Significant changes: End of the Bank Guarantee and UAE visa overhaul
In line with the sweeping changes being made by the UAE Government recently, the UAE Cabinet introduced a host of changes to the visa and immigration rules yesterday evening. The two most significant changes are the launch of an insurance scheme to replace the bank guarantee system and the introduction of a six-month temporary residency visa for individuals following loss of employment.
1. Insurance Scheme
Currently, all private sector employers have to issue a bank guarantee for each employee that they recruit in the amount of AED 3,000 (subject to a maximum of AED 1.5-3 million depending on categorisation of the employer). This is designed to cover repatriation costs (and partially pay for end of service benefits) of any employee(s) in the event that the employer is in financial trouble and unable to pay for the costs. For employees, the major drawback of this system is that the guarantee amount of AED 3,000, while ordinarily sufficient to pay for a one-way air ticket to their home country, it is wholly inadequate to also cover end of service benefits. Further, for employers, it means that potential working capital is tied up in the system (currently estimated to be in the region of AED 14 billion).
The new insurance scheme largely addresses these drawbacks by having insurance coverage of up to AED 20,000 per employee, which will go much further in addressing repatriation costs and end of service entitlements. Additionally employers can now pay an annual premium of AED 60 per employee and release their tied up capital in the form of the bank guarantees that they have issued.
2. Temporary Residency Visa
One of the most difficult issues the employees have to deal with on being made redundant or loss of their job in the UAE are the very limited timelines that they have to thereafter leave the country if they are unable to find alternative employment. The current immigration rules require that an employer cancels the employer sponsored residency visa within 30 days of the termination of employment and the employee has a further 30 days thereafter to exit the country. This often causes undue hardship and upheaval to the individual and their family, especially where there are children in school.
The launch of the temporary six-month visa will certainly alleviate some of this difficulty for individuals as it will allow them to remain in the country, following cancellation of their employer sponsored residency visa, and to seek new employment for that extended period.
Whilst this alert focuses on these key developments, the overhaul also includes changes to transit visas, the exit of illegal entrants and individuals overstaying their visas to the country, dependant students’ visas and permitting the adjustment of an individual’s visa status in country.
These changes, along with the others that have recently been announced, are a step in the right direction to keep the UAE an attractive place to do business and live. While these changes are ground-breaking in this region we would hope that in due course they go even further in order to create a more flexible labour market and help drive forward the economy.