UAE: How new law protects employees’ gratuity, end-of-service benefits
Posted Date: 11th August 2022
Relating to which Act: UAE Payroll and Labour Laws
Type: UAE New Resolution – Payroll and Labor Laws relating to Gratuity and end-of-service benefits
Pertains to employers and employees
Relevance of this news: Karma Management Global Consulting Solutions Pvt. Ltd diversified as way back as April 2021 by opening up its offices in Canada, the US, the UK, UAE, the Philippines, and Asia. It has since then gained a lot of momentum in terms of processing payroll, talent acquisition, and temp staffing in these countries.
It has an energetic team of payroll processors having the competency and sound knowledge to execute the work of each client on a timely basis exactly as per the payroll cycle of a week, fortnight, or monthly including taking care of deductions, taxes, and benefits. The entire processing work is automated with the latest technology, supported by AI and chatbots.
Subject : UAE: How new law protects employees’ gratuity, end-of-service benefits
UAE: How new law protects employees’ gratuity, end-of-service benefits
Karma Global’s Payroll Bureau has a team of experts that can help employers manage their payroll accurately and efficiently, be it at home or in the UAE.
“Karma Global’s payroll team is always friendly and professional, they enjoy what they do and this reflects in the quality of their work. They are consistent and responsive, delivering global payroll on time and that too every time their services are highly commendable this is what the global clients say, especially clients in Abu Dhabi, Sharjah, Dubai, Ras Al Khaimah, Ajman, Umm Al Quwain, and Fujairah.
“Karma Global’s payroll team is already attached to payroll processing in Canada, the US, and the UK with a determined set of highly trained and professional people. The main reason for this stability and growth is their dependability, reliability, and a high degree of responsiveness, aimed at timely delivery with accuracy and steadiness.
Karma Global is endowed with excellent software tools in which all the processes have been streamlined and automated. Karma Global’s payroll focus is not just only on payment of accurate wages but it lays a lot of emphasis on efficiency and affordability. Besides the payment of wages, there are several other factors where the emphasis has been laid, such as taxation, arrears, variable pay, and local regulations.
Karma Global utilizes most of its resources by carrying out the continuous process of study, research, and analyses where a constant watch is required to check on the changing regulations and rates as well as Government norms and procedures.
The UAE has announced a new resolution regarding bank guarantees from employers and employees’ protection insurance schemes for the companies operating in the private sector.
The new law protects employees in the event of an employer becoming insolvent and failing to pay end-of-service commitments to the employee.
Here are some of the details of the new resolution and its impact on employees and employers.
Below is a complete guide to the new law.
What is the new resolution all about?
Dr. Abdulrahman Al Awar, Minister of Human Resources and Emiratisation, has issued the Ministerial Resolution No. 318 of 2022 regarding bank guarantees and employees’ protection insurance schemes in the private sector.
What has changed in the new law?
Under the previous law, the company was required to put down a deposit of Dh3,000 per employee to ensure that the employer made provision for the end-of-service benefit for each employee. This new ministerial resolution further clarifies this option to ensure that the rights and benefits of employees are protected. Private companies can now pay a yearly sum directly to the local bank for each employee or pay monthly installments under an individual insurance policy per employee.
Are there multiple options for employers?
Employers have two options. Under the first option, an employer can provide a bank guarantee of Dh3,000 for each employee, valid for one year. The bank guarantee is the written commitment from the bank to support the obligation from the employer to the employee. The guarantee is automatically renewed for each year of service. Under the second option, the employer sets a 30-month insurance policy for each employee. The insurance policy is paid monthly at a value of Dh137.50 for each skilled worker, Dh180 for each unskilled worker, and Dh250 for each worker paid by higher-risk establishments that are not registered with the Wages Protection System (WPS). The insurance coverage amounts up to Dh20,000 per worker and will protect them if their employer fails to fulfil their end-of-service commitments. In case of a claim, the proceeds may be used to cover unpaid wages in the previous 12 months, end-of-service gratuity costs, or repatriation costs of the worker.
Does the new resolution protect workers?
Yes. Both options protect workers in the event of an employer being unable to pay end-of-service commitments to the employee.
How does the new law help employers?
The second option under the insurance policy category allows companies to spread the cost of employee benefits. This means they do not have to commit a large upfront deposit for each employee. This improves companies’ cash flow as they do not have large bank guarantees on their balance sheet – which can be significant for companies with large numbers of employees.
Can companies reclaim their bank guarantees?
Yes.
How can companies reclaim their bank guarantees?
The employer needs to submit a request to reclaim the employee’s bank guarantee if the employee leaves the company.