The Ministry of Human Resources and Emiratisation has confirmed that the “voluntary participation” of private sector employees in the “alternative savings system for end-of-service compensation”, whether in additional monthly amounts or lump sums of wages, is not included in the worker’s end-of-service benefits, noting that it is an additional option for the employee registered in the system. Saving, with the aim of increasing his savings.
She explained that the savings system, through which the amounts allocated for end-of-service rewards for employees working in private sector establishments are invested in approved investment funds, aims primarily to develop labor savings and benefit from their investment returns, pointing out that this system is an “optional alternative” to the system. The end-of-service bonus is currently in effect in the private sector, where establishments wishing to participate pay monthly percentages to the investment fund account for the workers they want to register in it.
The Ministry stated, in response to questions from visitors and followers of its website and its official accounts on social media platforms, that the savings system aims to ensure that workers receive their end-of-service benefits, protect them from waves of inflation, or the default or bankruptcy of the employer, and provide opportunities to save and develop them, and benefit from opportunities. Investing funds in investment tools for economic activities in the country.
She indicated that the monthly basic subscription amount for a full-time employee is calculated at 5.83% of the monthly basic wage if the period of service does not exceed five years, and 8.33% of the employee’s monthly basic wage if his period of service exceeds five years, pointing out that the subscriber to the system is entitled to All subscription amounts paid by the employer on his behalf, and any returns or profits accrued during the subscription period, in lieu of end-of-service benefits, provided that the basic monthly subscription is transferred to the investment fund account within 15 days, maximum, from the first day of the Gregorian month.
The Ministry said: “The employee may contribute a percentage of the total wage, or an additional monthly or lump sum, in addition to the basic subscription amount through what is called voluntary subscription, which is an additional option for employees registered in the system, with the aim of increasing their savings and encouraging them to invest and sound financial planning. So that the amount of money that the employee can pay from his wage is monthly or annually according to his desire,” indicating that there are two ways to participate in the system, the first is to transfer the voluntary contribution from the employer by deducting from the beneficiary’s wage if the voluntary contribution is monthly. The second is to transfer the voluntary subscription from the beneficiary directly to the investment fund account if the subscription is a lump sum.
The Ministry stressed that it is a condition that the voluntary contribution rate does not exceed 25% of the total wage if the payment is monthly, and the total contribution rate does not exceed the same rate (25%) annually if the amount is “lump,” stressing that the amounts directed to the voluntary subscription system do not fall within End of service benefits.
The Ministry added: “The employee has the right to withdraw part or all of the paid additional voluntary subscription amounts or their investment returns whenever he wants, in accordance with the controls in force at the investment fund. He can also, whenever he wants, change the percentage or amount of the voluntary subscription or stop paying, provided that The employee’s entitlement to this system ends when the work relationship with the employer ends, and he has the right to keep his money in the system without paying additional amounts.”
Options
The UAE Digital Government confirmed that the optional alternative system for end-of-service compensation in the private sector provides many benefits to the employee and the employer, including three diverse investment options for employees, including the option of a capital guarantee portfolio. It provides a risk-free option and guarantees the preservation of capital, if The beneficiary was from the category of unskilled workers, and the risk-based investment option, which includes options for various investment portfolios that carry varying degrees of financial risk, in proportion to the expected returns from them, in addition to the option of investment funds compatible with Islamic Sharia.
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