End of service benefits for workers in the private sector

End of service benefits for workers in the private sector

The Savings scheme – a voluntary and alternative end-of-service benefits scheme

The Saving scheme is an alternative and optional scheme to the existing end of service benefits system. Under this scheme, employees could invest their end of service benefits in reputable funds, enabling them to receive returns upon completion of their service.

Employers choosing to participate in the scheme will need to contribute monthly to an investment fund. These contributions will entitle beneficiaries (employees) to receive the allocated basic subscription amount, along with any investment returns generated, in place of their end of service benefits.

Objectives of the scheme

The Savings scheme aims to protect employees from inflation, default and bankruptcy. It also aims employees to benefit from investing in various economic activities in the UAE

Basic subscription fee

Employers’ contribution to the investment fund for full-time employees is as follows:

5.83 per cent of their employees’ monthly basic salary if the employee has not completed five years of service

8.33 per cent if the employee has served more than five years.

End of service benefits under full time contracts

UAE nationals

End of service benefits for Emiratis working in the private sector will be in accordance with the legislation regulating the pensions and social securities in the UAE.

As per Article 51 of the UAE Labour Law, end of service benefits for foreign workers working in the private sector will be as follows:

The worker is entitled to a gratuity for the served fraction of a year, provided that he completes one year of continuous service.

The end of service gratuity is calculated on basis of last wage which the worker was entitled to, namely the basic salary. Hence, it will not include allowances such as housing, conveyance, utilities, furniture etc.

If the worker owes any money to the employer, the employer may deduct the amount from the worker's gratuity.

All end of service entitlements must be paid within 14 days from the contract’s end date.

Calculations for gratuity pay

A worker who has spent one year or more in continuous service shall be entitled to an end of service gratuity upon the termination of his service. The days of absence from work without pay shall not be included in the calculation of the period of service and the gratuity shall be calculated as follows:

If a worker has served for less than 1 year, he is not entitled to any gratuity pay.

If a worker has served for more than 1 year but less than 5 years, he is entitled to full gratuity pay based on 21 days' salary for each year of work.

If a worker has served more than 5 years, he is entitled to full gratuity of 30 days' salary for each year of work following the first five years.

In all cases, the total gratuity shall not exceed the wage of two years.