An Opportunity to Attract and Retain Talent
Mandatory a new end-of-service benefits scheme, announced recently in the UAE, provides employers with an optional means to enhance their talent pool while also benefiting their workforce. This scheme enables companies to carefully select employees for enrollment, allowing them to invest their end-of-service gratuity in approved funds.
Mandatory Subscription for Selected Employees
The translation of the UAE Cabinet resolution on the scheme stipulates that “For employees selected by their employers to participate in the alternative system, subscription is mandatory.”
Preservation of Earned Gratuity and Transition to the New Scheme
The Ministry of Human Resources and Emiratisation (MoHRE) clarified that employees selected for the new scheme will retain the gratuity they have earned to date. The existing end-of-service gratuity system will be suspended for these employees, and financial entitlements will be calculated based on their years of service until they join the new scheme.
Additional Contributions and Withdrawal Options
Participating employees have the option to make additional contributions, equivalent to approximately 25 percent of their total annual salary, to boost their investment returns. They also have the flexibility to withdraw a portion or the entirety of their contributions and investment returns.
Freedom for Skilled Workers and Capital Guaranteed Portfolio for Unskilled Workers
Skilled workers can choose their investment options, while unskilled workers are included in the capital guaranteed portfolio.
Collaboration Between MoHRE and SCA
The implementation of this scheme is a collaborative effort between the MoHRE and the Securities and Commodities Authority (SCA). Companies interested in participating in this scheme can register through the committee established by these two government entities or via the ministry’s service channels.
Employers are responsible for selecting the investment fund, signing the subscription contract, and identifying the fund administrator. Savings accounts are established for the employees registered under the scheme. Employers must pay the monthly subscription in line with their employees’ basic monthly salary to ensure they can earn returns on their investments.
Conditions for Employer Withdrawal
Employers have the right to withdraw from the scheme, subject to approval from the MoHRE. Conditions for withdrawal include a minimum subscription period of one year, the absence of outstanding administrative fines or unresolved labor disputes, and measures in place to prevent adverse effects on employees’ rights and gratuities.
The new scheme offers employers an enticing tool to attract and motivate their workforce while enhancing end-of-service benefits for their employees.