In a landmark move, the United Arab Emirates (UAE) cabinet has taken a significant stride forward with a resolution that introduced an optional alternative system to the traditional End-of-Service (EoS) gratuity system. This progressive resolution marks a new era in the country’s labor landscape, offering both employers and employees a more dynamic and customizable approach to EoS benefits.
One of the key aspects of the new system is its voluntary nature. Employers now have the option to choose from a selection of schemes for their employees, a significant departure from the previous, mandatory EoS gratuity system. This choice empowers both employers and employees to tailor their benefits to better suit their individual needs and long-term financial goals.
The existing EoS gratuity system operates on a simple principle—employers provide a lump-sum payment based on the employee’s last basic salary, only applicable after a year of employment. The new resolution offers a fresh perspective, allowing employers to have the choice to invest and save their employees’ gratuity through private-sector investments and saving funds, governed by the Securities and Commodities Authority in collaboration with the Ministry of Human Resources and Emiratization.
Under the new system a diverse range of investment options has been made available to employers and employees. They can opt for a risk-free capital guarantee, a risk-based investment with varying levels of risk or a Sharia-compliant...
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