UAE: Voluntary savings scheme could replace your gratuity in future, says official

The voluntary savings system launched late last year could help companies attract the best talent. It can also raise employee loyalty and satisfaction levels, and increase productivity at work.

Moreover, it could replace end-of-service benefits at some point in the future, revealed Asma Al Madani, Acting Director of the Policy and Studies Department at the Ministry of Human Resources and Emiratization (MOHRE).

“The medium-term cost paid by the employer if he participates in the savings scheme is less than the cost of the current end-of-service gratuity,” she said. “Companies can then focus on their commercial activities as well as development and capital building rather than operational matters in managing and disbursing end-of-service benefits.”

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She said this would also help employers to attract the best talent. “The savings scheme would raise employee loyalty and satisfaction levels, and increasing productivity at work.”

Her comments came at the session exploring the future of work on the sidelines of the World Governments Summit (WGS) 2024. At the opening of the session, Dr. Abdulrahman Al Awar, Minister of Human Resources and Emiratization said it was a priority for governments to set clear and calculated strategies for the future of the labour market. “We live in a new world shaped by technologies,” he said. “This makes it essential that we have new approaches to the labour market.”

Voluntary scheme

The savings scheme, which began in November 2023, is open to employees working in the public and private sectors, and free zone entities. If employers decide to sign up for the programme, they can specify the staff members who will be part of it. Emiratis can also subscribe to this voluntary scheme.

“Employers can sign up their workers for it, irrespective of their professional levels,” she said. “It offers many benefits like sound financial planning and a sense of ownership to the worker. There is also the possibility of increasing the end-of-service reward for a skilled worker if he chooses to invest in portfolios with high returns.”

The employer's basic subscription amounts in this system are calculated in accordance with the labour regulation law for employees of the private sector. For those who have worked for less than five years, it is 5.83 per cent of the basic salary. Those who have worked for more than five years, will have their savings calculated 8.33% of their basic salary. The amount is based on the employee’s monthly salary and cannot be deducted from their wages.

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