Dubai: A new gratuity investment system is now in effect in the UAE and employers can start registering their workers for this ‘Voluntary Alternative End-of-Service Benefits Scheme’.
On Wednesday, November 1, the Ministry of Human Resources and Emiratisation (MOHRE) and the Securities and Commodities Authority (SCA) announced the implementation of the new savings scheme.
The new scheme is optional and invests the end-of-service gratuity benefits of employees who have been registered by their employers to the scheme.
The scheme allows the end-of-service benefits to be invested by investment funds that have been approved by MOHRE and SCA.
According to MOHRE, the aim of this new scheme is to increase employees’ savings, protect their financial entitlements, and “reduce the frequency of labour disputes between employees and employers over end-of-service gratuity”.
Who can register?
Here are the three categories that can sign for scheme:
1. Private sector workers selected by the employer.
2. UAE nationals employed in both the government and private sectors can voluntarily register in the scheme.
3. The scheme is available on a voluntary basis for non-citizen employees in the public sector, self-employed individuals, and those with freelance work permits.
So, if you are an employee in the private sector, you can’t directly register for the scheme. Employers have to subscribe to the scheme and then select the employees they want registered for the scheme.
What are the benefits of the scheme for employees?
According to Cabinet Resolution No. (96) of 2023 ‘Regarding the Voluntary Alternative End-of-Service Benefits Scheme for Private Sector Workers’, “…the scheme ensures that employees receive their end-of-service benefits, protect them from inflation, default, or bankruptcy, and provides them with an investment programme that allows them to save and invest their benefits.”
Skilled workers can increase their end-of-service benefits further, if they choose high-return investment funds.
You can also keep on investing your benefits even after leaving your job, according to MOHRE.
What happens to a worker’s current gratuity?
If you are registered for the scheme by your employer, here is how it will work - you will keep the gratuity that you have earned prior to the subscription to the new scheme.
From the date that you are registered in the new scheme, your gratuity will be calculated as per the new scheme.
At the end of your service, your cumulative earnings – before and after the new scheme - will be disbursed to you.
What is the monthly subscription fee for employers who want to enrol in the system?
According to MOHRE, employers pay the fees based on the employee’s basic salary :
- 5.83 per cent
of the employee's monthly basic salary, if their service duration is less than five years
.
- 8.33 per cent
of the employee's monthly basic salary, if their service duration exceeds five years
.
Can workers increase their benefits?
While the subscription fee for the scheme will be paid for by the employer, workers 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 of the contributions and investment returns. This is applicable to any additional contributions the employees may have made, and not the gratuity subscription fee put in by the employer.
How does the employee receive the benefits?
When the employer terminates the employment contract by cancelling their work permit with MOHRE, the worker has a choice to either receive the financial benefits or to continue investing in the scheme. According to MOHRE, the worker will be paid their financial benefits in accordance with the regulations.
