UAE End-of-Service Benefits Scheme: Everything You Need to Know
For workers in the UAE's public and commercial sectors and free zones, the Ministry of Human Resources and Emiratisation (MoHRE) and the Securities and Commodities Authority (SCA) have introduced a new alternative system for end-of-service incentives.
Key Information about the New Scheme
This innovative initiative allows employees to invest their end-of-service benefits in well-established investment funds with a strong track record, with the aim of generating investment returns for employees. The scheme is designed to attract top talent to organizations, enhance job loyalty and productivity, and create a more stable and prosperous labor market.
The scheme is open to both expatriates and UAE citizens, providing an alternative to the traditional gratuity payment.
Benefits for Employers:
- It promotes job loyalty and productivity among employees.
- Employers can focus on commercial activities and capital gain rather than the operational aspects of managing end-of-service benefits.
- Enrolling in the savings scheme is cost-effective compared to the current end-of-service scheme.
Benefits for Employees:
- Employees have diverse options to receive returns on their savings.
- It facilitates precise financial planning for the future.
- It contributes to a more stable and prosperous labor market.
- Choose an authorized investment fund to work with and sign a contract to put the plan into action.
- Determine the categories and levels of employees that the plan will cover.
- Employees who opt to use the new system will no longer receive their previous retirement benefits.
- Employers are obligated to determine and pay out benefits based on employees' base salaries at the time of participation.
- Inform the investment fund's service providers all they need to know.
Withdrawal of funds:
Employees can request the withdrawal of part or all of their voluntary contributions and investment returns. However, employers are not eligible for a refund of the basic subscription fee and can only recover it if the employment relationship ends within a year of the start date.
The scheme offers various investment options, including a capital-guaranteed portfolio, risk-based investment portfolios with different degrees of risk, and Shariah-compliant investment fund options.
Employer's Right to Withdraw:
Employers have the right to withdraw from the scheme with the approval of the MoHRE, subject to specific criteria.
Suspension of Payments:
Employers can temporarily suspend the payment of the basic subscription under certain circumstances, such as financial failure, beneficiary absence without a valid reason, or restructuring.
Responsibilities of Fund Managers:
Managers with at least Dh1 billion in assets and funds are required to provide investors with a range of investing options, including a capital guarantee portfolio. They should have worked with investments for at least three years, and they should send out account statements twice a year to clients.
The introduction of this alternative end-of-service benefits scheme reflects the UAE's commitment to enhancing the welfare of employees and attracting top talent to contribute to the country's growing economy. It offers flexibility and choice for both employers and employees while promoting financial security and stability in the labor market.