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MOHRE: New resolution for bank guarantees and employee protection insurance

On the 27th of June 2022, Dr. Abdulrahman Abdul Manan Al Awar, Minister of Human Resources and Emiratization issued Ministerial Decision No. 318/2022 concerning Bank Guarantees and Employee Protection Insurance (hereinafter referred to as “New Decision’’).

The New Decision is an implementation of Article 8 Cabinet Decision No. 18/2022 on the Classification of Private Sector Establishments Subject to the Provisions of the Law Regulating Labor Relations, which state that all entities that are subject to Federal Decree-Law No. 33/2021 on Regulation of Labor Relation (hereinafter referred to as “Labor Code”) shall pay a bank guarantee of AED 3,000 for each employee or insure each employee. 

Hence, according to Article 1 of the New Decision the entity shall undertake either to provide an insurance policy or a bank guarantee equal to no less than AED 3000 for each employee.

According to the New Decision the Ministry will have the right to deduct any amounts from the insurance or the bank guarantee in four situations such as covering the repatriation expenses of an employee to his home country, or in the event a judgment is issued ordering the settlement of any employee’s entitlements to the Ministry.

Which businesses does it affect?
All entities that are subject to the Labor Code should comply with the provisions of the New Decision, mainly all entities (every technical, industrial, commercial, or other economic unit approved in the UAE, employing workers, aiming to produce goods, market them or provide services, and is licensed by the competent entities) with the exception of employees of federal and local government entities, members of the armed forces, police and security and domestic employees. We note that entities subject to DIFC and ADGM laws are excluded as well. 

Will it be retroactive for all existing employees or new ones?
All entities shall adjust their situations in line with the provisions of the New Decision, as all the private sector employees should benefit from said provisions which aims to protect their legal rights. 

Written for SME10X, the full article, as published, can be found here: MOHRE issues new resolution for bank guarantees and employee protection insurance for private sector.

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