Employers in the UAE are being encouraged to sign up for a voluntary ‘savings scheme’ that offers a valuable alternative to traditional end-of-service benefits. This new system provides additional advantages for both employers and employees.
The savings scheme aims to help private sector companies attract and keep talented workers while ensuring that employees’ financial rights are protected. It also offers opportunities for workers to grow their savings through investments backed by reliable funds in the UAE.
Enhancing Employee Well-Being
The Ministry of Human Resources and Emiratisation (MoHRE) is urging private companies to take part in the savings scheme to improve employee well-being, attract talent, and enhance their company reputation in a competitive job market.
The MoHRE, along with the Securities and Commodities Authority (SCA), has approved various investment funds for this voluntary scheme, ensuring that the funds meet all necessary standards for managing savings effectively.
Benefits for Employers
By participating in the scheme, employers can position their companies as great places to work that focus on their employees’ financial growth and security. This not only builds loyalty among current employees but also attracts new talent.
The scheme can boost productivity by allowing employees to grow their savings and earn returns on investments through safe and dependable options. Additionally, it offers a smart way to manage financial commitments, as the medium-term costs for employers are lower compared to traditional end-of-service gratuities. Contributions are based on the employee’s basic salary at the time of payment, which is usually lower than the final salary paid at the end of service.
How to Sign Up
Private companies interested in joining the ‘savings scheme’ can apply through the MoHRE’s service channels. They need to select an accredited investment fund and pay the subscription fees for the employees they want to enroll.
The MoHRE regularly updates information about accredited investment funds on its website, along with details about the savings scheme designed for private sector workers.
Understanding the Scheme
Employees will retain any gratuity earned before joining the new scheme. The previous end-of-service gratuity system is paused for those enrolled in the new scheme. Their gratuity will be calculated based on their years of service up to the date they switch to the new system.
Starting from their registration date, the gratuity will be calculated under the new system, and all earnings will be paid out at the end of the employment contract. Employees can also increase their savings by contributing an extra 25% of their total annual salary. They have the option to withdraw some or all contributions and investment returns, depending on the scheme’s terms.
Skilled workers can choose any investment options available, while unskilled workers can only join the Capital Guarantee Portfolio. The scheme also allows voluntary participation for various categories, including self-employed individuals, freelancers, and non-citizen employees in government jobs, enabling them to benefit from the savings and investment opportunities.
Job Changes and Fund Management
When employees change jobs, they have two options regarding the funds contributed by their current employer: they can withdraw their accrued amount or keep it in the fund for continued investment, with access available at any time.
The new employer can either take over the previous employer’s contributions to the same fund by establishing a contract or register the worker with a different fund manager, paying the necessary contribution fees.
