MoHRE unveils new guidelines for optional saving system for employees

Abu Dhabi: The Ministry of Human Resources and Emiratisation (MOHRE) has outlined the registration and disbursement pathways for its optional savings system, which is designed to replace the conventional end-of-service gratuity.

The system offers employees the ability to grow their savings through leading investment opportunities, fostering financial well-being while also enhancing the appeal of the UAE labour market.

The initiative includes the approval of four investment funds and aims to enhance employee financial security, attract global talent, and boost investment activity in the UAE.

Employer selection of investment fund: Employers choose an approved investment fund and sign a subscription agreement.

Designating an administrative services intermediary: Employers appoint an intermediary to manage administrative tasks.

Employee enrollment: The intermediary enrolls employees in the system, opening individual savings accounts.

Monthly contributions: Employers contribute the basic and any additional voluntary monthly savings, while employees also have the option to make lump-sum contributions.

Two main pathways

The disbursement of employee savings is straightforward, with two main pathways. Upon termination of employment, the employer notifies MOHRE, and employees can choose between receiving their entitlements or continuing to invest in the system.

Employees can also withdraw their funds, subject to the system’s payout periods. For voluntary contributions, employees may opt for partial or full withdrawal of funds through the administrative intermediary.

Four investment funds

Four investment funds—Lunit, First Abu Dhabi Bank, Daman Investments, and National Bonds—have been approved by MOHRE, giving employers and employees flexible, secure investment options to manage savings.

The system operates on a defined contribution basis, with monthly contributions made by the employer and disbursed to the employee at the end of their service.

This initiative not only strengthens the UAE’s economic framework but also provides an opportunity for employees to grow their retirement savings through investment returns. Skilled workers, in particular, stand to benefit from higher payouts if they select high-yield investment options.

Key highlights

Alternative to end-of-service gratuity: Employers make monthly contributions, and employees receive the accumulated savings when their service ends.

Voluntary contributions: Employees can also make voluntary contributions, which can be deducted monthly or as a lump sum.

Flexible investment options: Employees may choose from four approved investment funds to optimise their savings growth.

Who can benefit

The system is open to private sector employers and free zone entities, along with specific groups such as self-employed individuals, freelancers, non-citizen government employees, and UAE nationals working in the public or private sectors.

The Ministry clarified that employers must calculate monthly contributions based on an employee’s continuous service period, starting from the date of employment rather than the registration date in the savings system. Voluntary contributions cannot exceed 25% of an employee’s total salary.

This system aims to strengthen the local economy, support workforce protection, and provide employees with enhanced savings and investment opportunities, ensuring long-term financial security.