UAE: Sheikh Mohammed announces new end-of-service benefits system for employees

“The goal is to boost workers’ savings … and to ensure that they are invested safely,” the Vice-President and Prime Minister of the UAE and Ruler of Dubai said

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Sahim Salim

Published: Mon 4 Sep 2023, 4:04 PM

Last updated: Mon 4 Sep 2023, 10:59 PM

The UAE Cabinet has adopted a new system for employees in the private sector and free zones to invest their end-of-service benefits. It will be optional for employers to join.

The system will set up a savings and investment fund that will be overseen by the Securities and Commodities Authority in coordination with the Ministry of Human Resources and Emiratisation. Employees’ end-of-service benefits will be invested in the fund, with multiple options offered.

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This came as His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, chaired a Cabinet meeting Monday.

“The goal is to protect workers’ savings … and to ensure that they are invested safely,” said Sheikh Mohammed. “It will ensure their rights, while offering stability to their families."

Government employees can take part in the scheme as well, the UAE Vice-President added.

Employees in the UAE receive a gratuity when they retire. Those who spend one year or more in continuous service are entitled to this end-of-service benefit.

How it works

Employers can choose to enrol their workers — regardless of their professional levels — in the new system and pay a monthly contribution. It offers three investment options:

>> Risk-free capital guarantee.

>> Investments, where risks vary between low, medium, and high.

>> Sharia-compliant investments.

End-of-service benefits and returns will be paid to employees when their work relationship with the employer ends.

For employers, in the long term, the scheme would cost lesser than the traditional system. Additionally, it will help employees retain talent as the alternative end-of-service scheme will offer more attractive terms.

Experts have often stressed how UAE residents depend on their gratuity as a retirement fund.

Last month, savings and investment company National Bonds said its annual index found 82 per cent workers are open to their gratuity being invested on their behalf.

In 2022, Dubai announced an end-of-service savings scheme for expatriates working in government departments. The integrated system offers employees various saving opportunities across financial portfolios that can boost their benefits and savings.

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Sahim Salim

Published: Mon 4 Sep 2023, 4:04 PM

Last updated: Mon 4 Sep 2023, 10:59 PM

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