The government of the United Arab Emirates has come up with the newly added benefits of an end-of-service savings scheme to encourage workers to invest more in the future. Equally, the scheme will trigger maximum overseas talent to contribute to the country.

The Prime Minister and Ruler of Dubai, Sheikh Mohammed Bin Rashid spoke about the highlights of the scheme on Monday that would benefit to “safeguard the savings of employees” and also will ensure financial security for the families. He targeted workers in different private sectors and free zones,

Sheikh Mohammed Bin Rashid has revealed the plan while chairing a UAE Cabinet meeting in Abu Dhabi. He also said the investment system will not be mandatory for the workers.

Sheikh Mohammed posted on X, formerly known as Twitter “This system will be optional for employers to join and will involve the establishment of savings and investment funds from the private sector, overseen by the Securities and Commodities Authority in coordination with the Ministry of Human Resources and Emiratisation.”

“Through this system, employees can save and invest their end-of-service benefits in various investment options. The goal is to safeguard the savings of employees, which represent their end-of-service benefits in the companies they work for, ensuring their rights and providing stability for their families,” he further added.

Not only the employees of the private sector but the workers from the public sector are equally eligible to participate in this particular End-of-Service investment system, in terms of the purpose of investing and saving for the future.

Contribution Towards a Long-term Stability

Dr Hassan Elhais, a Legal Consultant of Al Rowaad Advocates in Dubai has said how the End-of-Service investment service will benefit and provide some added financial security to the private sector employees and free zone workers in the United Arab Emirates.

“Unlike the traditional gratuity system, this alternative is flexible and enables employees to actively grow their end-of-service benefits through a range of investment options, supervised by the Securities and Commodities Authority and the Ministry of Human Resources and Emiratisation,” Dr Hassan Elhais said.

He said, “This approach doesn’t just safeguard employees’ rights but also increases their savings, contributing to long-term financial stability for them and their families.”

The non-compulsory nature of the scheme will give the employers the freedom to choose, and that  “makes it a win-win for all parties involved. Overall, this progressive initiative serves as an empowering mechanism for private sector employees, allowing them greater control over their financial future,” he further explained.

An employment lawyer specialist of a multinational law firm in Dubai, the  Pinsent Masons, Ruth Stephen said the investment policy will recognize the UAE as the global hub for skilled professionals.

Ms. Ruth Stephen said, “The ability for employees to invest and protect their accrued end-of-service gratuity marks a significant development in the UAE Labour Law.” 

Ms. Stephen also said the investment plan will empower more rightful elements for the employees and “therefore bolsters the UAE as an international business hub at attracting and retaining top talent. It will be interesting to see which employees take up this opportunity first and the momentum that follows.”

Hoda Mana, a recruitment consultant at an international recruitment and career coaching company, KM Talent with branches in the UAE also shared her thoughts. According to her, this End-of-Service scheme will raise up UAE’s status as a suitable destination for overseas employees.

The scheme will bring UAE as one of the front-line employers with many employment packages offered by other leading countries unlike the US, UK, and Australia.

How the Investment Plan Works

As per the shared report by the Government Media The investment plan is structured with three investment variations.

  • Risk-free capital guarantee investment.
  • Investments, where the risk factors will vary between low, medium, and high.
  • Sharia-compliant investments.

The participant employers are requested to pay a monthly contribution under the scheme.

The End-of-service scheme savings benefits and returns will be paid to the worker at the end of service and work relation.

For employers, the long-term scheme will cost less than the usual system. In addition, the scheme will help employees to add some more commission as other possible attractive benefits under the End-of-Service scheme.

A wide observation by the experts has witnessed the dependency on the gratuity scheme as a retirement fund by UAE residents.

In March 2022, the crown prince of Dubai, Sheikh Hamdan bin Mohammed announced a new savings pension plan that non-Emirati employees working under the Dubai Government can also join.

There were some varieties of investment plans to be offered such as  Sharia-compliant. A capital protection plan as an assurance will be given to those who do not wish to contribute.

In October, National Bonds, owned by the Investment Corporation of Dubai, a Sharia-compliant savings and investment company came up with the Golden Pension Scheme to provide a helping hand to foreign employees in different private sectors to restructure their financial plans.

The scheme will let the employees start with retirement plans, working in registered private companies through the offered returns by the National bond. The company also said that 82% of workers have shown interest in opening to their gratuity being invested on their behalf in the last month.