UAE Gratuity System to Be Enhanced and Improved |

UAE to Improve End-of-Service Gratuity System

Officials have called for investment funds to help expats manage retirement

Posted on

28 February 2019

Last updated on 28 February 2019
by Rebecca Roberts
Gratuity in Dubai and UAE

The proposed changes are an effort to attract and retain talent in the country as well as help expats create retirement funds.

Retirement planning is certainly on the list of things-to-figure-out for expats living here. What options do expats have in the UAE if they wish to stay here long term? What if they don't have enough gratuity to survive after retirement? But due to recent news, it seems these questions are soon to be answered...

According to a top UAE federal official, the country's current gratuity system needs to be enhanced and improved - and has called for the creation of investment funds to manage retirement and end-of-service benefits.

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As a result, the government is looking at studies to help enhance the current system and benefits that are awarded to employees.

Speaking at the first Workers Incentives and End of Service Benefits Conference in Dubai, Dr Abdul Rahman Abdul Manan Al Awar, director-general of the Federal Authority for Government Human Resources, said that "there is an urgent need in the region to establish investment funds to manage retirement and end-of-service benefits", according to Gulf News. "This will provide a saving opportunity to all employees in the UAE and the regional labour markets" he added.

Only 20 per cent of UAE companies offer a retirement or long-term savings plans for their employees.

This statistic was shared by Michael G. Brough, senior director of Wills Towers Watson (WTW) as a result of a recent survey that covered 300 companies.

The matter concerns millions of employees in the UAE - both in the public and private sectors - who often rely on their gratuity payment as a retirement fund.

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These funds will help employees plan properly by taking advantage of end-of-service benefits, enabling them to make use of their financial resources and creating jobs for new generations", Dr Al Awar continued.

“I believe that creating saving schemes and funds in all sectors is an important strategic step and a new experience of its kind in the region.

How is gratuity calculated in the UAE?

As per Federal Law No 8 of 1980 as amended, gratuity is calculated as 21 days of basic pay per year of service for five years of service and 30 days basic pay per year of service thereafter. Gratuity does not include allowances. To qualify, an employee must have 12 months of uninterrupted service.