Weekly Spotlight: Changes to the DIFC’s End of Gratuity Scheme Announced

The Dubai International Financial Centre have announced changes to the Centre’s end of gratuity scheme will come into effect on 1 January 2020. It follows the launching of an informal consultation in March 2019 where the Governor of the DIFC sent a letter to several hundred senior executives on replacing the end of service gratuity system with a new Employee Workplace Savings Trust savings scheme.

Under the changes, employees will contribute funds on an ongoing basis rather than being paid by their employer when they leave. However, the rate will be the same as the current gratuity and employees will be able to make extra contributions if they want to. Employees will also be able to determine if they want to invest in low, medium or high-risk options. When they leave they will receive their contributions and the end of service gratuity acquired to the date of the change. The replacement will only affect new benefits and gratuities. A new law laying out the provisions and requirements in detail will be issued and the scheme will be regulated by the Dubai Financial Services Authority. The master trust housing the scheme will be based in the DIFC.

However, it is not clear if the amended framework will only apply in the DIFC or will apply across the UAE.

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