UAE announces a new system regarding obtaining end-of-service benefits

decision to either continue investing in the end-of-service program or to get cash rewards upon the termination of the employment contract

Read also: UAE announces retail fuel prices for November 2023

The United Arab Emirates' innovative end-of-service scheme is now in full operation, offering companies the opportunity to engage with the Ministry of Human Resources and Emiratisation (Mohre) or the Securities and Commodities Authority for registration. In this article, we delve into the details of this groundbreaking system and explain how both employers and employees can benefit from it.

Introducing the Alternative End-of-Service Scheme

In a recent media briefing, Dr. Abdulrahman Al Awar, the Minister of Human Resources and Emiratisation, unveiled this pioneering initiative. Notably, participation in the scheme is entirely optional for both employers and employees, providing flexibility and choice to all parties involved.

This progressive scheme is accessible to employees across the public and private sectors, including those working in freezone entities. Employers who opt to participate can select specific staff members to be part of the program, tailoring it to their workforce's needs.

Employee Choice: Financial Benefits or Continued Investment

Under this scheme, employees have the freedom to choose between receiving financial benefits upon the termination of their employment contract or continuing to invest in the end-of-service scheme. This level of autonomy empowers individuals to make decisions that align with their financial goals and preferences.

Dr. Abdulrahman Al Awar emphasized that employees can also request withdrawals of their voluntary contribution amounts and investment returns, adding another layer of financial control for participants.

Rethinking Gratuity Payments

The end-of-service scheme for UAE employees, encompassing those in the public, private, and free zone sectors, presents an innovative alternative to the conventional gratuity payment system. Its primary objective is to safeguard employee dues while ensuring safe investments for these funds.

This initiative is geared toward increasing investment revenues for subscribers and introduces an additional voluntary contribution option, providing even more financial opportunities for those involved.

Maximizing Benefits with High-Returns Funds

Dr. Abdulrahman Al Awar highlighted that skilled workers have the potential to enhance their end-of-service benefits significantly by choosing high-return investment funds. This means that employees with investment expertise can tailor their financial strategy to achieve higher returns.

How to Register for the End-of-Service Scheme

The registration process is straightforward. Employers will initiate the registration by submitting a request to the Ministry of Human Resources and Emiratisation. Once approved, they will select an investment fund, choose the employees they wish to enroll in the scheme, and ensure that their employees' entitlements from the previous period are preserved.

Employers will then proceed to select the investment fund and sign the subscription contract, identifying the fund administrator. The participation and registration of establishment staff in the scheme will be managed through the fund administrator, who will open a savings account for beneficiaries.

Two Types of Subscription

There are two distinct subscription options within the end-of-service scheme:

  1. Basic Subscription: Designed for non-skilled workers, this option directs contributions exclusively to low-risk investment funds.

  2. Voluntary Subscription: Geared toward skilled workers with a strong understanding of investments, this option allows them to allocate their funds to high- to medium-risk investments. In the absence of a specific choice, skilled workers will be automatically directed to low-risk guaranteed investments.

Contribution Deductions Based on Tenure

The amount deducted from employees' salaries for the new scheme depends on their length of service with the company:

  • For employees with less than 5 years of service: 5.83% of their basic salaries will be deducted.
  • Those with more than 5 years of service: 8.33% of their basic salary will be deducted.

Furthermore, employees have the option to boost their investment returns by increasing their contributions to approximately 25% of their total annual salary. This enables them to withdraw part of the accumulated amount or their investment returns, providing even more financial flexibility.

In conclusion, the UAE's alternative end-of-service scheme ushers in a new era of financial security and empowerment for both employers and employees. Its flexibility, investment opportunities, and protection of employee dues make it a significant step forward in the region's employment benefits landscape. By understanding the scheme's intricacies and making informed choices, individuals can optimize their financial well-being in the UAE's dynamic job market.

Follow Us on Follow Akhbrna News at Google News
Join Telegram channel