UAE "Optional Saving" System: 8 Benefits Alternative to End-of-Service Gratuity

The Ministry of Human Resources and Emiratisation has unveiled the key advantages of the "optional savings" system, an innovative alternative to traditional end-of-service benefits aimed at private sector employees.

This system entails investing the allocated amounts for end-of-service rewards into leading investment funds, thus allowing employees to benefit from the returns on their investments.

Enhancing the business environment

In a recent press conference, the Ministry emphasized that the "optional savings" system not only streamlines the business environment but also strengthens the UAE's reputation as a preferred destination for living and working.

As It harnesses the robust infrastructure of investment funds and service providers, which are licensed to manage employees' end-of-service benefits.

Shifting focus from operational matters

One of the system's notable features is its shift in focus from managing operational matters related to end-of-service rewards to prioritizing commercial activities, development, and capital building. This shift contributes to higher employee job satisfaction and loyalty, boosting overall workplace productivity. Moreover, the medium-term cost for employers participating in the savings system is lower than the current end-of-service gratuity expenses.

Diversified Savings Opportunities

The "optional savings" system provides employees with diverse savings opportunities. This not only enhances their entitlements but also promotes sound financial planning and family stability. Workers can take advantage of their investment returns, and skilled workers have the option to increase their end-of-service rewards by selecting high-return investment portfolios or making additional voluntary contributions if they wish.

Voluntary Contribution Option

A significant advantage of this system is the voluntary contribution option. It fosters financial awareness and planning among employees, allowing them to continue investing their entitlements even after leaving their jobs if they desire.

Participation Process

To participate in the alternative voluntary savings system, employers must submit a subscription application, select one of the licensed investment funds, and make the required subscriptions for the registered workers. The system also allows the retention of previous entitlements in accordance with labor relations laws.

System Goals

The "optional savings" system serves several key objectives:

  1. Supporting the UAE's economic system while ensuring the welfare of the workforce.
  2. Increasing individual investment returns and enabling additional optional contributions
  3. Enhancing the attractiveness and flexibility of the labor market through improved services
  4. Capitalizing on investment opportunities in economic activities within the country.

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