INSITE - UAE - April 2024
- sukhwinder21
- Apr 29, 2024
- 2 min read
RECENT AMENDMENTS TO DIFC EMPLOYMENT LAW
Summary: DIFC Law No. 1 of 2024 has brought significant changes to the Employment Law, Law No. 2 of 2019 (the Amendment Law). These changes are effective from March 8, 2024, and include alterations to contributions for Qualifying Schemes, like Dubai Employee Workplace Savings (DEWS) and the addition of end-of-service gratuity accrual for sanctioned persons.
In Detail:
Enhancements to Qualifying Scheme Contributions for UAE/GCC Nationals
The Amendment Law brings significant changes for UAE and GCC national employees in the DIFC regarding qualifying scheme contributions. Previously, these employees were exempt from mandatory contributions, but now DIFC employers must make additional contributions for eligible UAE/GCC nationals. This change aims to address the disparity caused by pension caps.
Under the Amendment Law, DIFC employers must compare the core benefits payable to non-UAE/ GCC nationals with the pension contributions paid on behalf of UAE/ GCC nationals to the General Pension & Social Security Authority (GPSSA). If there's an underpayment, employers must make a top-up payment to a qualifying scheme, ensuring full salary contributions. The Amendment Law also sets a minimum top-up contribution of AED 1,000 for eligible employees. Non-compliance can lead to penalties of up to USD 2,000 per affected employee.
End of Service Gratuity for Sanctioned Persons
The Amendment Law introduces clear legal provisions to address situations where a DIFC employer is unable to contribute to a Qualifying Scheme for an employee, or the employee cannot receive monthly contributions due to being classified as a "Sanctioned Person." A "Sanctioned Person" is defined as an individual or entity listed on a sanctions list issued by the United Nations Security Council, the UAE Federal Cabinet, or other relevant authorities.
In such circumstances, DIFC employers are mandated to accrue end-of-service gratuity for affected employees until either:
the employer or employee is no longer designated as a Sanctioned Person,
or until the employee's termination. Upon the termination of the employee's service, the employer must transfer any accumulated gratuity payment to a Qualifying Scheme or directly to the employee, depending on the circumstances.
An employer will not be responsible for any profit or loss that may have accrued in a qualifying scheme had it not been for the need to accrue end of service gratuity on an employee’s behalf due to sanctions.
Conclusion: DIFC Law No. 1 of 2024 is a significant update aimed at improving employment regulations in the DIFC, focusing on fairness and adherence to the law. Employers need to take two important steps: (i) quickly assess if their UAE/GCC national employees are eligible for improved benefits by comparing their current pension contributions with what would be paid if they were not UAE/GCC nationals, and (ii) ensure they accrue end-of-service gratuity for employees affected by sanctions. It is important to note that employers will not be held responsible for any financial changes in the accrued amounts within a Qualifying Scheme.
Comments