Workplace savings scheme to transform employee benefits
GN event sheds light on the advantages of the alternative to end-of-service gratuity
The workplace savings scheme, the UAE government’s alternative to end-of-service gratuity, offers employees financial security with opportunities to grow their money while helping employers attract and retain talent, said experts at Elevate your Future – Unlocking the New Pension and End-of-Service Benefits Reform in the UAE. Organised by Gulf News and HAYAH Insurance at Holiday Inn, Business Bay, the event brought together legal experts, HR heads and insurance players to provide insight into the advantages of the end-of-service benefits reform through discussions and audience interactions.
“In an increasingly competitive environment, both businesses and employees are seeking solutions that not only meet their immediate needs but also set them up for long-term financial security and success,” said Mohamed Seghir, CEO of HAYAH Insurance in his keynote address at the event. “We believe the future of employee benefits lies at the intersection of innovation, inclusivity and sustainability.”
Under the workplace savings scheme introduced last November, employers can invest monthly end-of-service contributions in accredited funds approved by the Emirates’ Securities and Commodities Authority. Returns of these investments go to the employees at the end of their employment.
Opportunities for growth
“The existing end-of-service benefits is limited by law to two years’ salary based on the basic salary of the employee unlike the savings scheme, which is unlimited and offers opportunities for growth,” explained Zeiad Yehia, Senior Legal Counsel at Kashwani Law Firm, during a panel discussion on Workplace Savings – Strengthening the UAE as a Global Talent Hub.
Employees who haven’t completed five years in a company receive 21 days of pay based on their basic salary for every completed year as gratuity while those who have completed five years get 30 days of pay capped by a maximum of two years’ salary.
“Under the new scheme, employees can continue accumulating investments in the funds, which gives the savings scheme an edge over the traditional end-of-service gratuity,” he added.
The aim is to grow investment portfolios over the medium to long term, where employees too can chip in with voluntary contributions of up to 25 per cent of their total salary.
Safeguard against bankruptcy and inflation
A defined contribution plan such as the workplace savings scheme safeguards employees against default, bankruptcy and inflation as well.
“While some employers make provision for gratuity on the balance sheet, not all employers do so,” said Gordon Barr, Partner, Employment & Incentives at Al Tamimi & Company. “It creates exposure for employees. This type of defined contribution scheme guards against that because there is a custodian, because there's an insurance wrap around the product.”
As the workplace savings scheme is purely voluntary, employers can either choose to stay with end-of-service gratuity or opt for the savings scheme. Once they select the savings scheme, employers need to decide whether to make it available to all employees or certain categories.
They can then choose investment options from a variety of funds including Sharia-compliant funds, a risk-free, capital guaranteed fund for unskilled workers, and other portfolios with varying levels of financial risk. Along with Daman Investments, Lunate and National Bonds, HAYAH Insurance has also received approval from the Securities and Commodities Authority for its pension and end-of-service product, Employee Saver.
Implementing the savings scheme
“Our first mission is to help companies that we already have onboard navigate the complexities of implementing the pension scheme,” said Seghir during a session on the Path Ahead – Navigating the New World. “We design and structure a pension plan that is simple, accessible and effective by taking into account the profile of a company’s workforce, the issues it faces in terms of attracting as well as retaining talent.”
He also emphasised the need for employee education on the risks and benefits of investments, recommending a conservative approach initially.
During one of the panel discussions, Adil Saghir, Head of Pensions and End-of-Service Benefits at HAYAH Insurance, pointed out that globally 90 per cent of the pension plans are managed by insurance companies. “Unlike pure asset managers, insurance companies understand people’s needs in terms of lifestyle and retirement planning and provide a tailored and customised solution.” He also highlighted that HAYAH was the only insurance company among entities approved by the Securities and Commodities Authority to provide end-of-service benefits scheme in the UAE.
Having implemented a savings scheme for employees way back in 2022, HAYAH Insurance has experienced its impact first-hand. Iman Elkhyari, Head of Human Resources & Emiratization at HAYAH Insurance, said the scheme helped reduce its employee turnover rate and increase loyalty. “Saving schemes like HAYAH Employee Saver programme provide a sense of financial security,” she added. “This financial security leads to happier, more loyal employees who are less likely to leave for better opportunities.”