The Dubai International Financial Centre confirmed its new savings plan to replace the end-of-service gratuity will be implemented on February 1, after amendments to the law were ratified by Sheikh Mohammed bin Rashid, Vice President and Prime Minister of the UAE and Dubai Ruler.
“DIFC launches its new Dews”, the financial free zone posted in a Twitter video on Tuesday.
“The launch of Dews is part of our efforts to put in place a supportive environment for talent by creating greater financial security for employees of DIFC-based companies,” said Sheikh Maktoum bin Mohammed, deputy ruler of Dubai and president of DIFC.
Amendments to the DIFC’s employment law passed earlier this month specify that employers must enrol in the new DIFC Employee Workplace Savings Plan (Dews) by February 1 or a “qualifying alternative scheme” by March 31.
The shift to a “defined contribution” plan from a “defined benefit” plan is meant to more closely align with global practice.
“Dews makes clear that we are committed to giving our 24,000 professionals the ability to make measured choices in relation to their finances that will lead to greater protection and returns at the end of their service or retirement,” said Essa Kazim, governor of DIFC.
The initial planned roll-out date of January 1 was pushed back to allow for more time based on feedback from employers during the public consultation period in November.
While the DIFC has held several town hall meetings and information sessions over the last few months, there is still concern over a lack of awareness about the new plan.
"There are 2,500 employers in the DIFC and getting to each of them is very difficult," Shiraz Sethi, regional managing partner and co-head of employment at legal services firm DWF Middle East, told The National.
“There is still a lot of education and information that needs to go out to the DIFC community,” added Thenji Moyo, legal director and co-head of employment at DWF.
The Dews plan requires employers based at the financial zone to make monthly contributions to a professionally managed investment scheme. Under the current gratuity scheme, employers have to pay 21 days of an employee’s basic wage for each year of the first five years of service and 30 days of the wage for each additional year of service. This amounts to 5.83 per cent and 8.33 per cent, the percentages that will now be funded to the Dews or qualifying scheme.
Requirements for a qualifying scheme are outlined in the new DIFC Employment Regulations published this month and employers must seek a Certificate of Compliance from the DIFC Authority.
However, Ms Moyo anticipates that many qualifying schemes will not be able to make the deadline of March 31.
The penalty for not registering to Dews or a qualifying scheme on time will be hefty at up to $2,000 (Dh7,346) per breach per employee, Mr Sethi said.