• Sat. Jun 15th, 2024

Employers Face Penalties and Fines for Non-Payment in New End-of-Service Benefits Scheme

Employers who opt for the newly-launched alternative end-of-service benefits scheme must make on-time payments or face penalties

Employers in the UAE participating in the recently launched alternative end-of-service benefits scheme must adhere to payment obligations or face penalties and fines. The scheme, which is optional for both employers and employees, was introduced by the UAE’s Ministry of Human Resources and Emiratisation (MoHRE) and the Securities and Commodities Authority (SCA) earlier this month. Employers are encouraged to register with the Ministry, select employees for participation in the scheme, and make the required monthly subscription payments.

According to Cabinet Resolution No. (96) of 2023 Regarding an Alternative End-of-Service Benefits System, employers are responsible for paying a monthly subscription to an investment fund. This fund aims to enable beneficiaries to receive their entitled benefits upon the completion of their employment, using the basic subscription amount allocated to them.

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However, if an employer fails to make the basic subscription payment by the due date, they will face consequences. The Resolution states that “If an employer fails to make a payment of the overdue subscription amount for a period of 2 months, the Ministry will cease issuing new work permits and may take other administrative actions in accordance with its applicable regulations.”

In addition to this, the Cabinet Resolution outlines a penalty of Dh1,000 per beneficiary per month, imposed by the Ministry on the employer if the subscription amounts are not paid after 4 months from the date the employer initially failed to make the payments.

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The Resolution also specifies that the fund manager must notify the employer in writing within 30 days of the payment due date. Employers will be required to pay the basic subscription within five business days after receiving the notification. Moreover, the fund manager is obligated to inform the Ministry of any instances of non-payment of the basic subscription within 15 days of sending the payment notification.

The alternative end-of-service benefits scheme offers an option for employers and employees seeking an alternative to the traditional gratuity system. While it grants flexibility to participating employers, it also imposes strict payment obligations to ensure the timely provision of benefits to employees.

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