Abu Dhabi: A new insurance plan replacing bank guarantee is expected to bring down cost of hiring housemaids and other domestic workers, government officials said on Wednesday.
As part of sweeping new changes to visa and workers’ laws, the Ministry of Human Resources and Emiratisation will no longer take 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 in June. The new insurance system on the registered employees will replace the bank guarantees to safeguard the rights of the employees.
The announcement to implement the Cabinet decision followed the signing of a memorandum of understanding by the ministry in Dubai on Wednesday with an insurance conglomerate represented by Dubai Insurance Company, where the conglomerate will issue electronic insurance documents on workers of the private sector companies and the 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 failure 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 inefficiencies, or the domestic worker’s desire to cancel the work relationship, in addition to the unpaid wages and the worker’s end-of-service benefits, vacation allowance and overtime allowance if not paid by the employer, a return ticket to his country as well as work injury cases.
Announcing the decision on Wednesday, 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The scheme has been replaced by a new insurance policy that only costs Dh60 annually per worker.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, Vice-President 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.
Shaikh Mohammad said the new low-cost insurance scheme will release Dh14 billion back to the 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 Indian Business and Professional Council in an earlier statment
He said the release of Dh14 billion back into the economy would particularly help small- and medium-sized enterprises (SMEs), but would impact the entire economy.
He pointed out that dropping the bank guarantee requirement for recruitment 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 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.
The elimination of bank guarantee will surely ease recruitment process whereby helping organisations to bring human resources from diverse nationalities.”
