Understanding the Legal Framework: Employers looking to implement the UAE’s new pension scheme must first become familiar with the governing regulations. The scheme was established by Cabinet Resolution No. 96 of 2023 and further detailed by Ministerial Resolution No. 668 of 2023
Legally, it’s a voluntary alternative system to the mandated gratuity, but once an employer opts in for select employees or categories of employees, participation for those employees becomes mandatory going forward
This means an employer cannot dip in and out of the scheme at will; there’s a commitment to continue funding for those enrolled, and they must discontinue the old gratuity accrual for them
Employers must notify MOHRE of their intent to participate and submit a request to register
Practically, this involves documentation and possibly an undertaking that they will abide by scheme rules. It’s advisable to get this registration right – working with a provider like HAYAH can simplify that, as HAYAH would have templates and guidance on the application process (they have navigated this for many clients as the pioneer provider).
Selecting a Qualified Provider: Legally, employers must select a fund manager or provider licensed by the Securities and Commodities Authority (SCA)
Not every financial company can handle these contributions; only those approved (as of mid-2024, two investment companies were approved to offer the scheme
And HAYAH Insurance is one of them, with the distinction of being the pioneer of a pension plan approved by the UAE Central Bank
Choosing HAYAH ensures compliance with this requirement, as HAYAH holds the SCA license for corporate pensions
By partnering with an approved provider, employers meet their legal duty of care in selecting a reputable scheme.
There will be a contractual agreement between the employer and the chosen provider (e.g., HAYAH) outlining responsibilities: timely contribution payment, data sharing (like informing the fund manager of new joiners, leavers, salary changes), and the services the provider will deliver. Employers should review this contract in light of their obligations to employees. For instance, ensuring it covers the preservation of existing entitlements – the law says employees’ past gratuity up to joining the scheme must be preserved
Does the contract allow or require the employer to inject that past service liability into the fund? Or does the employer keep it separate? HAYAH’s expertise can guide the employer on best practice here. Legally, the employer just needs to ensure the employee isn’t short-changed on their pre-scheme service. Many companies might choose to pay the accrued gratuity into the scheme to fully settle their liability (this could require an explicit arrangement in the contract with the provider).
Compliance with Contribution Requirements: Once the scheme is live, employers have a legal duty to remit contributions on time (within 15 days of month-end)
Late or missing contributions could expose the employer to penalties or fines, as MOHRE can handle complaints about the alternative system
There’s an analogy here to how missing salary payments would be treated seriously. To stay compliant, employers should integrate the contribution process with payroll. HAYAH’s digital system helps by automatically calculating the contributions (5.83% or 8.33% based on each employee’s tenure) and can even integrate via API with payroll software to reduce manual errors.
Also, legally, if an employer chooses to include only certain categories of employees, they must clearly define those categories (e.g., all managerial staff, or all new hires after a certain date, etc.) and ensure no discrimination that could be legally problematic. They should have a rational basis (usually it’s by grade or contract type). Over time, they may extend it to more employees. The resolutions allow flexibility in coverage, but once included, those employees must remain in the scheme unless they leave the company.
Employment Contract and Policy Updates: Implementing the scheme likely requires updates to employment contracts or at least issuing addenda. For current employees, a formal communication or agreement might be prudent: explaining that going forward, their end-of-service benefit will be governed by contributions to the scheme in lieu of the standard gratuity formula, and obtaining written acknowledgment. Although the law enables this change, having employee consent or acknowledgment can prevent future disputes or confusion. New contracts for hires after adoption should clearly state their eligibility for the pension scheme instead of (or in addition to) gratuity. In many cases, companies might phrase it as “End-of-Service Benefit: You will be enrolled in the [HAYAH Pension Scheme], to which the Company contributes [X]% of your basic salary monthly as per UAE law, in lieu of the end-of-service gratuity.” Legal review of these contract changes by the company’s counsel is recommended to ensure alignment with the Labour Law and free zone rules if applicable.
Handling Gratuity for Non-Participants: If an employer doesn’t enroll all staff (e.g., maybe they start with management cadre first), they must continue to comply with the gratuity law for those outside the scheme. This means parallel systems. Legally, that’s acceptable, but administratively it’s tricky. Employers should maintain clear records of who is under which system. HAYAH’s team can assist by providing listings and even managing both sets (HAYAH’s platform could potentially track notional gratuity accruals for those not yet in the scheme if the employer wants a one-stop solution). However, legally the employer remains liable for gratuity for non-enrolled employees as before, so they should not neglect those obligations.
Regulatory Oversight and Audits: The MOHRE and SCA have oversight. The MOHRE can investigate complaints – for instance, if an employee says “My employer hasn’t been contributing for 3 months” or “My employer didn’t preserve my past gratuity,” MOHRE can step in
SCA oversees the fund providers, but also any complaints about fund performance or mismanagement
Employers should prepare for possible audits or inquiries. This means keeping documentation like proof of monthly contribution transfers, employee enrollment forms, and statements from the provider. Working with HAYAH, employers will receive regular statements and reports, which serve as evidence of compliance.
Data Protection and Privacy: When implementing a pension scheme, employers will share personal data of employees with the provider (names, salaries, ages, etc. for account setup and actuarial purposes). UAE has emerging data protection laws (and if in DIFC/ADGM, those have their own data laws). Employers should ensure that their contract with HAYAH includes appropriate data protection clauses (it likely does, given HAYAH’s standards). HAYAH’s digital platform is secure and compliant with regulations
being regulated by the Central Bank. Nonetheless, informing employees that their data will be shared with HAYAH for the purpose of administering the pension is a good practice, possibly via a privacy notice update.
Free Zone Nuances: The federal scheme doesn’t automatically cover the DIFC or ADGM, as they have separate employment laws (DIFC has DEWS, ADGM was considering its own scheme). But it does apply in other free zones (e.g., JAFZA, DAFZA, DMCC, etc.)
Free zone companies must similarly register via MOHRE (since most free zones follow federal labor law for gratuity unless they explicitly opt into the federal scheme). One nuance: if a free zone has its own mandated trust (like DIFC), a company in that zone should follow that. But if not, they can join this federal scheme voluntarily. Employers should check their specific free zone authority communications – for example, some free zone authorities (like the financial free zones) might require notification or have their own guidelines on enrolling in the federal scheme. HAYAH’s expertise spans GCC and free zones
So they can advise a company in, say, DMCC on any zone-specific steps.
Legal Protection and Reduced Risk: By moving to a funded scheme, employers actually reduce certain legal risks. One is the risk of insolvency or cashflow issues leaving them unable to pay gratuity, which could result in labor disputes or even court cases. With the scheme, those funds are largely out of the employer’s hands and in the employees’ accounts; this protects the employer from future liability (aside from ensuring contributions were made). It’s a sort of legal “safe harbor” – if an employer has faithfully contributed to the scheme, they have fulfilled their end-of-service obligation. So long as they can show that to any inquiring authority or employee, they should be shielded from claims. In contrast, under the old system, if an employer failed to reserve enough money, they could face significant payouts and possibly legal claims if they delayed or failed to pay.
HAYAH’s Expert Support: One of the most valuable legal supports HAYAH provides is knowledge and hand-holding through the transition. HAYAH likely has a dedicated onboarding team that helps employers draft employee communication (ensuring it’s legally sound and clear), update contracts, and train HR on scheme rules. They can provide templates: for example, a template “Pension Scheme Policy” document for the employee handbook, which outlines how the scheme works, what the company’s and employees’ rights and obligations are, how vesting works (though contributions vest immediately to the employee, it’s good to clarify). Having these well-documented helps if any disputes arise.
HAYAH’s robust regulatory compliance is also a layer of comfort. They align with CBUAE and SCA regulations, meaning they will not advise an employer to do anything that cuts corners. For instance, if an employer asked, “Can I pause contributions during a business downturn?”, legally the answer is no (not without violating the scheme rules) – HAYAH would advise legally compliant solutions, maybe suggesting employees reduce voluntary contributions or discussing partial temporary measures if any are legally permissible (as of now, none are specified, but HAYAH would keep clients updated if government allows, say, a temporary relief in crises).
Ensuring Fairness and Non-Discrimination: Legally, while the scheme is voluntary, companies should be mindful of fairness. If only part of the workforce is getting this benefit (and an arguably better structure, since it includes investment returns), others might allege discrimination. It may not be unlawful if it’s based on objective criteria (like grade level), but it can affect morale. Many companies, therefore, will lean towards eventually covering everyone. HAYAH can help plan a phased rollout. Legally it’s fine to phase, but internally it must be managed carefully. Possibly offer something to those not yet in the scheme (like still accruing gratuity plus maybe a small top-up or the promise of joining next year). Consulting with legal and HAYAH on how to frame this is wise.
Exit Settlements and Legal Disputes: When an employee leaves, the law says they get their fund payout within 14 days
If the market is down at that time, an employee might be unhappy that their fund didn’t equal the defined formula of gratuity. However, legally, if they were in the scheme, that is their benefit (the law is written such that the fund replaces gratuity entirely). To mitigate grievances, some employers might consider (though not obliged) ensuring that at least the gratuity formula amount is met. HAYAH could design the default fund with relatively low volatility or a capital guarantee for basic contributions (especially for shorter-tenured employees) – indeed, the scheme includes a capital guarantee option for certain cases
This would cover legal complaints like “I got less than I expected.” Since the scheme aims to avoid that scenario, legal disputes on that front should be rare, especially if communication was clear that market fluctuations are part of the deal.
In case of any dispute, having HAYAH as a partner means the employer is not alone. If an employee were to file a complaint or lawsuit around the pension, HAYAH can provide supporting documents and possibly expert statements to clarify the scheme’s operation. They are stakeholders in smooth legal compliance, so they’ll stand by the employer to resolve issues.
Conclusion: Implementing a new pension scheme touches various legal aspects – labor law, regulatory compliance, contract law, and data protection. The good news is that the framework is set up to protect employees’ rights and, by extension, to protect compliant employers from legal trouble. By working closely with an experienced provider like HAYAH, employers can navigate these requirements confidently. HAYAH’s expertise effectively serves as legal compliance insurance: they have done this before, know the pitfalls, and keep the employer on the right side of the law at each step. This allows the company to focus on the positive outcomes (employee satisfaction, talent retention) rather than worry about legal minutiae, because those are being handled diligently in the background.
Sources:
UAE Cabinet Resolution 96/2023 – Establishes the alternative benefits scheme; participation is voluntary for employers but mandatory for chosen employees, replacing gratuity accrual
UAE MOHRE Guidelines – Employers must register with MOHRE and select an SCA-licensed fund provider to implement the scheme
UAE Ministerial Resolution 668/2023 – Details subscription and contributions (deadlines, rates) and preservation of prior entitlements
UAE Government Portal – MOHRE and SCA will supervise and handle complaints related to the alternative system and fund performance respectively
International Adviser – HAYAH was the pioneer of the first and only Central Bank-approved pension plan in 2021 and now SCA-licensed for corporate pensions
International Adviser – HAYAH ensures robust regulatory compliance and high transparency, aligning with all legal requirements to foster client trust
Simmons & Simmons Legal Update – All companies (mainland and free zone, except DIFC/ADGM) can opt into the Savings Scheme; two providers approved as of mid-2024
HAYAH Press Release – Adil Saghir affirms that acquiring the SCA licence attests to the superior quality of HAYAH’s retirement solutions designed to meet aspirations and secure futures for all employees