DIFC has recently rolled out a set of regulations and a new workplace savings scheme named “DEWS” that effectively change the end of service gratuity system in this zone. The new DWES scheme is considered by many experts as a move in the right direction of establishing the UAE as a central hub for talent. Also, a much anticipated shift in the landscape of private sector corporate governance and a push towards sustainability.
This article has all the details that you should be aware of about these new regulations, the problems these regulations solve, and underlying challenges.
The Dubai International Financial Center (DIFC) is a special economic “free zone” in Dubai.
In 2016 the DIFC began to examine how to overhaul the gratuity scheme for expats and, in line with the global best practice, replace it with a new, “employer-funded” defined-contribution savings scheme. From February 2020 onwards, all employers in the DIFC are now required to register for the DEWS, a new scheme of defined contributions.
The new workplace savings scheme, which the DIFC launched in January 2020, will be funded by monthly employer contributions that would be a) segregated from employer’s cash flow, and maintained with an independent custodian, and b) invested on behalf of employees according to their personal choice. At the end of the employment period, the employee would have the option to receive their gratuity savings in cash or continue to invest it in the savings plan.
DIFC is the first free zone in the UAE to embrace a defined contribution plan to replace the current underfunded end of service gratuity schemes, and this reform could be a catalyst for pension reform in the UAE’s other free zones and the broader mainland.
The new workplace savings scheme is considered a major upgrade when it comes to protecting employee rights while maintaining a healthy financial position of employers. No wonder why, it was well received by both employers and employees who both stand to benefit from such an upgrade.
The new end of service gratuity scheme is a step in the right direction as it protects the interest of the employees. However, it comes with its own set of challenges:
At FinFlx, we made it our mission to help SMEs all over the UAE to navigate uncertainty when it comes to End of Service Gratuity. We provide an out of the box solution that helps SMEs forecast, manage and report their EoSG liabilities on autopilot. Offering a flexible, transparent, and sustainable solution.
Even better, we made very easy for businesses of all sizes to start today, and build a sustainable workplace savings plan to cover their gratuity liability and protect their employees savings all at no extra cost.