The UAE has adopted a system to boost the end-of-service benefits of workers in the private sector and free zones in the country.

The system, approved by the UAE cabinet on Monday, includes the establishment of savings and investment funds that will be overseen by the Securities and Commodities Authority, in coordination with the Ministry of Human Resources, Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of UAE and Ruler of Dubai said on Monday.

“The aim is to preserve the workers’ savings… and to ensure that they are invested in a safe way,” the ruler said on X, formerly known as Twitter.

The rewards system will be optional for companies in the UAE. Workers in the government sector also have the option to participate in the system to boost their savings.

The new scheme is the latest initiative the UAE has announced to boost gratuity benefits of workers in the private sector, in a bid to attract talent.

The scheme will have three investment options such as: Risk-free investment that maintains capital; risk-based investment where the risk varies between low, medium and high; and the sharia-compliant investment. Employees can avail the end-of-service benefits once their work relationship with the employer ends.

Similar to pension
Unlike several markets outside the Gulf region, the UAE has no system in place that provides state and employer contributions for workers’ pension, which guarantees a monthly allowance or pay during retirement.

The closest to a pension plan the private sector has seen recently is the DIFC Employee Workplace Savings Scheme (DEWS), which was introduced in 2020.

Under the scheme, DIFC firms make monthly contributions at the rate of 4.83% or 8.33% of the staff’s monthly basic pay. Workers are entitled to withdraw the funds upon termination of their work or keep the savings invested for later use.

Sheikh Mohammad also announced on Monday that, at the Council of Ministers session, the UAE approved a new system to provide rewards and incentives for federal government employees.

The goal is to boost the competitiveness within the UAE national workforce.

“The rewards and financial and in-kind incentives are for three categories… for the outstanding annual performance of the employee … or for the exceptional achievements at the level of the entity… or for the national achievements that the employee may achieve for the state,” Sheikh Mohammad said.

(Editing by Seban Scaria seban.scaria@lseg.com)