Unlock Your Financial Future with the UAE’s New Voluntary Alternative Scheme!
November 15, 2023
Cabinet Decision No. 96/2023 Pioneering the Future: The Voluntary Alternative Scheme Replacing Traditional Gratuity
Get ready to embark on a thrilling journey towards financial empowerment, as the United Arab Emirates Cabinet ushers in a game-changing era with Cabinet Decision No. 96/2023.
In a forward-thinking move, the UAE Cabinet, after careful consideration of existing labor regulations and their implementing regulations, presents an optional scheme - the Voluntary Alternative Scheme - as a dynamic alternative to the conventional End-of-Service Gratuity Scheme. This scheme offers employees an exciting opportunity to invest in their future and enjoy a brighter financial tomorrow.
The Scheme in a Nutshell
Here's what you need to know about the Voluntary Alternative Scheme:
- Monthly Contributions: Employers will make monthly contributions to an Investment Fund on behalf of their employees.
- Alternative to Gratuity: Employees will receive their dues from the Basic Contribution amount allocated to them and any resulting investment returns upon the conclusion of their service.
- Flexibility for Employers :At this initial stage, the scheme remains optional for employers. There is no obligation to participate, and those who choose to do so can initiate the process by submitting a request to the Ministry of Human Resources and Emiratisation (MoHRE).
Employer Commitments
If an employer opts to subscribe to the scheme, they will be expected to:
- Handpick an accredited Fund Manager, your financial ally.
- Decide which employees will become the pioneers of this revolutionary scheme.
- Bid adieu to End-of-Service Gratuity (EOSG) for participating employees, with a fair calculation and payout upon departure.
- Contribute the Principal Premium as outlined, without impacting your employees' salaries.
Key Highlights
- Registration is a must for adventurous employers.
- A commitment of at least one year is your ticket to the future.
- Contributions are tailor-made, ranging from 5.83% of monthly basic salary for those under five years of service to 8.33% for those with more than five years of dedication.
- The conventional end-of-service benefits system will soon be history for participating employees.
- You have the freedom to voluntarily contribute up to 25% of your salary, along with your employer's contribution.
- A buffet of investment options awaits, offering varying degrees of risk, as well as Sharia-compliant choices for the savvy.
Ensuring Compliance for a Seamless Journey
In the event of an employer failing to pay the Basic Contribution, the following procedures apply:
Ensuring compliance with the Voluntary Alternative Scheme is vital for a secure future. When an employer faces difficulties in paying the Basic Contribution, a well-defined process is in place. It starts with a swift warning from the Fund Manager, offering a five-day window for payment. If the contribution remains unpaid after 15 days, the Ministry is promptly informed. For employers who continue to default for two months, the issuance of new work permits will be temporarily halted. Moreover, if the contributions remain unpaid for four months, the Ministry will impose an administrative fine of AED 1,000 per month for each beneficiary. We're committed to ensuring your compliance and guiding you towards a prosperous future within this innovative scheme.
Dare to Dream, Secure Your Future: How can MBG Help !!
We're your dedicated partners in navigating the changing landscape of labor regulations. The Voluntary Alternative Scheme introduced by Cabinet Decision No. 96/2023 is a game-changer for businesses of all sizes, especially small ones. Our expert legal consultants are here to simplify the complexities, ensuring that your business not only complies with the scheme but also thrives within it. We'll provide tailored, cost-effective solutions, safeguard your interests, and offer hands-on support every step of the way. Your success is our mission. Let's shape your small business's financial future together. Contact us today to start your journey with confidence.