Guide to Involuntary Loss of Employment (ILOE) in UAE (2025)

The UAE’s Involuntary Loss of Employment (ILOE) scheme is now mandatory for most employees in the government and private sectors. The scheme provides support to workers with up to 60% of their basic salary (within limits) for up to three months if they lose their job. Employees must register within four months of receiving their work permit to avoid a AED 400 penalty. Employers can also incur a AED 20,000 penalty for assisting an employee with a false claim.

This guide sets out the main rules, penalties, and timeframes relating to ILOE and explains how Auxilium can help organisations maintain compliance by embedding ILOE in their employee life cycle: hiring, payroll, and offboarding processes.

Why ILOE insurance is crucial in 2025

ILOE has become more than just a safety net. It is a necessity. Missing deadlines or skipping payments can result in fines, delays in renewing work permits, and disruptions to business operations. For employees, even a small detail like whether a cancelled work permit says ‘resignation’ or ‘termination’ can decide if they lose their benefit.

Organisations expanding to the UAE, particularly those without a local entity, must prioritise building ILOE for onboarding, payroll, and offboarding. This is where an Employer of Record (EOR), like Auxilium, steps in to ensure compliance without administrative burden. 

Who is covered by ILOE insurance?

The ILOE insurance scheme is a backup plan for all employees. If you lose your job (not by choice, like being fired), it pays you monthly for a short time to help you find a new one.

How much you get:

• You can receive 60% of your basic salary (not including allowances).
• Payments last for up to 3 months.
• Category A: up to AED 10,000 per month.
• Category B: up to AED 20,000 per month.

Who is covered:

• All employees in the federal government and private sector.
• Both UAE nationals and expat residents.

Who is not covered:

• Business owners/investors.
• Domestic workers (e.g., nannies, drivers, cleaners).
• Workers under 18.
• People on temporary contracts.
• Retirees with a pension who return to work.

Important: The insurance is based only on your basic salary. Not on housing, transport, or other allowances.

ILOE Categories

ILOE provides meaningful protection to employees across various income ranges. Employees are grouped into two categories based on their basic salary, and the benefit caps differ accordingly.

Category A → If you earn AED 16,000 or less:

• You pay AED 5 per month. 
• You can get up to AED 10,000 per month in benefits.

Category B → If you earn more than AED 16,000:

• You pay AED 10 per month.
• You can get up to AED 20,000 per month in benefits.

You can choose how often to pay for ILOE, whether every month, every 3 months, every 6 months, or once a year. 

ILOE Registration Deadlines and Penalties in UAE

With ILOE, signing up is just the first step. You also need to follow strict deadline. Following deadlines is an indispensable part of it. There are strict time limits for both employees and employers. If you miss them, you could face a fine or lose a benefit.

• Enrollment: New employees must sign up within 4 months of receiving their work permit.
  
• If you don’t sign up, you will be fined AED 400.
  
• If you don’t pay on time, you will be fined AED 40.
  
• Claims: Must be made within 30 days of job loss or after your labour dispute is settled.

In short: once your claim is approved, you’ll receive the payout quickly, usually in 14 days or less.

Mind Employer Penalties and Responsibilities

Employees must sign up and pay for ILOE themselves, but employers also have important responsibilities:

• Cheating the System: If a fake agreement is concluded between a company and worker so the worker can collect ILOE money, the company can be fined AED 20,000 for each case.
• Correct Paperwork: Imagine your employer cancels your work permit. If it is marked as “termination” (not “resignation”), you will receive ILOE benefits. If it is marked differently, you lose your ILOE benefits.
• Smooth Offboarding: Employers should provide a termination letter and ensure the accuracy of all documents. Thanks to this, the ILOE claim is accepted without problems.

3-Step ILOE Claim Process for Employees

1. Gather required documents:
   
   • Termination letter
     
   • Work-permit cancellation (marked “termination”)
     
   • Emirates ID & IBAN certificate
     
   • Policy certificate
     
2. Submit the claim:
   
   • Through ILOE website/app, call centre, or approved exchange partners
     
3. Receive payout within 2 weeks if approved.

Common Compliance Problems

Despite the scheme appearing to be simple on paper, both employees and employers encounter difficulties in the process. Unfortunately, it might have an impact on compliance. With the right awareness and available systems, we can usually avoid these problems. Understanding them right from the start allows businesses to plan activities and employees to keep their benefits.

• If you don’t enrol within 4 months for ILOE, there is a fine of AED 400.
  
• Late payments: If you pay late, the 12-month waiting period for claims starts over.
  
• Wrong paperwork: If your employer has incorrectly documented your departure, e.g., “resignation” instead of “termination”, you won’t get ILOE benefits.
  

Practical Checklist for HR leaders and business owners

Compliance with ILOE can feel overwhelming. This checklist helps with ILOE during onboarding, payroll, and offboarding processes.

Onboarding:

• Record the employee’s salary data and assign it to correct ILOE category
• Send enrollment reminders for signing up for 30, 60, and 90 days.
• By the fourth month, verify that the employee has their ILOE subscription certificate.

During Employment

• Match premium payments with payroll records
• Make sure employee contact details are up to date

Offboarding

• Ensure cancellation letter states “termination”
• Provide supporting documentation promptly
• Remind the employee they only have 30 days to file an ILOE claim.
  

The Role of Auxilium 

For companies moving into the UAE without a local office, ILOE compliance can feel complicated. Auxilium, an award-winning Employer of Record with over 20 years of experience, makes it simple by building ILOE compliance into every step:

• Onboarding: Reminding employees about signup deadlines and keeping their ILOE certificates.
• Payroll processes: Making sure premium payments are included in WPS payroll.
• Offboarding: Properly filling out termination paperwork (so employees don’t lose benefits).
  

Our role is to protect employees and save businesses from penalties. It ensures seamless operation across the GCC.