The Finance World Magazine| Edition: October 2023

The UAE’s innovative Savings and
Investment Funds Scheme introduces
a novel concept where employees
have the option to replace the traditional
gratuity system with contributions to
investment funds. Key features of this
revolutionary scheme include:
1. Voluntary Participation:
Employers can participate in this
scheme voluntarily, signalling the government’s
commitment to promoting a
business-friendly environment. Those who
opt-in will make monthly contributions
to selected investment funds on behalf
of their employees.
2. Diverse Investment Options:
Employees will have the freedom to
choose from a range of investment options.
These options are expected to include a
risk-free investment to protect capital,
risk-based investments, and sharia-compliant
investment opportunities, catering
to a wide range of financial preferences.
3. Regulatory Oversight:
To ensure the scheme’s integrity and
transparency, the UAE Securities and
Commodities Authority will supervise the
funds in coordination with the Ministry
of Human Resources and Emiratization.
4. Employee Benefits:
Upon the termination of employment,
participating employees will be entitled
to receive their accumulated savings
and investment returns based on their
chosen investment strategy. Employees
who leave their jobs will also have the
option to continue with the fund without
additional contributions from their
former employers.
The new scheme will bring about several
significant changes for employers:
1. Gratuity Replacement:
Participating employers will no longer
be required to provide end-of-service
gratuity payments to employees. Instead,
they will channel funds into the designated
investment options.
2. Financial Prudence:
Employers will need to budget for
monthly contributions to the investment
funds. This requirement encourages financial
responsibility and ensures that
employees’ benefits remain safeguarded,
even if the employer faces financial
challenges.
The UAE is becoming a more
sophisticated environment
for employers and employees,
and this is an important
development in that respect.
The concept of creating a
national savings scheme that
is available to all employees in
the private sector will be one of
the first saving schemes of its
kind in the region
3. Accounting Reforms:
Unlike the current system, where
employers don’t have to account for
end-of-service benefits until the point
of payment, the new scheme mandates
monthly contributions. This shift offers
greater financial transparency and ensures
that employee benefits are more secure.
The UAE’s introduction of the Savings
and Investment Funds Scheme marks a
significant milestone in the nation’s commitment
to fostering a prosperous and
secure work environment for employees.
This forward-thinking initiative aligns the
UAE with global employment standards
and enhances the nation’s appeal as a
destination for businesses and skilled
professionals.
By offering a more flexible and transparent
system, the UAE not only empowers
its workforce but also ensures that employers
can better manage their financial
obligations. As detailed legislation and
implementation guidelines for the scheme
are expected to emerge in due course, it
is evident that the UAE is committed to
further enhancing the well-being of its
employees and solidifying its position
as a global business leader.
October 2023 www.thefinanceworld.com 15