UAE’s new end-of-service saving scheme is mandatory for these employees

An alternative end-of-service benefits scheme announced on Wednesday is optional for employers and a way to attract and retain talented employees. Companies have the option to choose the employees they wish to register under the scheme that sees their end-of-service gratuity invested in approved funds. This way, employees get to boost their gratuity savings.

“For employees selected by their employers to participate in the alternative system, subscription is mandatory,” a translation of the UAE Cabinet resolution on the scheme says.

During a press briefing, the Ministry of Human Resources and Emiratisation (MoHRE) explained: “Workers will keep the gratuity they earned so far (prior to subscription to the new scheme). However, the existing end-of-service gratuity system will be suspended for employees registered in the new scheme. The financial entitlements they have accrued are calculated based on their years of service up to the date they join the new scheme.”

Once registered, the gratuity will be calculated as per the new scheme from that date. All earnings before and after the new scheme are disbursed at the end of the contract with the employer.

Employees have the option to make additional contributions of approximately 25 per cent of their total annual salary to increase their investment returns. They can also withdraw some or all the contributions and investment returns.

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Under the scheme, skilled workers can choose the type of investment options. Unskilled workers are only included in the capital guaranteed portfolio.

How it works

The scheme is being implemented by the MoHRE and Securities and Commodities Authority (SCA). Companies interested in the scheme can register with the committee established by the two government entities or through the ministry’s service channels.

The employer selects the investment fund and signs the subscription contract after identifying the fund administrator. Savings accounts are opened for employees that the company registers for the scheme.

Employees earn returns on investment, provided their employers pay the monthly subscription as per the latter’s basic monthly salary.

• UAE’s new end-of-service scheme: Who is eligible, how will gratuity be invested; all your questions answered