Adopted to: Khaleej Times
In a move aimed at revolutionizing the way end-of-service benefits are managed, the UAE’s Ministry of Human Resources and Emiratisation (MoHRE) and the Securities and Commodities Authority (SCA) have introduced a groundbreaking alternative scheme for employees across public, private, and free zone sectors. This initiative promises to not only enhance employee financial security but also bolster job loyalty and productivity.
What is the Scheme?
The voluntary scheme channels end-of-service benefits into well-proven investment funds, with a track record of delivering robust returns. The primary objective is to offer employees the potential for substantial investment growth on their end-of-service benefits.
Who Can Participate?
The scheme is open to employees from both public and private sectors, as well as free zone companies. Employers have the flexibility to opt into this scheme, providing a compelling alternative to the conventional gratuity payment system.
Inclusivity for All
The scheme is inclusive, extending its benefits to both expatriates and UAE citizens, further reinforcing the country’s commitment to providing equitable opportunities for all.
Benefits for Employers
The scheme promises to elevate job loyalty and productivity among employees. It also enables businesses to focus on their core operations and revenue generation, rather than getting bogged down in the complexities of managing and disbursing end-of-service benefits.
A Win-Win for Employees
Employees stand to gain from a range of benefits including diversified investment options, facilitating precise financial planning, and contributing to a more stable and prosperous labor market.
Employer Obligations
To participate in the scheme, employers must:
- Select and contract with a licensed investment fund.
- Determine which employee categories will be included in the scheme.
- Discontinue the existing end-of-service benefits system for participating employees.
- Calculate and pay the basic subscription amount without deducting it from the beneficiary’s salary.
- Provide all necessary documentation and information to investment fund service providers.
Funds Transfer Timeline
Subscriptions are transferred into the investment fund account within 15 days of the first day of the calendar month.
Tailored Participation
Employers have the discretion to decide whether to include all employees or a specific subset, based on their organizational needs and workforce structure.
Types of Subscriptions
The scheme offers two subscription types: basic and voluntary. Basic subscriptions are designed for non-skilled workers, while voluntary subscriptions are available for skilled workers who can allocate their funds to low, medium, or high-risk assets.
Empowering Skilled Workers
Professional workers earning a monthly salary of at least AED4,000 are categorized as skilled labor and have the flexibility to pursue higher-risk, higher-return investment portfolios.
Transparent Allocation
The scheme allocates up to 5.83% of the monthly basic salary for employees with less than five years of service, and 8.33% for those with more than five years. The voluntary subscription percentage cannot exceed 25% of the total salary.
Protecting Employee Interests
Employees’ entitlements from the previous period are preserved when they join the scheme.
A New Era for End-of-Service Benefits
The UAE’s innovative end-of-service benefits scheme represents a significant leap forward in safeguarding the financial futures of employees. By providing diverse investment opportunities and streamlined processes, the scheme not only benefits employees but also supports businesses in their pursuit of talent and productivity.
In a rapidly evolving employment landscape, the UAE’s forward-thinking approach sets a new standard for employee benefits across the globe. As this scheme takes root, it promises to reshape the future of workforce benefits, driving prosperity and stability in the labor market.
