Pressure on Dubai to implement stricter gratuity payment legislation

Several financial advisers in Dubai are calling on the emirate to introduce new legislation that will make it mandatory for companies to set aside capital to be used for the gratuity payment of employees in case of insolvency.

Only 12% of people in the UAE are relying solely on their gratuity to fund their retirement, with 51% of people saying they are relying on gratuity “a little” and 34% saying they aren’t relying on it at all, according to research conducted by Old Mutual International and Quilter Cheviot.

The financial community in Dubai say stricter laws would help ensure employees are protected in the event their employer goes into insolvency, and would help give employees the confidence that will allow them to make their gratuities a part of their long-term savings plans.

“Entitlement to end-of-service benefit is an integral part of an expatriate’s employment in the UAE, but whilst it is expected it will be paid upon leaving service, few question how it will be funded,” Shiraz Sethi, regional managing partner at DWF told local media outlet, Arabian Business.

In a bid to attract new businesses and talent to the UAE, the country recently announced changes to the visa system that will allow some expatriates to apply for 10 year visas.

Additionally, new legislation will see the current bank guarantee for private sector workers replaced by a new labour insurance system which will protect employees if a company faces financial difficulties, up to AED 20,000 per employee.

Pedro Gonçalves
Pedro Gonçalves is Financial Correspondent at International Investment.

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