By Gavin Gibbon
New workplace savings scheme to be introduced from February 1
Leading legal outfit DWF has warned business owners in Dubai International Financial Centre to get on board with the new DIFC Employee Workplace Savings (DEWS) plan, or risk receiving hefty fines.
The new Employment Law Amendment Law was announced by Dubai Ruler Sheikh Mohammed bin Rashid Al Maktoum and is set to come into force from February 1.
Although there is a period of grace, until March 31, employers in DIFC who do not have staff signed up to the new savings scheme, or an alternative qualifying scheme, will be hit with financial penalties.
Shiraz Sethi, regional managing partner and co-head of employment, DWF (Middle East), told Arabian Business: “The time frame is difficult. It’s a February 1 deadline and a March 31 grace period within which employers need to ensure they are ready and onto the platform. I think most people will get there.
“From our perspective we’re educating people to make sure they do get there because if they’re not then there is a $2,000 fine per employee, per breach, so that could be a significant issue for employers, especially where they’ve got a lot of employees in a month, for example, if you have 50 employees and you multiply that by 2,000, that’s $100,000 fine each month.
“You’ve got to be very careful you don’t fall into that trap.”
The savings scheme replaces the existing accruing of end-of-service gratuity benefits in favour of employees. Employers will make mandatory monthly contributions to a professionally managed and regulated savings plan.
Sethi added: “I think for some international organisations there is push back just because they need to get board approval from their home jurisdictions.
“Some of the bigger entities, I won’t mention names, but one of the biggest employers in the DIFC is a hotel and they have a number of staff on their books, I think about 5,500 employees, and they have a lot of low skilled low paid workers who don’t even have smart phones or email addresses and this whole platform is set up for more sophisticated users in terms of having a smart phone so you can check your phones on a daily basis, you can receive emails from the DIFC to register.
“These are practical issues that we are seeing and facing. Obviously the DIFC have considered a lot of these things, but some of these things, because of the time frame, may have fallen through the cracks. We’re trying to now rectify and amend these at a late stage.”
The DEWS plan was established by DIFC as a default scheme following an exhaustive competitive bidding process.
Under the scheme, employees are permitted to make voluntary workplace savings contributions on top of the mandatory monthly contributions to be made by employers. It also ensures that any accrued end-of-service benefits under the current regime remain in place.
Thenji Moyo, legal director and co-head of the employment, DWF (Middle East), said: “There’s no risk because it’s held in trust for the benefit of the employees so if anything now there is financial certainty and guarantees that they will actually get their savings pot.
“Whereas historically, for the end of service gratuity regime there was no certainty whatsoever. If the company went insolvent or the company simply chose not to pay out an employee could end up with no money whatsoever.”
Meanwhile, employees need to decide what their risk profile is, based on the technology platform made available to track their investments – a low, low to moderate, moderate to high or a high risk fund.
The first payment is defaulted to the low risk fund, but this can be changed after that.
“You need to get independent financial advice on these funds to ensure that you are fully aware of the risks and the rewards of going into some of these funds,” said Sethi.