A new insurance plan for employers, that takes effect from next week, will help reduce recruitment costs compared to the existing deposit scheme which the insurance plan will replace.
The new system will cover the cost of replacing workers in the case of contract termination or bad performance. It will also cover costs such as salaries, end of service benefits, return tickets and work injuries, according to local media reports.
The Ministry of Human Resources and Emiratisation has said businesses will pay just AED60 a year per employee under the insurance scheme. The surety insurance plan will pay up to AED20,000 per employee.
Currently, an employer pays a mandatory AED3,000 ($817) deposit for each employee he hires. Payouts to employees are typically limited to AED3,000.
In June, the government said that AED14bn was held in employee deposits, which will be released back to companies this month, improving their cash flow.
Dubai Insurance will be responsible for the management of the electronic insurance policies to be issued through a group of local insurance companies.