UAE: Private sector firms urged to register for savings scheme to protect employees

The scheme is an alternative end-of-services benefits system that enhances employee productivity by allowing them to grow their financial assets

Published: Thu 7 Nov 2024, 2:18 PM

Updated: Thu 7 Nov 2024, 2:21 PM

By
Web Desk

Employers in the UAE have been urged to register for the voluntary 'savings scheme' as an alternative end-of-service benefits system offering additional advantages.

The new scheme boosts private sector companies’ ability to attract and retain talent, while protecting workers’ financial entitlements and providing them with opportunities to grow their savings through investment returns, supported by reliable investment funds in the country.

The Ministry of Human Resources and Emiratisation urged private sector companies in the UAE to participate in the savings scheme to enhance their employees’ wellbeing, attract talent, and strengthen their corporate reputation in the country's increasingly competitive labour market.

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The MoHRE and the Securities and Commodities Authority (SCA) have approved a group of investment funds to operate the voluntary scheme, after verifying that the operating institutions meet the necessary standards for establishment and management of savings funds.

Benefits for employers

The scheme enables employers to establish their firms as outstanding places to work that prioritise their employees’ financial growth and future security, which fosters employee loyalty and helps attract new talent.

Participating in the scheme enhances employee productivity by allowing them to grow their financial assets and gain investment returns on their savings through secure and reliable investment opportunities.

The system offers a proactive approach to managing financial obligations and promotes companies’ long-term financial health, especially given that the medium-term cost for employers participating in the savings scheme is lower than the cost of paying end-of-service gratuities, as contributions are based on the basic salary of the employee at the time of payment, rather than the basic salary at the end of service, which is typically higher.

How to apply

Private companies wishing to join the 'savings scheme' can apply through the Ministry’s service channels, select one of the accredited investment funds, and pay the subscription fees for the employees they wish to enrol in the system.

The authority provides regularly updated information on accredited investment funds on its website along with details on the voluntary alternative end-of-service benefits system 'savings scheme’ for private sector workers.

How does it work

Employees will keep the gratuity they earned before being enrolled in the scheme by their employer. The existing end-of-service gratuity system is then suspended for workers registered in the new system, and the monetary sums they have accrued are calculated based on their years of service, in accordance with the law, up to the date they join the new system.

The gratuity will be calculated as per the new system starting from the date the employee is registered in it, with all earnings (before and after the new system) disbursed at the end of the contract with the employer.

To increase savings and investment returns, workers have the option to make additional contributions of approximately 25 per cent of their total annual salary. They can also withdraw some or all of the contributions and investment returns, based on the terms and conditions of the system.

The scheme also allows skilled workers the freedom to choose any investment options it offers according to their investment preferences. Meanwhile, unskilled workers can only be enrolled in the Capital Guarantee Portfolio.

Moreover, it allows optional participation for additional categories wishing to benefit from its advantages, giving self-employed individuals, those with freelance work permits, non-citizen employees working in government entities or their affiliated establishments and subsidiaries, as well as Emirati employees in the public and private sectors, the option to register in the system through additional voluntary contributions only.

This allows them to protect, invest, and grow their savings, ultimately receiving them as an end-of-service gratuity. Meanwhile, employers remain responsible for paying the contributions for UAE nationals in pension and social security authorities and systems.

What happens during job switch?

When a worker moves from their current employer to a new one, they may either withdraw their accrued amount from the fund contributed by the current employer, or choose to keep it in the fund to continue investing with the option of accessing it at any time.

The new employer may take over the previous employer’s contributions to the same fund after establishing a contract with the fund. The new employer may also register the worker with another fund manager and pay the associated contribution fees.

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