The United Arab Emirates' Ministry of Human Resources and Emiratisation unveiled a new alternative way for end-of-service rewards for UAE residents and workers in the country's business and public sectors. This approach benefits the UAE's economy while also safeguarding the safety of the country's workforce.
The savings system enhances the ease of doing business, by providing a low subscription cost compared to the cost of end-of-service gratuity. The system also works to increase individual investment returns for beneficiaries and allows the worker to pay an additional optional contribution.
Enhancing the economic impact of the employer and employee
The Ministry of Human Resources and Emiratisation in the UAE explained that the system of investing the amounts allocated for end-of-service bonuses has already been implemented, if any of the establishments wish to participate in them, through investment funds to develop employees’ savings, and this matter will indeed have a positive impact in isolating the impact. Economic benefits for the employer and the worker.
This new system, the “Savings System,” is also considered an optional alternative to the end-of-service reward for two-year residents in the private sector, in accordance with UAE Cabinet Resolution No. 96 of 2023.
Participation in the savings system through the employer
The Ministry of Human Resources in the UAE allows the employer to participate in the savings system by submitting an application through one of the licensed investment funds, in addition to the list of workers who wish to participate in the system and pay the subscription value for them.
Accordingly, the traditional reward system is suspended in these cases, with the amounts due to each worker being calculated for years of experience in accordance with the law regulating labor relations.
Optionally pay the additional contribution
The Ministry and the Authority also give the worker the right to pay the additional contribution optionally, if he wishes to develop and increase his savings and investment returns, within a limit of 25% of your annual gross salary.
System governance
It is worth noting that this system operates according to specific governance, as it ensures that the worker invests the financial amounts for the end-of-service reward in a safe manner to protect his rights and achieve stability, by paying additional sums of money by paying the basic subscription amount in accordance with the monthly basic salary of the worker registered in the system.
It is also mentioned that the cost paid by the employer for workers who want the new savings system is much less than the current end-of-service reward, as a result of paying the contribution for the value of the basic salary in the month of payment and not for the basic value of the salary.
