UAE: New end-of-service benefits scheme – what happens if an employer fails to pay the subscription fee?
Find out the cost, how to sign up, fines and penalties for late payments by employers.
Dubai: If you are an employer planning to register your employees for the UAE’s new gratuity investment system, it is your responsibility to pay the subscription fee. If you fail to do so, you can face fines and, in some cases, you can even be prevented from getting new work permits.
What is the subscription fee?
The ‘Voluntary Alternative End-of-Service Benefits Scheme’ was launched by the Ministry of Human Resources and Emiratisation (MOHRE) and the Securities and Commodities Authority (SCA) and came into effect on November 1.
While the scheme is optional, employers who subscribe to it will be required to register their employees, whose end-of-service gratuity benefits will then be invested in well performing investment funds that are approved by the SCA.
Once registered, employers would need to pay the subscription fee in the scheme for the employees who have been registered in the new system.
The scheme aims to provide investment returns to employees on the amount they are entitled to for their end-of-service gratuity.
What is the monthly subscription fee for employers who want to enrol in the system?
These are the subscription fees employers would need to pay, according to MOHRE:
- 5.83 per cent of the employee's monthly basic salary, if their service duration is less than five years.
- 8.33 per cent of the employee's monthly basic salary, if their service duration exceeds five years.
What happens if the employer fails to pay for the subscription fee?
In case of non-payment, an employer faces not just monetary penalties, but also the possibility of the company's new work permits not being issued, as per Article 12 of 'Cabinet Resolution No. (96) of 2023 regarding an alternative end-of-service benefits system'.
According to the article, if the employer fails to make the basic subscription payment by the due date, the following procedures will be followed:
1. The fund manager must notify the employer in writing within 30 days of the payment date that he or she will be required to pay the basic subscription within five business days after receiving the notification.
2. The fund manager shall notify MOHRE of any non-payment of the basic subscription within 15 days of sending the payment notification.
3. If an employer fails to make a payment of the overdue subscription amount for a period of two months, MOHRE will cease issuing new work permits and may take other administrative actions in accordance with its applicable regulations.
4. A penalty of Dh1,000 per beneficiary per month will be imposed by MOHRE upon the employer if the subscription amounts are not paid after four months from the date the employer failed to pay the subscription amounts.