The UAE’s Federal Authority for Government Human Resources (FAHR) has begun moves to develop a new fund-based system for expat workers in relation to retirement benefits and the end-of-service-gratuity (EoSG).
In recent months the FAHR has carried out a review of best practice in the management of pension funds and EoSG benefits with international investment companies focusing on how developing a system for expat employees receiving retirement and end- of service compensation.
The government plans to change the way end-of-service benefits are collected so that contributions from employers or institutions will be paid to the beneficiary employee at once, upon retirement or termination, plus investment returns, making the employee a partner in investment decisions.
It said the “competent authorities managing investment and financial portfolios, called ‘benefit managers’, (would) manage a fund, which includes monthly deductions, and voluntary additional contributions of employees, and invest them optimally, to generate financial returns for the benefit of employees, who contribute to investment decisions”.
Provide opportunities
Abdulrahman Al Awar, director general of the FAHR, said: “Setting up investment funds for the retirement benefits of UAE expats will help employees and officials to properly plan for the future by taking advantage of end of service benefits, and utilise their financial resources after retirement.
“It will also provide employment opportunities for new generations, or the so-called Millennials.
“I believe that the idea of establishing such systems or savings funds for end-of-service benefits in all sectors is an important strategic step and a new experience of its kind in the region.
“There are successful global experiences in this area, as well as in the UAE.”
Participation
The savings system will be optional for various government or private institutions, choosing either to participate in the fund, or employee end of service.
It also suggests that the employee can choose to take part in an additional monthly contribution, if the employer chooses the savings option, and the employer can provide the system to certain categories of employees, according to their levels, or grades.
The FAHR suggests that the new employee’s compensation will be calculated according to the system.
It added: “For existing employees, their end-of-service benefits will be calculated up to the date of application of the system and will be paid to the employee upon resignation from work, in addition to the company’s contributions to the fund, which start the beginning of the system, in the event the employer desires to participate in the fund.”
This news comes after the Al Awar spoke about the urgent need to set up funds for expats at the Workers Incentives & End of Service Benefits Conference 2019 in February.
