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The alternative plan is an optional benefit for employers; however, it is mandatory for employees selected to participate in the alternative plan by their employers.
Subscription to the scheme is optional and voluntary for the following categories:
The 'Savings Scheme' is implemented in compliance with Cabinet Resolution No. (96) of 2023, which provides an alternative to the End-of-Service gratuity system as prescribed by Federal Decree-Law No. (33) of 2021 on Labor Relations Regulation and its Executive Regulations. The new scheme requires employers to choose a number of their employees they wish to enroll in this scheme and to pay a monthly subscription to the approved investment fund on behalf of those employees. As a result, the employee receives the basic subscription amount allocated to him/her at the end of his/her service and any investment returns results therefrom, and this is legally regarded as end-of-service compensation.
The scheme is designed to accomplish several objectives, among which are:
Employers are required to make payments to the savings fund for all employees registered in the fund on a monthly basis. The following procedures will be applied gradually if the employer fails to comply with this requirement:
Employers have the right to withdraw from the savings scheme after the Ministry's approval, subject to the following conditions:
In accordance with the applicable legislation in this regard, employers are required to determine the amounts due employees prior to registering them in the savings scheme. In addition, they must pay them upon the termination of the contractual relationship, calculated at the time of registering the employee in the savings scheme based on the employee's basic wage.
Employees may withdraw end-of-service compensation only following the termination of their employment relationship with the employer.
In the event of an employee's death, the investment fund will pay the subscription amount to the employee's beneficiaries and heirs within ten (10) working days.
Employees may continue to invest their end-of-service benefits after terminating their contractual relationships with their employers without incurring any additional contributions.
Upon termination of employment, an employee is entitled to receive all basic subscription amounts paid by the employer under the savings plan and any returns resulting from such contributions within a period of fourteen days of such termination. Furthermore, the beneficiaries of a deceased employee are entitled to receive the same rights and benefits within ten working days of his death
It is a risk-free investment option that guarantees capital preservation.
A company cannot change the investment option for their registered employees, as unskilled employees are only eligible for the capital guarantee portfolio option, while skilled employees have the right to change their investment option in accordance with their preferences.
Skilled workers may choose between various investment options based on the various risks associated with the plan, while non-skilled workers are only eligible for the capital guarantee portfolio investment option.
A minimum of three main investment options are available under the plan:
Despite the termination of an employee's employment relationship with their employer, employees are entitled to continue making voluntary contributions. Employees may retain the funds in their savings account without incurring any additional fees.
Registrants have two options for paying their voluntary contribution amount:
Employees cannot make additional voluntary contributions in excess of 25% of their gross salary, either monthly or annually.
A voluntary contribution amount is not considered part of an employee's end-of-service compensation.
Employees are permitted to withdraw part or all of their paid additional voluntary subscription amounts or their investment returns in accordance with the investment fund's controls.
Yes, the employee may change the percentage or amount of the voluntary contribution at any time, or stop making contributions altogether.
In the case of a monthly payment, the voluntary subscription percentage cannot exceed 25 percent of the total wage, while in the case of a lump sum payment, it cannot exceed the same percentage annually.
The basic subscription amount and profits or returns generated by the savings plan cannot be withdrawn before the termination of the employment relationship between the employer and employee. Nevertheless, employers may only recover basic subscription amounts if the employment relationship terminates before one year has elapsed.
Employers must pay and transfer the monthly subscription amounts to the investment fund account within 15 days of the first day of each calendar month.
Unless otherwise specified in the investment fund's contract, employers are responsible for paying their registered employees' basic subscription amounts on a monthly basis.
Employees can elect to pay a percentage of their wages on a monthly or annual basis based on their preferences. Neither of these amounts are part of the employees' end-of-service benefits, and they may be withdrawn at any time.
Registered employees are given an additional voluntary subscription option as part of the savings scheme with the intent of increasing savings and encouraging them to develop sound financial planning habits.
The monthly subscription amount is determined by the employer based on the employee's continuous service duration, beginning from the date of joining employment and the commencement of his/her contractual relationship with the employer, not from the date of his/her registration with the plan.
The basic monthly subscription amount is calculated as follows:
A basic subscription amount is a monthly contribution made by an employer to a savings plan. These amounts are determined based on the employee's years of experience and basic salary. Employers are required to pay these amounts without deducting them from the wages of their employees.
A company opting to subscribe to the savings plan must select a number or a category of employees and register their details with an investment fund through an administrative services broker. Thereafter, employers are responsible for paying subscription amounts without deducting them from the wages of enrolled employees.
Employers must choose an investment fund licensed by the Securities and Commodities Authority and sign a contract with the selected fund in order to enroll their employees in the savings plan.
Employees may not be eligible to enroll in a savings plan unless they are registered by their employer.
The scheme is open to private sector employers, including free zones, and their employees. There is an additional voluntary subscription option available to the following categories who wish to benefit from the scheme: