United Arab Emirates: New End-of-Service Savings Scheme Implemented for Select Private Sector Employees

Effective immediately, a new end-of-service savings scheme, the “Voluntary Alternative End-of-Service Benefits Scheme,” is now available to employees selected by their private sector employers operating in both the mainland and in select free zones overseen by federal employment regulations. The scheme offers an investment pathway for eligible employees seeking to gain returns on their monthly end-of-service gratuity earnings, which were previously paid out in a lump sum at the end of their employment. Employees currently working in the public sector are also eligible to voluntarily opt into this new scheme. Employers may voluntarily choose to register with the new scheme, while ensuring their employees’ accrued entitlements from the previous end-of-service gratuity scheme are preserved, by submitting an application to the Ministry of Human Resources and Emiratization. Upon the Ministry’s approval, the employer must enter into a contractual agreement with an approved investment fund licensed by the Securities and Commodities Authority, which will assign the company a “Fund Manager” to oversee the respective investments. Employers must then select, subject to their own discretion, the employees who they would like to allow to participate in the new scheme. Employers who fail to pay the basic contribution fee on time will face penalties. This new scheme with monthly contributions gives employees an additional layer of security since previously lump sum payments made at the end of an employee’s employment could be at risk if the company went bankrupt or fell into other financial difficulties.