UAE unveiled a novel end-of-service benefits scheme that offers companies the flexibility to enhance employee retention and attract top talent. This innovative initiative provides employers with the option to enrol selected employees into a new program where their end-of-service gratuity is invested in approved funds, ultimately boosting their retirement savings. In this article, we will delve into the details of this scheme and how it functions, highlighting the advantages it offers to both employers and employees.
1. Flexibility for Employers:
– Under the newly introduced scheme, participation is entirely optional for employers. They can decide to choose the employees they wish to include in this program.
2. Mandatory Subscription for Selected Employees:
– Employees selected by their employers to participate in the alternative system are required to subscribe to the scheme.
– For these selected employees, the existing end-of-service gratuity system will be suspended, and their financial entitlements will be based on their years of service up to the date they join the new scheme.
3. Calculation and Disbursement:
– Gratuity calculation, once registered, follows the new scheme’s rules from that date.
– All earnings, both before and after the new scheme’s introduction, are disbursed at the end of the employment contract with the employer.
4. Additional Contributions and Withdrawal Options:
– Employees can make additional contributions of approximately 25% of their total annual salary to increase their investment returns.
– They also have the flexibility to withdraw some or all of their contributions and investment returns.
5. Customised Investment Options:
– Skilled workers participating in the scheme can choose from a range of investment options.
– Unskilled workers are included in the capital guaranteed portfolio.
6. Implementation and Registration:
– The scheme is jointly implemented by the Ministry of Human Resources and Emiratisation (MoHRE) and the Securities and Commodities Authority (SCA).
– Companies interested in the scheme can register through the committee established by these government entities or via the ministry’s service channels.
7. Fund Selection and Subscription:
– Employers choose the investment fund and sign a subscription contract after identifying the fund administrator.
– Savings accounts are opened for employees registered in the scheme, and returns on investments are earned, provided that the employers pay the monthly subscription as per the employee’s basic monthly salary.
8. Withdrawal for Employers:
– Employers have the right to withdraw from the scheme with the approval of the MoHRE.
– Conditions for withdrawal include a minimum subscription period of one year, the absence of outstanding administrative fines or unresolved labor disputes, and assurance that the withdrawal will not adversely affect the rights and gratuities of employees.
The UAE’s new end-of-service benefits scheme offers an attractive option for companies to enhance their talent retention strategies and provide their employees with a chance to grow their gratuity savings. This innovative approach aligns with the country’s ongoing efforts to promote economic growth and improve the overall welfare of its workforce. As the scheme is introduced and adopted, both employers and employees will have the opportunity to benefit from this flexible and forward-thinking initiative.
