United Arab Emirates: End-of-Service Savings Initiative Forthcoming for Private Sector Employees
September 15, 2023
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The UAE Cabinet approved a new, optional, end-of-service savings initiative for private sector employees. The initiative will provide employees with low-risk investment options for end-of-service gratuity payments, overseen by the Securities and Commodities Authority and the Ministry of Human Resources and Emiratization, in order to increase their financial returns and savings. Employees are only eligible to receive their end-of-service gratuity payments upon termination of their employment if they have worked for the employer for at least one continuous year. Employees working in the private sector, in both the mainland and free zones, are eligible for this scheme. Public sector employees are also eligible to voluntarily opt into the scheme, although they have additional investment schemes in which they can take part. The scheme is expected to have three investment options: risk-free investment to maintain capital; risk-based investments where the risk level varies between low, medium and high; and Sharia-compliant investments. The new initiative will enhance the attractiveness of the UAE as a global hub for foreign talent as it provides a scheme for a monthly allowance or payment during retirement in the country. The government has not yet announced when the scheme will be implemented but further details are expected in coming months. Currently, there are limited investment options for foreign nationals in the private sector. In 2020, the Dubai Financial Center Employee Workplace Savings Scheme was introduced for private sector employees employed by companies in the Dubai Financial Center, and in 2022, the Golden Pension Plan was introduced by the Investment Corporation of Dubai.
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