An alternative end-of-service scheme has been unveiled, presenting an option besides the traditional gratuity payment system for UAE residents. Both public and private sectors, as well as free zones, are eligible for this system, which emphasizes the secure investment of end-of-service dues.
Key details of the scheme:
- Mandatory? The system is not mandatory. It serves as an alternative for employers who choose to opt-in.
- Current System: Presently, UAE employees receive a gratuity upon ending their work relationship. This sum is based on the last basic salary of the employee and is available to those who’ve completed a continuous service of a year or more.
- The New Scheme: This new initiative will operate under the supervision of the Securities and Commodities Authority and the Ministry of Human Resources and Emiratisation. They will establish a private sector investments and savings fund, allowing qualifying employees to invest their gratuity in a range of savings schemes.
- Implications for Employers: Joining is optional for employers. Those who opt in are required to make a monthly contribution and can specify which employee categories can benefit.
- Eligibility: The scheme is open to all private sector and free zone employees. Workers from “all occupational levels and work patterns” are eligible, as per the UAE Government Media Office’s statement. Government employees can join the system exclusively for “savings and investment purposes”.
- Investment Choices: The new system proposes three primary investment routes:
- Risk-free investment which preserves the principal amount.
- Diverse risk investments, spanning from low to high.
- Sharia-compliant investments in line with Islamic Sharia law.
- Benefit Payout: Once the employment relationship concludes, beneficiaries will receive the end-of-service benefits, coupled with any investment returns. In the event of an employee’s death, the nominee will be given the benefits.
- Implementation Date: The exact date for the new system’s roll-out remains undisclosed.
- First of its Kind?: On the federal scale, this is a pioneering initiative. However, a similar scheme was introduced in Dubai last year for expatriates in governmental roles. Additionally, National Bonds offers the Golden Pension scheme, where companies can make one-off or monthly contributions for their staff.
The exact timeline for the scheme’s implementation remains to be announced.