In line with the federal pension and social security law, companies in the private sector that fail to pay monthly contributions or provide correct data of Emirati employees may be subject to additional penalties and imprisonment. This recent warning was issued by the General Pension and Social Security Authority (“GPSSA”) which is campaigning to increase awareness of Emiratis and their companies about an insured individual’s rights and duties complying with the NAFIS programme for Emiratisation.

Governments across countries implement pension and insurance initiatives to ensure the well-being of their citizens. The nationals who belong to the countries of Gulf Cooperation Council (“GCC”) and work for establishments in the UAE must be registered by the employer with the GPSSA. This authority acts as a mediator to manage the pension program. Private sector companies are to register their employees within 30 days of their employment. Once registered under this program, the employers are to pay contributions to their funds. In the UAE, under the GPSSA mandate, calculations reflect 12.5% of employer contribution and 5.0% of employee contribution with a total contribution of 17.5%.

According to a statement issued by the GPSSA, employers are fined for each Emirati employee not registered with the GPSSA and are also responsible for contributing on their employees’ behalf and paying their due contributions in accordance with their starting dates. According to the law, these contributions are due at the beginning of every month and extendable till the 15^th. In addition to fines for overdue contributions or late registration of GCC nationals into the pension program, the labour authority portal of the employer may also be blocked.

Also stated by the GPSSA, charging an insured Emirati with a greater percentage than the due contribution percentage or failure to incur expenses, results in a fine of AED 5,000 for each insured individual. However, an order from the competent Court is required to oblige the entities to return the excess amount which was wrongly levied from its insured employees. Under Article 13 of the Pension and Social Security federal law, monthly pension contributions are non-refundable. In accordance with the provisions of Article 14, an additional amount at the rate of 0.1% of contributions of subsequent delayed days is to be paid by employers in the case of delayed payment beyond the specified days.

Furthermore, a fine of AED 5,000 for each employee is imposed on employers for providing incorrect information or abstaining from providing information on illegal practices. Employers are therefore expected to ensure the registration of their employees within the specified time period, pay monthly contributions timely and conduct frequent audits to ensure compliance.

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