New End-of-Service or Gratuity Scheme in UAE Explained
Announced on Monday, a groundbreaking end-of-service scheme for United Arab Emirates residents introduces an innovative alternative to the established method of gratuity payment, offering employees a new and more comprehensive approach to their post-employment benefits. The scheme, which is open to employees across various sectors including public, private, and free zones, has a primary objective of ensuring the protection of end-of-service entitlements and facilitating secure investment opportunities for participants. Here are the key details currently known regarding the scheme:
Common Questions About the New Gratuity Scheme
Is it mandatory to use the latest system?
Employers have the choice to participate in the scheme, which serves as an optional end-of-service program they can opt to implement.
What is the functioning process of the existing end-of-service system within the UAE?
The end-of-service benefit, referred to as gratuity, constitutes a payout provided to employees upon concluding their employment. It gets computed according to the employee’s ultimate basic salary. Eligibility for this perk is extended to individuals who have maintained uninterrupted service for a duration of at least one year or beyond.
What is the functioning of the latest system?
To ensure effective supervision, the Private Sector Investment and Savings Fund will be created in cooperation with the Securities and Commodities Authority (SCA) and the Ministry of Human Resources and Emiratisation (MOHRE). Eligible employees will be given the chance to allocate their gratuity into various savings programs offered within the fund.
What are the impacts of the scheme for employers?
Participation in the scheme is voluntary for employers. In the event that they choose to enroll, they will be responsible for making monthly contributions. Additionally, employers have the flexibility to select which group of employees can take advantage of the program.
Who is eligible to participate in the program?
The optional system is available to all employees employed within the private sector as well as free zones. According to a statement from the United Arab Emirates Government Media Office, Employees from diverse job roles and work schedules can participate. Government-employed individuals can participate within the system for the purpose of savings as well as investment.
What types of investment choices are accessible?
Within the system, there are three primary investment options available:
- By investing with no risk, capital amount remains unchanged.
- There are a variety of investment options available with varying levels of risk, ranging from low to medium to high.
- Islamic Sharia law-compliant investments refer to investment options that follow the principles outlined in Islamic Sharia.
When can we expect the distribution of the benefits and in what manner?
Upon the end of the employment relationship, beneficiaries will receive the end-of-service benefits, along with the earnings that have accrued within the investment funds. In the event of the employee’s death, the designated individual will be entitled to receive these benefits.
When is the implementation of the latest system scheduled?
As of now, specific dates or a timeline for the implementation have not been announced by the relevant authorities.
Does this represent the UAE’s first-ever gratuity scheme based on investments?
Yes, on the federal level, this constitutes the initial investment-oriented gratuity scheme. Nevertheless, it’s worth highlighting that Dubai introduced a distinct end-of-service investment plan geared towards expatriates in government positions just last year.
The savings and investment firm, National Bonds, provides a Golden Pension program, allowing businesses to participate by making one-time or monthly contributions, either independently or on behalf of their staff members. These contributions are placed into the pension plan with any relevant profits and incentives distributed among the employees.