In January 2020, His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, made some amendments in the gratuity law of Dubai. In his capacity as the Ruler of Dubai, he has enacted the Employment Law Amendment Law No. 4 of 2020, Dubai International Financial Centre (DIFC), the leading international financial hub in the Middle East, Africa and South Asia region.
According to the Amendment Law, the new Qualifying Scheme workplace savings scheme will be implemented in the DIFC, replacing the current end-of-service gratuity payment regime that has been in place since the inception of the DIFC in 2004. The new regime, which will be effective from the February 1, 2020, employers will have to make mandatory monthly contributions to a professionally managed and regulated savings plan. This plan, which replaces the current accruing of end-of-service gratuity benefits is believed to be more employee-friendly. Besides, the Board of Directors of the DIFC Authority has also issued new Employment Regulations that clearly delineate the requirements for Qualifying Schemes.
Whom does it cover:
Employers can enroll into a Qualifying Scheme by the 31st of March, 2020, which includes the DIFC Employee Workplace Savings (DEWS) Plan. This was introduced by the DIFC as a best-in-class default Qualifying Scheme following an exhaustive competitive bidding process. Alternatively, employers can obtain a Certificate of Compliance from the DIFC Authority to seek an alternative Qualifying Scheme under the Regulations.
Key changes introduced:
- Voluntary savings- employees will be allowed to make voluntary workplace savings contributions into a Qualifying Scheme besides the compulsory monthly contributions to be made by employers under the Employment Law
- Qualifying scheme- this is to ensure that all the accrued end-of-service benefits under the current regime are in place. It also allows employees to opt for paying thee accrued benefits into a Qualifying Scheme.
- Short term workers- this is meant to create exemptions for certain types of employees, such as those on secondment in the DIFC, short-term workers, equity partners and employees working for government departments and bodies that are part of the DIFC.
- Mandatory contribution- employers mandatory have to contribute 5.83% of monthly basic wage, if they have less than five years of service, while employees who have longer service have to pay 8.33% of their monthly basic wage.
- Exemptions- this is aimed at creating exemptions for international institutions which have a statutory obligation to make pension, retirement or similar contributions on behalf of their employees elsewhere. It also seeks to make an exemption for employers who are keen to provide a regulated defined benefit scheme to their employees, which can offer additional benefits to them.
- Miscellaneous enhancements- Essa Kazim, Governor of DIFC affirmed that these comprehensive enhancements to DIFC Employment Law Amendment is deeply committed to creating a flourishing hub for the 24,000 professionals based at the DIFC. These have also been framed with the idea of providing clear guidance to employees and employers in terms of growing their savings securely without putting their respective interests at stake. Kazim further added that as they gear up to embark upon an expansion that will have definitive significance to the future of finance, these amendments to the DIFC Employment Law will further reinforce their position as a far-sighted international financial hub in sync with global best practices.
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