Savings Scheme for the ex-pats working in Dubai: towards a different management of the End of Service?

A Savings Scheme for the ex-pats working in Dubai is a project that may come to light following resolution No. 29 of 2022. This new resolution was adopted by the Executive Council of Dubai on April 23, 2022, forming the Steering Committee For The Savings Scheme Project For The Non-Citizens Employees Working in the Emirate of Dubai.

The role of this Committee is to develop and supervise a Savings Scheme project to administer the End of Service monies for the non-citizens employees working for the governmental and private bodies in the Emirate of Dubai.

Currently, the employees in the UAE receive their End of Service gratuity by and large directly from their employer at the end of every employment relationship, unlike many countries in the world where the employees receive their End of Service gratuity from a dedicated fund at the time of their retirement – or earlier should requirements be fulfilled. In such countries, employers don’t have to pay an End of Service gratuity to the employees at the end of their employment relationship; instead, employers must contribute to a dedicated fund for each employee. The said fund managers administer these contributions, and when eligible, the employee may receive its End of Service gratuity from the fund instead of the employers.

Mainly the End of Service gratuity in such systems is calculated based on the last salary multiplied by the number of years of service. This system is more favorable and secure to the employees in two ways: on the one hand, the employees don’t have to face risks of non-payment by their employers; and on the other hand, the calculation of the End of Service gratuity that is based on the numbers of years of service may be more beneficial to the employees.

It is too early to predict the form of the End of Service system that might be implemented in Dubai. According to Resolution No. 29 of 2022 the Committee shall adopt a vision and set goals for the Savings Scheme project, including the milestones, the budget, a financial plan, the funding of the project, the legal framework, and the governance.

What is noteworthy is the appointment of the Governor of the Dubai International Financial Center (DIFC) as a member of the formed Steering Committee of this project; which may be a hint that any End of Service system may also be applied to the employees working in the DIFC (which is a separate jurisdiction having its courts and laws including employment law).

The Committee shall by the end of March 2023 – or later if the period is extended – submit to the Executive Council a final report about its recommendations concerning the project and the work that has been done in accordance with resolution No. 29 of 2022.

The said resolution does not provide clear insights about the next steps that might follow the Committee’s final report; nevertheless – and in light of the Committee’s final report – a new resolution may be adopted by the Executive Council of Dubai setting out the legal framework of the Savings Scheme project paving the way for its implementation at a later stage.

This project is among many initiatives taken by the government of Dubai and the UAE in general to meet and cope with recent challenges, particularly in the last year, where several laws and legislations have been amended or enacted for a similar purpose. For instance, we have seen amendments in the civil marriage law in the Emirate of Abu Dhabi, the new companies law, the new employment law, but also the introduction of a  criminal code and cybercrime law.

For more details, please contact:

Joe Khalaf Senior Associate joe.khalaf@galadarilaw.com