‘Is it compulsory to enrol in a workplace pension scheme?’

Such programmes guarantee that an employer has the funds to pay for an employee's gratuity

There are a number of large mainland employers who have an alternative to the standard gratuity scheme and the DIFC has recently moved to a similar arrangement. Getty Images

I have been with my employer for three years and they have now advised us that they plan to introduce a pension-type scheme for all employees in place of the usual end-of-service gratuity. Apparently, they pay into an investment of some type and we can also contribute if we want to.

This looks to be compulsory, but I don't want to join as it seems to be a better plan for employees who stay with the company for many years. However, it is my intention to leave by the end of next year and return to South Africa. My employer doesn't know that and I don't want them to. Do I have to join this scheme rather than continue as things are at the moment? BS, Dubai

There are a number of large mainland employers who have an alternative to the standard gratuity scheme. The Dubai International Financial Centre, which has its own legislation, has recently moved to a similar arrangement. I believe we can expect to see more of this in the future across the UAE and rules are in place to ensure that employees are not disadvantaged.

This issue is covered in the UAE Labour Law and Article 140 states: “Should the establishment have a saving fund for the workers, and the rules of the fund stipulate that the sums deposited into the fund on behalf of the worker are in return for the legal obligation with regards to the end-of-service gratuity, the saved amount or the duly due gratuity shall be paid to the worker, whichever is greater. Should the rules of the fund not stipulate that the amounts paid by the employer are in return for his legal obligation with regards to the end-of-service gratuity, the worker shall receive the amounts due to him from the saving fund in addition to the statutory end-of-service gratuity.”

This makes it clear that no employee should be any worse off if there is a retirement scheme in place. In some cases, such schemes are an alternative and there is a choice, but this must be made clear by an employer.

The employee is further covered under Article 141 of the UAE Labour Law, which clarifies: “Should the establishment have a retirement system, an insurance or any similar scheme, the worker entitled to a pension may choose between such pension, the prescribed gratuity or the money entitled thereto from the retirement system or under the insurance scheme, whichever is better.”

Such arrangements can have advantages for employees. If a savings scheme is set up with an external company, the money invested should be protected and held on behalf of the individual. The employee is then not dependent on the employer having the money to pay out a gratuity when it is due and this should avoid any delays in payment. In this situation, even if BS is required to join such a scheme, he is protected from losing out under the UAE law.

I have just moved to the UAE. I have a work visa with a company based in Abu Dhabi but would like to live in Dubai and commute to Abu Dhabi every day. A friend told me that if I do this, I won't be able to sponsor my wife as I need to have a tenancy contract in the emirate of Abu Dhabi. Is this true? MH, Abu Dhabi

There was a change in legislation in 2017, which stated that an individual needs to have a tenancy agreement in Abu Dhabi, or a local lease known as Tawtheeq, in order to sponsor family members. This has not been revoked but there can be some leeway for employees of free zone companies, especially if the company is headquartered in another emirate.

Applications that do not fit standard criteria are reviewed on a case-by-case basis by the General Directorate of Residency and Foreigners Affairs – Abu Dhabi. There is no guarantee that any application will be approved.

In addition, MH will need to ensure that the employer will permit him to live in a different emirate. Government employees are expected to live in the emirate of Abu Dhabi and there can be a clause in other contracts of employment to that effect.

There are also additional considerations such as the cost of commuting and, particularly, the current Covid-19 restrictions in crossing the border between Abu Dhabi and Dubai. This makes daily travel complicated right now, as not only are regular tests required, there are also delays in entry and exit. That alone is likely to put many people put off doing the journey on a regular basis if they don’t need to.

Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with more than 25 years’ experience. Contact her at [e-mail]. Follow her on Twitter at @FinancialUAE

The advice provided in our columns does not constitute legal advice and is provided for information only