New End-of-Service Savings Scheme for Employees
New End-of-Service Savings Scheme for Employees UAE has emerged in UAE as a statutory scheme for the private sector employers and employees. The End-of-Service Savings Scheme for Employees UAE program started in November 2023 as an optional replacement to the ESG (end-of-service gratuity) and is intended to offer more framework for legislation, flexibility, and financial security for end-of-service benefits.
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The End-of-Service Savings Scheme for Employees UAE has been an optional form of ESG system(end-of-service gratuity) for quite some time now. In the existing ESG rules, the employee is entitled to an end-of-service allowance calculated based on his length of service and his last basic emoluments paid when the employment is terminated, but the employment must have a one-year continuous period.
The End-of-Service Savings Scheme for Employees UAE. However, lets both the employer and employee make contributions to fund an investment scheme, which guarantees capital and may also give higher yields.
It must be noted that the scheme is compulsory for employees and employers only in the situation when employers agree to embrace the system. Once they do it will be obligatory for the selected categories of employees that they enroll.
Employers are required to make a fraction of the monthly basic wage of each enlisted worker to the investment fund. The contribution rates are:
In the investment program, one can choose between riskless, low, medium-high, and super high-risk portfolios as well as Shariah-compliant funds. It also meant that its employees were able to choose plans depending on their tolerance to risk.
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The new scheme has many advantages for employers as given below:
Advantages for Employees
The following advantages are available for employees under the new scheme:
The first two investment funds were recently licensed to manage the End-of-Service Savings Scheme for Employees UAE in July 2024. Their approval was a stage achieved where employers could start enrolling their employees hence preparing the ground for the popularity of the scheme throughout the UAE.
For employers considering participation in the End-of-Service Savings Scheme for Employees UAE, several important steps and considerations must be taken into account:
The Employer’s Alternative ECSB Scheme is defined by Cabinet Decision No. 96/2023 and Ministerial Resolution No. 668/2023 which regulates the operational governance of the subject. A standing committee constituted by the MOHRE in cooperation with the Securities and Commodities Authority oversees the targeted implementation of the scheme and enforcement of compliance.
The End-of-Service Savings Scheme for Employees UAE is a big social change in the management of end-of-service benefits as more secure and liberal for employees and savings for the employer. With the onset of the scheme as it is anticipated, it will form part of the remuneration package of employees in the private sector in the same manner as it is in the global market standards in managing human resources.
End-of-Service Savings Scheme for Employees UAE was preferred so that employers are motivated to embrace the benefits of the scheme and effectively explain the same to their employees hence increasing the possibility of success of this innovative means of getting end-service benefit.
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