UAE Employers May Incur Penalties for Non-Payment of End-of-Service Benefits Subscription Fees

Employers in the United Arab Emirates (UAE) participating in the newly-introduced alternative scheme for end-of-service benefits may face penalties and fines if they fail to make timely payments of subscription fees. Launched by the UAE’s Ministry of Human Resources and Emiratisation (MoHRE) and the Securities and Commodities Authority (SCA), the scheme is optional for both employers and employees. It involves monthly subscriptions to an investment fund, ensuring that beneficiaries can receive their entitlements upon the completion of their employment.

According to Cabinet Resolution No. (96) of 2023 Regarding an Alternative End-of-Service Benefits System, employers are obligated to pay a monthly subscription fee into the investment fund, and failure to meet these payment obligations may result in punitive measures. In cases where an employer neglects to make the basic subscription payment by the due date, the Ministry has the authority to cease issuing new work permits and may implement other administrative actions in line with its applicable regulations.

The resolution outlines a specific penalty structure for non-compliance. If an employer neglects to make a payment for the overdue subscription amount for a consecutive two-month period, the Ministry reserves the right to take administrative actions. Additionally, employers may face a penalty of Dh1,000 per beneficiary per month if subscription amounts remain unpaid four months after the employer’s default.

The resolution further dictates the role of the fund manager, requiring them to notify the employer in writing within 30 days of the payment date, indicating the obligation to pay the basic subscription within five business days. Moreover, the fund manager is obligated to inform the Ministry if any non-payment of the basic subscription occurs within 15 days of issuing the payment notification.

The alternative end-of-service benefits scheme aims to enhance the financial security of employees by ensuring that funds are set aside for their end-of-service benefits. While it provides flexibility for employers and employees, non-compliance with the payment obligations outlined in the resolution will result in regulatory consequences for employers.