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Oman introduces job security insurance
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Market Insight 22 October 2020 22 October 2020
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Middle East
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Employment, Pensions & Immigration
In a move to support its national population, Oman has recently published a new law¹ regarding compulsory insurance for Omani nationals in situations where employment is terminated for purely business reasons. In this article, we provide a summary of the provisions of the law, and the implications on employers following the introduction of this new piece of legislation.
Who does the new law apply to?
The new legislation appears to cover a broad spectrum of employers. This includes public sector employers, such as civil, military and security arms of the government, and all private sector employers.
In terms of employees, all Omani nationals working for the above employers are required to be insured under the new law.
Are employers required to pay contributions?
Yes, contributions have to be made by both parties. Contributions are based on a percentage of the employee's monthly wage, being basic plus regular allowances and follow the same calculation used in the Retirement and Social Insurance Law². Contribution requirements under the job security insurance law are as follows:
- Employer contributions - 1% of the employee's monthly wage
- Employee contributions - 1% of the employee's monthly wage which may be deducted at source by the employer who is liable to make such payment on the employee's behalf
- Additional payments – the employer is also required to pay an additional 5% of the fee charged for each new licence or licence renewal when recruiting foreign nationals
- Payments are required to be made at the end of the month for public sector employers and by the 15th of every month for private sector employers. Failure to make payments on time may result in additional charges being levied on the employer.
Who is eligible to benefit from the new insurance scheme?
In order to qualify, the insured employee must meet the following conditions:
- The employee is required to complete a minimum subscription period prior to termination and claiming under the insurance. For each claim made, a different subscription period applies. We set out the minimum periods as follows:
- First claim – a minimum subscription period of 12 consecutive or non-consecutive months within a period of 36 months prior to termination
- Second claim - a minimum subscription period of 18 consecutive or non-consecutive months within a period of 42 months prior to termination
- Third claim - a minimum subscription period of 24 consecutive or non-consecutive months within a period of 48 months prior to termination
- Fourth claim - a minimum subscription period of 36 consecutive or non-consecutive months within a period of 60 months prior to termination
- A claim is considered to be a new claim once the benefit of the insurance has been paid to the insured employee for a period of 6 consecutive or non-consecutive months.
- The employee must not be in receipt of a retirement pension pursuant to the Retirement and Social Insurance Law
- The employee did not instigate the termination of the employment contract
- The employee was not dismissed for disciplinary reasons
- The employee must be able to work and be diligent in searching for employment according to any rules and conditions issued by the Board of Directors of the Social Insurance Authority
- The employee must not be enrolled with an educational institution
What amount does an insured employee receive on qualifying for the benefits?
The insured employee, on qualifying for the benefit, receives a monthly payment for a maximum period of 6 consecutive or non-consecutive months. The amount received will depend on the overall contribution made, but the law provides for an amount of 60% of the contribution made within the 24 month period preceding the date of termination, or the subscription period, if less than 24 months, providing the amount received is not less than any minimum pension set by the Retirement and Social Insurance Law.
The payment start date is determined by a specialised committee, to be formed pursuant to the new law. The committee is also charged with determining the cases where termination is considered as collective termination.
Additional employer considerations
Aside from the requirement to make the statutory contributions set out above, private sector employers are also required, pursuant to the new law, to inform the Ministry of Labour of their intention to make collective terminations not less than 3 months prior to the proposed date of termination. Failure to comply with such requirement may lead to additional charges being levied on the employer.
When does the law come into effect?
The law comes into effect on 1st November 2020, save that the requirement to commence payment of the contributions commences on 1st January 2021 and the minimum prescription periods will be in effect from 1st November 2021. It is also expected that further regulations to law will be issued in due course.
¹Sultani Decree No. 82/2020
²Sultani Decree No. 72/1991, as amended
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