The UAE's advantages as a place to live and work are well known, and there is much to be said about its diverse international work force and office culture.
Many who come to the country arrive with an employment contract to work in the private or public sector or in the free zones. Now, UAE residents – primarily employees of the private sector and free zones – can look forward to end of service benefits in the form of accumulated savings as and when they reach the end of their service with a company. The new end-of-service savings scheme was laid out by Sheikh Mohammed bin Rashid, Prime Minister and Ruler of Dubai, at the regular UAE Cabinet meeting in Abu Dhabi. The idea behind the new investments scheme is to foster a culture of savings, protect employees and create financial stability for families.
Many companies in the UAE already provide gratuities or lump sums – with varying terms, depending on their contracts. But in general, after working for at least a year at a company, employees receive a gratuity of 14 days of basic pay for each year in the job. This sum increases to 30 days (of basic pay per year) after completing five years at the same company.
Companies that participate will be required to pay a monthly contribution under the scheme. When employees leave the company, they will receive savings and investment returns accrued during their tenure. This is especially important as even though many among us keep an eye on the future – either investing in mutual funds or stocks, setting aside funds for children's college, retirement and so on. Financial literacy is by no means everyone's forte, and not everyone is inclined to save or proficient at systematic savings. Many are unfamiliar with the nuances of calculating gratuities or planning for their futures keeping savings in mind.
A survey in 2021 of more than 1200 people showed 40 per cent of UAE respondents outside the Dubai International Finance Centre didn't know about gratuities or how their salaries could work for them. Considering realities of financial unawareness, having employers put away on employees' behalf an amount that will grow and yield a tidy sum years down the line could be an attractive proposition for many, who have options in signing up for companies' schemes.
There is also the factor of trust that enters the picture in UAE federal plans that are deemed more secure with good reason, as opposed to perhaps riskier investments that may or may not yield the returns that one had hoped for. Nor is this the first progressive step the country has taken looking out for its many millions of overseas workers. In March last year, Dubai laid out an inclusive new savings pension plan for non-Emirati employees working in Dubai’s government and public sector.
End of service benefits are frequently the norm in several countries, not just in the West, to ensure financial security for employees. They're in keeping with industry best practices and prove immensely valuable in the many cases when they help people tide over lean periods between jobs. Financial experts told The National that this measure "would bring the Emirates in line with employment packages offered in countries such as the UK, the US, and Australia".
Even as more details of the new end-of-service programme, including the timeline, come to light, the country's broad approach and plans are clear: they're centred on taking care of the work force and in doing so, making the country more attractive to future potential employees. Other government steps to the same end, including providing visas for remote work, make the UAE more inviting to overseas talent. Strengthening the legal framework around employee benefits at a federal level could encourage people not just to relocate to the UAE, but to build their lives here, provide for families, and watch them grow, as the country itself does.