Firms to get worker bank guarantee refunds soon
LOW-COST INSURANCE SYSTEM TO TAKE EFFECT FROM MID-OCTOBER
The government yesterday said it will start refunding this month bank guarantees 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 guarantees given by companies at the rate of Dh3,000 for each employee since 2001, it was announced.
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 announcement came following an agreement signed by the ministry with an insurance conglomerate led by Dubai Insurance Company yesterday.
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 as per 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 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.
In order for companies to get bank guarantee refunds, they must not have committed any violations related to failure to pay salaries at least six months before renewal of the work permits.
Anew insurance plan replacing bank guarantees is expected to bring down the cost of hiring housemaids and other domestic workers, government officials said yesterday.
As part of sweeping new changes to visa and workers’ laws, the Ministry of Human Resources and Emiratisation will no longer take the mandatory bank guarantee deposit of Dh3,000 per worker from employers.
The Ministry of Human Resources and Emiratisation announced yesterday that it would also start refunding the bank guarantees to businesses from October 15, in implementation of a Cabinet decision made in June.
The new insurance system on the registered employees will replace the bank guarantees to safeguard the rights of the employees.
The announcement follows the signing of a memorandum of understanding by the ministry in Dubai yesterday with an insurance consortium represented by Dubai Insurance Company, where the conglomerate will issue electronic insurance documents to workers employed by private sector companies and domestic workers registered with the ministry.
In order for companies to get their bank guarantees refunded, they must not have committed any violations related to them failing to pay salaries at least six months before the renewal of the work permits.
The domestic workers’ policies also cover the cost of replacing the worker in cases of interruption of work, health problems, or the domestic worker’s desire to cancel the contract, in addition to unpaid wages and the worker’s endof-service benefits, vacation and overtime allowances if not paid by the employer, return air tickets as well as cases involving work-related injuries.
Announcing the decision yesterday, Nasser Bin Thani Al Hameli, Minister of Human Resources and Emiratisation, said the new insurance cover for the domestic workers will reduce the cost of their recruitment.
The scheme has been replaced by a new insurance policy that only costs Dh60 annually per worker. The decision was approved in June during a Cabinet meeting chaired by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, VicePresident and Prime Minister of the UAE and Ruler of Dubai.
“Our goal is to remain a top destination for ease of doing business, through an agile economy based on flexibility and openness,” Shaikh Mohammad said in an earlier statement.
Boost to economy
Shaikh Mohammad said the new low-cost insurance scheme will release Dh14 billion back to private sector companies and will further lower the cost of doing business. The move was welcomed by the UAE business community in June.
“Any injection of liquidity helps enormously,” said Suresh Kumar, president of the Indian Business and Professional Council in an earlier statement.
He said the release of Dh14 billion back into the economy would help small- and medium-sized enterprises (SMEs), in addition to boosting the entire economy.
He pointed out that the move to drop the requirement on bank guarantees would also ease paperwork, allowing firms to concentrate on growth rather than bureaucracy.
“It is very positive for business,” he said.
Steve Mayne, managing partner of business start-up consultancy Creative Zone, had told Gulf News that the move would help SMEs and other businesses.
“Reducing costs for businesses in a challenging economic climate is an extremely prudent and timely move by the UAE government,” he said.