The UAE issues adecision regarding the savings system and its relationship to the end-of-service reward

ahmed atef - | UAE

A ruling is handed down by HR about the savings program and how it relates to the end-of-service bonus.

Although it is an additional option for the employee registered in the savings system to increase his savings, the Ministry of Human Resources and Emiratization confirmed that "voluntary participation" of private sector employees in the "alternative savings system for end-of-Service Bonus"—whether with additional monthly or lump sum amounts of wages—is not included in the employee's end-of-service benefits.

End of service benefits for employees

it clarified that the savings system, which invests employee end-of-service bonus funds in approved investment funds, is primarily intended to foster labor savings and reap the benefits of investment returns. She noted that this system is a "optional alternative" to the private sector's current end-of-service bonus program, in which participating establishments pay monthly percentages to the investment fund's account for the employment they wish to register for.

Savings system

In response to inquiries from visitors and followers of its website and official accounts on social media, the ministry said that the savings system aims to guarantee end-of-service benefits to employees, shield them from waves of inflation, default or bankruptcy by the employer, offer chances for saving and development, and take advantage of opportunities to use funds in investment instruments for the nation's economic activities.

The speaker made a point of stating that the monthly basic contribution amount for a full-time employee is 5.83% of the monthly basic wage if the employee's service period does not exceed five years, and 8.33% of the monthly basic wage for an employee if his service period exceeds five years. The speaker also mentioned that the system subscriber is entitled to all subscription amounts paid by the employer on his behalf, as well as any profits or returns made during the subscription period, in lieu of end-of-service benefits, as long as he or she keeps in mind that the monthly basic contribution is deposited into the investment fund account no later than 15 days, no matter how long it takes.

Encourage employees to invest

In order to increase savings and encourage employees to invest and practice sound financial planning, the ministry stated: "An employee may contribute a percentage of the total salary, or an additional monthly or lump sum amount, in addition to the basic subscription amount through the so-called voluntary subscription, which is an additional option for employees registered in the system, so that the amount of money that the employee can pay from his wages monthly or annually according to his desire," pointing out that there are two ways to participate in the system: the first is to transfer the voluntary subscription from the employer with deduction from the payee if the voluntary subscription is monthly. If the voluntary contribution is a lump sum, the second option is to send the money directly from the beneficiary to the investment fund account.

The ministry emphasized that, in the case of a monthly payment, the voluntary contribution rate should not surpass 25% of the total salary; in the case of a "lump sum" payment, the total contribution rate should not surpass the same percentage (25%) annually. It further emphasized that the amounts paid into the voluntary contribution system are not included in the end-of-service dues.

"An employee has the right to keep his money in the system without paying additional amounts," the ministry continued. "An employee can change the percentage or amount of voluntary contributions or stop paying, provided that the employee's eligibility in this system ends at the end of the employment relationship with the employer. An employee can withdraw all or part of the additional voluntary contribution amounts paid or their investment returns whenever he wants, in accordance with the regulations in force at the investment fund."


According to the Digital Government of the United Arab Emirates, there are several benefits for both employers and employees associated with the optional alternative system for end-of-service remuneration in the private sector. These benefits include three distinct investment options for employees: the capital guarantee portfolio option, which offers a risk-free option and guarantees capital preservation if the beneficiary falls under the category of unskilled labor; the risk-based investment option, which includes options for various investment portfolios that carry varying degrees of financial risk commensurate with the expected returns from them; and the option of sharia-compliant investment funds.

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