Pension and Gratuity Entitlements for Emirati Employees in the UAE: A Practical Legal and Compliance Guide

Employment benefits in the UAE differ significantly depending on whether an employee is a UAE national or a foreign national. While expatriate employees are generally entitled to end-of-service gratuity, Emirati employees are covered by a statutory pension system. Over time, this pension framework has evolved, and today two separate pension laws may apply to Emirati workers, depending on when they first entered insured employment.

For employers, HR managers and Emirati employees, understanding which pension law applies, how monthly contributions are calculated, and how retirement benefits are determined is essential for legal compliance. The 2023 Pension Law applies to Emirati nationals first employed and registered with the General Pension and Social Security Authority (GPSSA) on or after October 31, 2023. Those employed before this date remain subject to the 1999 Pension Law, together with its subsequent amendments.

Under the 2023 Law, employees must be UAE nationals, aged between 18 and 60, and meet prescribed medical fitness requirements at the time of joining. Employers are legally required to register eligible Emirati employees with the GPSSA within 30 days of the commencement of employment. Failure to do so may result in penalties, including backdated contribution liabilities.

Pension contributions and benefits are calculated based on the employee’s pensionable (contribution-account) salary, as defined by the GPSSA. This typically includes the basic salary and certain fixed allowances, while variable pay and bonuses are generally excluded. Statutory salary caps may also apply. Accurate identification of pensionable salary components is therefore critical for payroll accuracy and regulatory compliance.

Under the framework introduced by the 2023 Law, pension contributions are calculated on the employee’s pensionable salary and must be paid monthly to the GPSSA or the relevant local pension fund.

For Emirati employees working in the government sector, the monthly contributions are as follows:

• Employee (Emirati): 11 per cent
• Employer: 15 per cent
• Total monthly contribution: 26 per cent
  
  

For Emirati employees working in the private sector, the contribution structure is as follows:

• Government contribution: 2.5 per cent
• Employer contribution (salary above Dh20,000): 15 per cent
• Employer contribution (salary up to Dh20,000): 12.5 per cent
• Employee contribution: 11 per cent
  
  

The 2023 Pension Law adopts a standard accrual method, under which pension entitlement increases progressively with each year of service. The pension is calculated as a percentage of the employee’s pensionable salary for each year of contribution. Under this system, the pension accrues at 2.67 per cent of the pensionable salary for each year of service up to 30 years, with a higher accrual rate of 4 per cent applying to additional years, subject to a statutory maximum.

The law also provides minimum pension protections. The minimum monthly pension is Dh10,000. Where the pension calculated under the statutory formula falls below this amount, the GPSSA will make up the shortfall so that the insured employee receives Dh10,000 per month. As a result, employees with longer service are entitled to higher pensions, while statutory caps and minimum thresholds ensure protection for lower-paid employees.

Emirati employees covered by the pension system do not receive end-of-service gratuity under the Labour Law in addition to their pension. The pension scheme operates as the statutory retirement system for UAE nationals and replaces gratuity for this purpose. However, where an Emirati employee does not qualify for a pension due to insufficient contribution years or other statutory reasons, they may instead be entitled to an end-of-service gratuity calculated under the pension legislation.

The gratuity accrual rates are as follows:

• 1 to 5 years of service: 1.5 months’ salary per year
• 6 to 10 years of service: 2 months’ salary per year
• 11 years and above: 3 months’ salary per year
  
  

Under the 2023 Pension Law, employers have clear and enforceable obligations to ensure pension contributions are correctly managed. Employers must register eligible employees with the GPSSA within one month of joining and update the system within 15 days of an employee’s departure. They must submit all required documentation, deduct employee contributions accurately, and remit total contributions monthly.

Importantly, pension contributions for the first and last month of employment are not pro-rated, even if the employee does not work the full month. Late, incorrect or incomplete payments may result in daily fines, additional contribution liabilities and significant penalties, including fines of up to Dh50,000 per employee and, in serious cases, imprisonment of the employer’s representative.

For each Emirati employee, employers should proactively confirm (1) which pension law applies, (2) the correct pensionable salary components, and (3) the total years of contribution, to ensure full compliance with the UAE’s pension framework.

 

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