Out-Law / Your Daily Need-To-Know

The introduction of a new pensions regime in the Dubai International Financial Centre (DIFC) will help attract talent to work in the city and is a framework that other authorities in the region could look to replicate, an employment law expert has said.

Dubai-based Luke Tapp of Pinsent Masons, the law firm behind Out-Law, was commenting after new legislation was introduced in the DIFC requiring employers to make mandatory monthly contributions to regulated employee workplace savings plan (DEWS). The Employment Law Amendment Law No. 4 of 2020 takes effect on 1 February 2020, and employers will have until 31 March 2020 to enrol their employees into a qualifying scheme. 

Employers must contribute at least 5.83% of their employees' monthly basic wage in cases where employees have less than five years’ service, and 8.33% in cases where employees have longer service.

Under the new regime, employees will be free to voluntarily add their own contributions to DEWS. They will also be able to choose whether to invest their savings and, if so, the level of risk they wish to be exposed to. Cash equivalent options are also available.

The government of Dubai said: "In addition to making voluntary savings on top of employers’ contributions to secure long-term savings goals, employees will also have the choice and flexibility to decide how savings will be managed according to their preferred level of risk, including Sharia-compliant options. Employees will receive greater cash flow certainty with end-of-service entitlements spread over the full tenure of service to the employer instead of when their service ends. DEWS will also provide financial protection for employees in circumstances such as organisations entering administration or going out of business."

Tapp said the mandatory savings plan "is an incredibly positive and exciting development for the DIFC and the UAE generally". He said it is the first mandatory, employment-related savings plan for expat employees to have been introduced in the Middle East.   

"The plan will benefit DIFC companies by encouraging long-term service for their workforce and for employees that their savings will be invested and growing while their employment continues," Tapp said.

"It is another example of the increasing emphasis which the UAE authorities are placing on long-term and sustainable periods of residence and employment within the UAE for expat employees and their families. If the plan is successful, it could be an exciting template for other authorities to use to implement similar schemes across the UAE and the region generally," he said.

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