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Discover the latest developments in pension contributions for Emirati employees in Dubai and the UAE. Learn how the new law impacts both public and private sectors, offering increased financial support and sustainability for the local workforce. Stay informed about the fresh pension scheme effective October 2023.

Rewritten Article:
New Pension Contribution Structures for Emirati Employees in the UAE

The landscape of pension contributions for Emirati workers in the UAE has recently evolved with the introduction of Law No. 57 of 2023. As of October 31, 2023, Emirati employees entering the workforce are subject to an adjusted contribution rate totaling 26 percent of their monthly salary.

This change signifies an increase of 6 percent from previous rates, with the employee now responsible for an 11 percent contribution and the employer covering the remaining 15 percent. In an effort to bolster Emiratization within the private sector, the UAE government will subsidize an additional 2.5 percent for employees with contribution account salaries below Dh20,000, thereby incentivizing the private sector to grow its Emirati employee base.

The adjustment from the prior 5 percent employee and 12.5 percent employer contribution rates was communicated during an informational session attended by representatives from over 120 entities across various industries. A circular issued in November further clarified the guidelines for transferring pension contribution payments for those newly employed Emiratis or those not previously encompassed by Law No. 7 of 1999.

For those in public sector roles, the government is committed to financing 15 percent of the monthly pension contribution, with the employee contributing the other 11 percent, for those joining after the October 31, 2023, threshold. Previously, the distribution was set at 15 percent from the government entity and 5 percent from the employee.

The pension scheme introduces caps on the maximum pensionable earnings at Dh100,000 for government sector and Dh70,000 for private sector Emirati employees, maintaining a minimum pension of Dh10,000 per month.

The motivation behind this legislative change is to optimize the utilization and retention of the Emirati workforce, enhance retirement pension values in correlation with extended employment, and ensure the financial viability of the General Pension and Social Security Authority (GPSSA) by aligning revenues with expenditures.

Key aims are to address the rising cost of living through pension inflation adjustment, equalize contributions and end-of-service benefits across sectors, and offer a social insurance framework that supports women in balancing work with family through preferential pension conditions such as reduced required years of employment.

Entities employing UAE nationals have been presented with two options for adhering to the new contribution rates for a specified three-month period ending in December 2023, as stipulated by the GPSSA, which has assured that no additional penalties will be incurred for delayed payments during this transitional phase provided accuracy in all declarations is maintained.

Exceptions to the new law include Emirati employees hired before the October 31, 2023, cut-off and those pensioners who have commenced their retirement prior to this date, all of whom will remain under the governance of the 1999 law.

Furthermore, Fatima Ahli from the GPSSA noted that Emiratis receiving end-of-service gratuity prior to the end of October and ministers retired before the aforementioned date would also remain under the earlier law if they resume work. Interestingly, this revised law is also applied retroactively for the first time to Emiratis in foreign embassies, and regional and international political missions.