UAE Unveils New End-of-Service Scheme: Registration Process and Details Explained

An alternate end-of-service plan has been implemented in the United Arab Emirates, giving employees the option to continue investing in the plan or receive financial rewards upon contract termination.

UAE's New End-of-Service Scheme

This system, open to public and private sector employees as well as freezone entities, offers an innovative approach to gratuity payments and aims to protect employees' dues while ensuring secure investments.

Registration Process:

Employers who wish to participate in the scheme should contact the Ministry of Human Resources and Emiratization (Mohre) or the Securities and Commodities Authority. Employers can specify which employees will be part of the scheme. Once registered, employees have the flexibility to withdraw all or part of their voluntary contribution amounts and investment returns.

Types of subscriptions:

There are two types of subscriptions available in the scheme:

1. Basic Subscription:

This option is suitable for non-skilled workers. Contributions are directed towards low-risk investment funds.

2. Voluntary Subscription:

Skilled workers who are well-versed in investments can choose this option. They have the freedom to invest in high- to medium-risk funds. If skilled workers do not specify their preference, their funds are automatically directed to low-risk guaranteed investments.

Contributions Based on Employment Duration:

The amount deducted from employees' salaries under the new scheme depends on their length of service with the company.

  • Employees with less than 5 years of service: 5.83% of their basic salaries will be deducted.
  • For those with more than 5 years of service, 8.33% of their basic salary will be deducted.

Employees can also enhance their investment returns by increasing their contributions to approximately 25% of their total annual salary. They retain the flexibility to withdraw part of the amount or their investment returns.

End-of-Service Benefits:

The end-of-service scheme provides an alternative system to traditional gratuity payments, emphasizing secure investment and the protection of employee dues. By participating in this scheme, employees can explore opportunities to grow their end-of-service benefits, especially if they choose high-return funds.

The UAE's alternative end-of-service scheme offers both employers and employees a choice to optimize their end-of-service benefits while ensuring the safety of their investments. This initiative represents a step toward enhancing financial security and flexibility for the country's workforce.

Read also: The UAE announces an alternative system for end-of-service benefits for foreign expatriates

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