In a diligent move, UAE has introduced a fresh new alternative to the traditional end-of-service gratuity payment system. Now, both employers and employees have the choice to explore this novel avenue, offering financial benefits post-employment. What’s more, it is open to everyone working in the UAE, from the public and private sectors to employees in free zones, making it a far-reaching initiative. Here are all the details you need to know!
Also read: UAE Unveils New End-of-service Employee Benefits System For Private Sector & Free Zone
How Can I Get Started?
First things first, companies will have to start off by reaching out to the Ministry of Human Resources and Emiratisation (Mohre) or the Securities and Commodities Authority (SCA) for registration. The process is straightforward and optional for all parties involved, offering flexibility and choice to both employers and employees.
Who Can Join?
This initiative is truly inclusive. It welcomes employees from various sectors, including the public and private domains. So, whether you are an Emirati looking to secure your financial well-being or an employee working in the dynamic free zones, this scheme has room for everyone.
Selecting The Right Path
For employers interested in subscribing to this innovative savings scheme, the process is simple. They can submit a request to the Ministry, choose from a selection of approved investment funds, and pay the subscription fees for the employees they wish to enroll. Regulatory authorities in UAE’s financial free zones are overseeing the development and implementation of the scheme’s rules and regulations to ensure fair play for everyone involved.
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Reaping the Benefits
With this new end-of-service scheme, employees can choose between two paths. They can opt to receive financial benefits immediately upon the termination of their employment contract, or they can continue investing in the scheme until it matures. The latter option allows employees to enhance their end-of-service benefits, either by selecting high-return investment portfolios or making additional voluntary contributions. However, it’s important to note that employees who opt for high-risk investments do so at their own discretion.
Two Types Of Subscriptions
Contributions to the scheme come in two categories – Basic and Voluntary:
- Basic subscriptions are suitable for non-skilled workers, with contributions going into low-risk investment funds.
- Voluntary subscriptions are designed for skilled workers who are more investment-savvy. They can direct their funds toward high- to medium-risk investments.
- For those who don’t specify their preference, they will be automatically directed to low-risk guaranteed investments.
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Understanding Deductions
The amount deducted from an employee’s salary is determined by their length of service with a company. For employees with less than five years of service, 5.83% of their basic salaries will be deducted. Those with more than five years of service will see 8.33% of their basic salary deducted. Furthermore, employees have the flexibility to increase their investment returns by boosting their contributions to approximately 25% of their total annual salary.
This new end-of-service scheme is a leap forward in protecting workers’ rights and empowering them to achieve long-term investment goals in the UAE. It is designed to bring financial security, growth, and flexibility into the lives of employees and businesses alike, ensuring a brighter future for all. Be sure that you and your company make the most out of this new initiative.
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