New Monthly Pension Contribution System for Emiratis in Private Sector

Introduction: In a recent development, the monthly pension contribution structure for Emirati employees in the private sector underwent significant changes, marked by an increase of six percent. The adjustments, outlined in Law No. 57 of 2023, came into effect for Emiratis who entered the workforce after October 31, 2023. This update brings the total contribution salary to 26 percent.

Revised Contribution Breakdown: Under the amended system, Emirati employees will now contribute 11 percent of the total amount, with the employer covering the remaining 15 percent. Notably, for Emiratis working in the private sector with contribution account salaries below Dh20,000, the UAE government extends support by contributing 2.5 percent. This initiative aims to encourage the hiring of Emiratis in the private sector.

Previous Contribution Model: In contrast, the previous structure involved employees contributing 5 percent of their monthly contribution salary, while employers contributed 12.5 percent. The government played a role by covering the remaining 2.5 percent.

Transition Period: The General Pension and Social Security Authority of the UAE clarified that both government entities and private sector firms employing UAE citizens have two options to implement the new contribution rates. This transition period spans three months, covering October to December 2023, in accordance with the provisions of the new law.

Guidelines for Implementation: To ensure a smooth transition, a circular was sent in November to all public and private sector entities. This communication provided comprehensive guidelines on the procedural aspects of transferring contribution payments on behalf of Emiratis entering the workforce after October 31, 2023, especially those not previously covered by the provisions of Law No. 7 of 1999.

This strategic move is aligned with the UAE's commitment to enhancing the welfare of its workforce and fostering increased participation of Emiratis in the dynamic landscape of the private sector.

New Regulations for UAE Private Sector: Emirati Pension Registration and Emiratisation Targets

In a recent announcement, the Ministry of Human Resources and Emiratisation reminded private sector companies in the UAE, excluding those in Abu Dhabi, of a crucial obligation. According to the ministry, private sector entities must register their Emirati employees in the pension system within 30 days from the issuance of their work permits.

This requirement is a key component of the Nafis program, a federal initiative designed to empower Emiratis in securing employment within the private sector. The overarching goal of the Nafis program is to increase the number of Emirati beneficiaries from the current 75,000 to an ambitious 170,000 within the next five years.

As of the end of the current year, companies are mandated to ensure that 2% of their skilled staff are Emiratis. Starting January 1, 2023, penalties will be imposed for failure to meet this target. Companies failing to achieve the required Emiratisation target will face an annual penalty of Dh72,000 for every UAE national not hired.

The General Pension and Social Security Authority (GPSSA) outlined that all private sector entities throughout the UAE, except those in Abu Dhabi, are required to pay their pension contributions at the start of each month, with a maximum grace period until the middle of the month.

Once registered with the GPSSA, insured individuals are obligated to contribute 5% of the Contribution Calculation Salary, deducted by the employer from the employee's salary and transferred monthly to the GPSSA. Additionally, employers must pay 12.5% of the contribution salary, while the government contributes 2.5% as a form of encouragement and support.

The Contribution Calculation Salary includes the basic salary, gratuities, and allowances as stipulated in the employment contract. For those joining the workforce after January, the Contribution Calculation Salary of that month serves as the basis for contribution payments until the following January.

To register an Emirati employee with the GPSSA, companies need to provide copies of the passport, Emirates ID, Family Book, and birth certificate. Additionally, three copies of the insured's service start form, an attested original copy of the employment contract, and a photocopy of the medical examination report after appointment are required. The contributor's age should be between 18 and 60. Once the registration procedures are completed, the GPSSA issues an insurance number to the employee.

The GPSSA reported an increase in the number of contributors working in the private sector, reaching 21,868 across 7,874 private sector entities. Staying informed about these regulations is crucial for private sector companies to remain compliant with UAE labor laws and actively contribute to the nation's Emiratisation initiatives.