[co-author: Samir Kantaria]*
The Dubai International Financial Centre (DIFC) introduced the DIFC Employee Workplace Savings Plan (DEWS), which took effect on February 1, 2020. The DEWS amends the current DIFC Employment Law, Law No. 2 of 2019, by replacing the end-of-service gratuity (ESG) regime with a defined contribution plan. All DIFC employers are now required to make mandatory monthly contributions into the DEWS (or some other qualifying plan) for each eligible employee.
The minimum contributions that DIFC employers are required to make are as follows:
- For each of the employee’s first five years of continuous employment: 5.83 percent of the monthly basic wage
- For each of the employee’s additional years of continuous employment: 8.33 percent of the monthly basic wage
As a result of DEWS’s implementation, employees stopped accruing ESG on January 31, 2020. Any ESG that an employee accrued prior to February 1, 2020, must either be paid to him or her directly upon termination of employment or transferred into his or her DEWS.
However, several types of employees are ineligible to enroll in the DEWS, including:
- employees on probation;
- equity partners;
- eligible United Arab Emirates and other Gulf Cooperation Council nationals who are required to register with the state government pension authority;
- employees who are under notice of termination of their employment as of February 1, 2020;
- employees who are employed in the DIFC on the basis of a secondment;
- employees who are under a statutory duty in another country to make pension, retirement, or savings contributions into a plan; and
- employees who are employed in the DIFC by a local or federal government entity.
A two-month grace period has been provided (until March 31, 2020) to give employers more time to register their employees; however, contributions will need to be paid retroactively.
Comment
The DEWS intends to provide employee benefit security and to allow an employee’s benefits to be professionally managed and invested by a third party. Employers may want to update their related policies and contracts to reflect the legislative changes.
*Al Tamimi & Co.
