. If the employee passes away and documentation of the body’s burial or repatriation to the country is provided.
3. If the worker moves on to a different employer.
4. Any other situation where the employer can demonstrate that the employee’s work permit was revoked and that the employee was compensated for any unpaid benefits.

The article goes on to list the circumstances under which MOHRE may decline to refund the employer for the bank guarantee. This covers circumstances in which an employee’s entitlements must be resolved after a complaint of a collective labor dispute has been made against the company. If the establishment has been assessed any fines or if the issuing of work permits has been suspended for the establishment, the bank guarantee can also not be refunded.