A new voluntary investment system for gratuity benefits has been introduced in the UAE, allowing employers to register their workers for the ‘Voluntary Alternative End-of-Service Benefits Scheme’. This initiative, announced on Wednesday, November 1, is a collaboration between the Ministry of Human Resources and Emiratisation (MOHRE) and the Securities and Commodities Authority (SCA).
Under this new scheme, employers have the option to invest in the end-of-service gratuity benefits of their employees who have been enrolled in the program. The investments will be managed by approved investment funds, as authorized by MOHRE and SCA.
This innovative scheme offers employers and employees the opportunity to maximize the potential of their end-of-service benefits. By investing these funds, individuals can potentially earn higher returns and secure a more prosperous future.
The introduction of this voluntary investment system reflects the UAE’s commitment to providing its workforce with enhanced financial security and stability. Employers now have the chance to actively participate in the financial well-being of their employees, while employees can benefit from the potential growth of their gratuity benefits.
To ensure the credibility and reliability of the investment funds, MOHRE and SCA have implemented a rigorous approval process. Only funds that meet the stringent criteria set by these regulatory bodies will be eligible for participation in the scheme. This ensures that employees’ hard-earned benefits are entrusted to reputable and trustworthy investment entities.
By offering this optional investment scheme, the UAE aims to empower its workforce and encourage long-term financial planning. Employees can now take control of their financial future by exploring investment opportunities that align with their goals and risk appetite.
In conclusion, the introduction of the ‘Voluntary Alternative End-of-Service Benefits Scheme’ marks a significant step towards enhancing the financial well-being of employees in the UAE. This voluntary investment system provides employers and employees with the opportunity to maximize the potential of their end-of-service benefits, ensuring a more secure and prosperous future for all.
According to MOHRE, the aim of this new scheme is to increase employees’ savings, protect their financial entitlements, and “reduce the frequency of labor disputes between employees and employers over end-of-service gratuity”.
Who can register?
Here are the three categories eligible to sign up for the scheme:
- Private sector workers who have been chosen by their employers.
2. UAE nationals employed in both the government and private sectors have the option to voluntarily enroll in the scheme.
3. The scheme is also available on a voluntary basis for non-citizen employees in the public sector, self-employed individuals, and those with freelance work permits.
If you are an employee in the private sector, you cannot directly register for the scheme. Instead, employers must subscribe to the scheme and then select the employees they wish to have registered.
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 have the opportunity to enhance their end-of-service benefits by opting for 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 enrolled in the scheme by your employer, here is how it will work: you will retain the gratuity that you have earned before subscribing to the new scheme.
Once you are registered in the new scheme, your gratuity will be calculated according to its guidelines.
Upon completion of your service, your total earnings – both before and after the implementation of the new scheme – will be disbursed to you.
What is the monthly subscription fee for employers who want to enroll in the system?
According to the Ministry of Human Resources and Emiratisation (MOHRE), employers are required to pay fees based on the employee’s basic salary. The fee structure is as follows:
– If the employee’s service duration is less than five years, the employer must pay 5.83 percent of the employee’s monthly basic salary.
– If the employee’s service duration exceeds five years, the employer must pay 8.33 percent of the employee’s monthly basic salary.
These fees are calculated based on the employee’s basic salary and serve as a contribution towards various benefits and services provided by the MOHRE.
Can workers increase their benefits?
The employer will cover the subscription fee for the scheme, but workers have the choice to enhance their investment returns by making additional contributions of around 25% of their total annual salary. Moreover, they have the flexibility to withdraw both their contributions and investment returns. It’s important to note that this applies only to the additional contributions made by employees, not the gratuity subscription fee provided by the employer.
How does the employee receive the benefits?
When an employer terminates the employment contract by canceling the worker’s work permit with MOHRE, the worker is presented with a choice: they can either receive their financial benefits or opt to continue investing in the scheme. As per MOHRE regulations, the worker will be duly compensated for their financial benefits.