The Ministry of Human Resources and Emiratization (MOHRE) has launched a Voluntary Savings Scheme aimed at replacing the traditional end-of-service gratuity system. This initiative invites private sector companies to participate, allowing them to invest employee end-of-service benefits in four approved investment funds.

The four funds approved for the scheme include the FAB Fund from First Abu Dhabi Bank, the Lunate Fund, Waha Capital’s “Waha Investment Fund,” and The National Bonds Sukuk Fund. MOHRE has highlighted 12 key benefits of this new savings plan, which aims to enhance financial security for employees and provide companies with a flexible way to manage employee savings effectively.

Participating in the scheme can improve a company’s reputation as a forward-thinking organization focused on employee welfare. It can lead to increased employee loyalty and productivity while facilitating the attraction of top talent. Notably, the cost for employers under this savings scheme is expected to be lower in the medium term than the traditional gratuity payout, as contributions are calculated based on the basic salary at the time of payment, rather than at termination when salaries are usually higher.

For employees, the new system offers several advantages, including the potential for asset growth and reliable investment returns. Guaranteed gratuity payouts ensure financial stability for families, regardless of an employer’s financial condition. Employees also gain financial awareness and can manage their personal savings more effectively, with the option to make additional contributions of up to 25% of their total annual salary.

Skilled employees can select from various investment portfolios, while non-skilled workers will automatically be placed in capital-guaranteed portfolios. Employees whose companies join the scheme will have their end-of-service entitlements calculated according to traditional labor law for any service prior to enrollment. Benefits accrued after enrollment will be managed under the new savings system, with all accumulated benefits payable at the end of the employment relationship.

MOHRE has also expanded the eligibility for voluntary participation in the scheme to include self-employed individuals, freelance permit holders, non-UAE nationals in government entities, and UAE nationals in both public and private sectors. Employers are still required to contribute to pension and social security schemes for UAE nationals as stipulated by law.

Employees transitioning to a new employer have the option to withdraw their savings or keep them invested, with new employers allowed to continue contributions to the same fund or select a different fund manager. To initiate the disbursement of entitlements, an employer must terminate the employee’s work permit through MOHRE, after which employees can choose to withdraw their savings or maintain their investments without additional contributions.