The UAE needs to set up investment funds to manage retirement and end-of-service benefits for employees in the UAE, according to the director-general of the Federal Authority for Government Human Resources.
Inaugurating the first Workers Incentives and End of Service Benefits Conference in Dubai on Tuesday, Dr Abdul Rahman Abdul Manan Al Awar said authorities are conducting studies to improve the end-of-service benefits system, particularly as the age of retirement has increased.
The new system will possibly include an enhanced gratuity system and private sector savings scheme which will help retain talent in the UAE.
However, Dr Anwar did not provide a timeline for implementation.
“With accelerated global technological advancements and the increased retirement age and years of service, there is an urgent need in the region to establish investment funds to manage retirement and end-of-service benefits, which will provide a saving opportunity to all employees in the UAE and the regional labour markets,” he said.
“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,” he added.
Dr Anwar said creating saving schemes and funds is an important strategic step for the region, with leading UAE organisations such as Emirates airline following the practice.
A fifth of UAE companies face end-of-service liabilities of over $15 million. With 88% of GCC companies surveyed having no plan to fund gratuities due, according to 2018 survey by global advisory and brokerage company Willis Towers Watson which covered 300 firms.
Out of all of them, only 20% said they offer a retirement or long-term savings plans for their employees.
"Companies sometimes do not fund their liabilities in relation to their end-of-service benefits for their employees and introducing schemes that allow better governing of such liabilities will help those companies manage their balance sheet even better,” Dr Anwar said.
It is not currently mandatory for companies in the UAE to set aside payment for end-of-service gratuity. It is calculated as 21 days of pay per year of service for five years of service, and 30 days of pay per year of service thereafter. It does not, however, include allowances.For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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