TME LEGAL | DUBAI – RECHT KLAR

UAE Launches End of Service Savings Scheme

UAE Launches End of Service Savings Scheme


In a move aimed at redefining employee benefits in the United Arab Emirates (UAE), the government has introduced a system for end-of-service benefits (EOSB), offering employees an opportunity to invest in their financial futures. This scheme, approved by the UAE Cabinet, is set to provide an alternative to the conventional gratuity system, offering benefits to employees primarily in the private sector and free zones.


A Modern Approach to EOSB


The UAE government’s new EOSB initiative allows employers to participate in a revolutionary savings- and investment fund. Under this scheme, employers will make monthly contributions to the selected fund on behalf of their employees, transforming the traditional gratuity approach.


A Trio of Investment Options


Risk-Free Investment: Designed to maintain the capital and provide a secure-, low-risk investment avenue.


Risk-Based Investment: Offering employees choose low-, medium-, or high-risk investments, catering to varying risk appetites.


Sharia-Compliant Investment: Ensuring compliance with Islamic finance principles, this option adheres to Sharia law.


Employees can tailor their investments based on individual preferences, goals, and risk tolerance. The accumulated savings and returns from these investments will be accessible to employees at the end of their service.


Advantages for Employers and Employees


This innovative EOSB system offers numerous advantages for both employers and employees. For employers, it is expected to be a cost-effective and attractive option to retain talent, creating a win-win situation. On the other hand, employees benefit from enhanced control over their financial futures and the potential for higher returns on their savings.


Government Employees Included


The scheme extends beyond the private sector, as public sector workers are also invited to participate. This inclusion underscores the government’s commitment to promoting financial stability and security for all its citizens and residents.


Protection in Challenging Times


One of the notable features of this scheme is the protection it offers to employee savings, even in challenging economic circumstances. Employers must make monthly contributions, ensuring that a portion of EOSB remains safeguarded, even if the employer faces financial difficulties.


Legislation and Implementation


While the comprehensive legislation regarding this scheme and its implementation is expected to be released in due course, legal experts anticipate that this flexible and forward-thinking approach will strengthen employees’ financial security and contribute to long-term financial stability for them and their families.


Attracting Global Talent


Industry experts believe this innovative EOSB system will enhance the UAE’s appeal as a global hub for skilled professionals. This policy is a significant development in the UAE Labour Law, reinforcing employees’ statutory entitlements and making the UAE a more attractive destination for top talent.


Setting a Regional Precedent


The introduction of this scheme positions the UAE as a trailblazer in the region, potentially inspiring other countries in the Middle East and North Africa to adopt similar employee-centric initiatives. This move reflects the UAE’s commitment to safeguarding employee rights and financial well-being.


With the launch of this innovative EOSB system, the UAE continues to prioritize its employees’ financial stability and well-being, reinforcing its reputation as a progressive and forward-thinking nation. This initiative empowers private sector employees, offering them greater control over their financial destinies and a promising future.

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