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Aden - Yasmine El Tohamy - Dubai International Financial Centre, DIFC, announced on Monday the introduction of a new workplace savings scheme for employees that will replace the current end-of-service gratuity payment regime that has been in place since the inception of the DIFC in 2004.
His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President, Prime Minister and Ruler of Dubai, in his capacity as the Ruler of Dubai, has enacted the amendments to DIFC employment law that will benefit some 24,000 professionals.
As per the new Employment Law Amendment Law No. 04 of 2020, effective from 1st February 2020, DIFC companies will make mandatory monthly contributions to a professionally managed and regulated savings plan. The plan replaces the existing accruing of end-of-service gratuity benefits in favour of employees, which is currently in line with the rest of the UAE, the international financial hub said in a statement.
Essa Kazim, governor of DIFC, said with a firm commitment to creating a prosperous hub for 24,000 professionals based at the DIFC, the comprehensive enhancements to DIFC Employment Law would give clear guidance to employers and employees seeking to grow their savings securely while fortifying both their interests.
"By doing this, the DIFC also sets a clear example for others to follow global best practice in this regard."
The Board of Directors of the DIFC Authority has also issued new employment regulations that set out the requirements for "Qualifying Schemes."
Employers will have until 31st March 2020 to enroll into a qualifying scheme. These include the DIFC Employee Workplace Savings (DEWS) Plan, established by the DIFC as a best-in-class default qualifying scheme.
Alternatively, employers may seek a Certificate of Compliance from the DIFC Authority for an alternative qualifying scheme.
The requirements for the qualifying schemes include having an oversight body that will have the right to appoint and remove the scheme operator, review its governance and fees and charges imposed on the scheme. In addition, these schemes must require employer and employee representation and independent oversight with the aim of ensuring the proper protection of the employee's interests.
DIFC said other key changes include allowing employees to make voluntary workplace savings contributions into a Qualifying Scheme on top of the mandatory monthly contributions to be made by employers under the Employment Law; ensuring that any accrued end-of-service benefits under the current regime remain in place, also providing employers with the option to pay these accrued benefits into a Qualifying Scheme; creating 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 have a presence in the DIFC.
As per the law, the mandatory contributions to be made by employers will be 5.83 per cent of monthly basic wage (for employees who have less than five years' service), and 8.33 per cent of monthly basic wage for employees who have longer service. The law also stipulated exemptions for international institutions that have a statutory obligation to make pension, retirement or similar contributions on behalf of their employees elsewhere, as well for employers who wish to provide a regulated defined benefit scheme to their employees that provides for benefits in excess of what the mandatory defined contributions are under the DIFC Employment Law.
Editorial Director of Al Khaleej Today, is a well-connected Indian journalist and an economic and financial commentator. He has been in the UAE's mainstream journalism for 35 years, including 23 years with Al Khaleej Today. A post-graduate in English and graduate in economics, he has won over two dozen awards. Acclaimed for his authentic and insightful analysis of global and regional businesses and economic trends, he is respected for his astute understanding of the local business scene.
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