UAE urges companies to register for voluntary 'Savings Scheme' to protect employees

The Ministry of Human Resources and Emiratisation (MoHRE) highlighted the notable efficiency of the voluntary ‘Savings Scheme’ – an alternative end-of-service benefits system for private-sector workers – and its effectiveness in enhancing ease of doing business.

The Ministry explained that the new Scheme boosts private sector companies’ ability to attract and retain talent, while protecting workers’ financial entitlements and providing them with opportunities to grow their savings through investment returns, supported by reliable, accredited investment funds in the country.

MoHRE and the Securities and Commodities Authority (SCA) had approved a group of investment funds to operate the voluntary alternative end-of-service benefits scheme, after verifying that the operating institutions meet the necessary standards and requirements for the establishment and management of savings funds.

In a press statement, the Ministry urged private sector companies in the UAE to participate in the Savings Scheme to enhance their employees’ wellbeing, attract talent, and strengthen their corporate reputation in the increasingly competitive UAE labour market.

The Scheme enables employers to establish themselves as outstanding places to work that prioritise their employees’ financial growth and future security, which fosters employee loyalty and helps attract exceptional talent. Moreover, participating in the Savings Scheme enhances employee productivity by allowing them to grow their financial assets and gain investment returns on their savings through secure and reliable investment opportunities.

The system offers a proactive approach to managing financial obligations and promotes companies’ long-term financial health, especially given that the medium-term cost for employers participating in the Savings Scheme is lower than the cost of paying end-of-service gratuities, as contributions are based on the basic salary of the employee at the time of payment, rather than the basic salary at the end of service, which is typically higher.

Companies wishing to join the Savings Scheme can apply through the Ministry’s service channels, select one of the accredited investment funds, and pay the subscription fees for the employees they wish to enrol in the system.

Workers will keep the gratuity they earned before being enrolled in the Scheme by their employer. The existing end-of-service gratuity system – as stipulated in the Federal Decree Law Regarding the Regulation of Employment Relationship – is then suspended for employees registered in the new system, and the monetary sums they have accrued are calculated based on their years of service, in accordance with the law, up to the date they join the new system.

The gratuity will be calculated as per the new system starting from the date the employee is registered in it, with all earnings (before and after the new system) disbursed at the end of the contract with the employer.

To increase savings and investment returns, workers have the option to make additional contributions of approximately 25% of their total annual salary. They can also withdraw some or all of the contributions and investment returns, based on the terms and conditions of the system.

When a worker moves from their current employer to a new one, they may either withdraw their accrued amount from the fund contributed by the current employer, or choose to keep it in the fund to continue investing with the option of accessing it at any time. The new employer may take over the previous employer’s contributions to the same fund after establishing a contract with the fund. The new employer may also register the worker with another fund manager and pay the associated contribution fees.

The Savings Scheme also allows skilled workers the freedom to choose any of the investment options it offers according to their investment preferences. While unskilled workers can only be enrolled in the Capital Guarantee Portfolio.

Moreover, it allows optional participation for additional categories wishing to benefit from its advantages, giving self-employed individuals, those with freelance work permits, non-citizen employees working in government entities or their affiliated establishments and subsidiaries, as well as Emirati employees in the public and private sectors, the option to register in the system through additional voluntary contributions only. This allows them to protect, invest, and grow their savings, ultimately receiving them as an end-of-service gratuity. Meanwhile, employers remain responsible for paying the contributions for UAE nationals in pension and social security authorities and systems.

The Ministry of Human Resources and Emiratisation provides comprehensive, regularly updated information on accredited investment funds on its website, www.mohre.gov.ae, along with details on the voluntary alternative end-of-service benefits system ‘Savings Scheme’ for private sector workers.