It’s in a bid to attract and retain talent, and help expats manage savings and create retirement funds…

The UAE end-of-service gratuity system is set for a shake-up, according to a government official.

Currently, the government is looking at studies to ‘enhance and improve’ the end-of-service gratuity benefits awarded to employees, to help attract and retain talent, as well as helping expats manage savings and create retirement funds.

Speaking on the sidelines of the first Workers Incentives and End of Service Benefits Conference in Dubai, Abdulrahman Al Awar, director general of the Federal Authority for Government Human Resources said that “there is an urgent need in the region to establish investment funds to manage retirement and end-of-service benefits”, according to Gulf News. This will then “provide a saving opportunity to all employees in the UAE and the regional labour markets,” Al Awar continued.

This is something that concerns millions of employees in the UAE, who often rely on their end-of-service gratuity as a retirement fund.

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“These funds will help employees plan properly by taking advantage of end-of-service benefits, enabling them to make use of their financial resources and creating jobs for new generations,” the government official stated.

The government is said to be exploring multiple policies, but no specific details or timeline were given for announcing, nor implementing, a reviewed system.

Dr Al Awar added, “I believe that creating saving schemes and funds in all sectors is an important strategic step and a new experience of its kind in the region.”

How is gratuity currently calculated?

As per Federal Law No 8 of 1980 as amended, gratuity is calculated as 21 days of basic pay per year of service for five years of service and 30 days basic pay per year of service thereafter. Gratuity does not include allowances. To qualify, an employee must have 12 months of uninterrupted service.

Source: Clyde & Co

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