DEWS: Digital Solutions for DIFC Payroll Professionals

This article will explore the introduction of the Dubai International Financial Centre (DIFC) Employee Workplace Savings Scheme (DEWS), an online platform that aims to facilitate the payment of end of service benefits to DIFC Employees. We will then examine recent developments and future trends expected across both the UAE and the GCC region.  

Background: What is DEWS?

DEWS was introduced via Employment Law Amendment Law No.4/2020 (“DIFC Law No.4/2020”). Prior to its introduction, DIFC employees were entitled under the now amended DIFC Law No.2/2019 (“DIFC Employment Law”) to end of service gratuity (“ESG”) upon being terminated, provided that they completed a year of continuous service and were not required to register with the General Pension and Social Security Authority (“GPSSA”). However, the absence of a strict obligation upon employers to accrue gratuity under the DIFC Employment Law may have created significant risk, as mismanagement of cash flow could have led to employees not being able to obtain ESG. 

DEWS has effectively replaced the traditional payment of ESG to employees and may have mitigated said risk. The scheme requires DIFC employers to make monthly contributions to their employees’ DEWS accounts and allows employees to make additional voluntary contributions from their monthly compensation. Employees are then granted the opportunity to select an investment plan from several options, ranging in risk. Once an employee is terminated, the contributions will be directly paid into their nominated bank account, or the employee can choose to remain invested in DEWS and obtain the benefits later.

Benefits of DEWS

DIFC payroll professionals may benefit from the organization DEWS provides, as having a centralised online platform may allow them to handle the payment of end of service benefits with efficiency and ease. Furthermore, requiring monthly contributions may aid payroll professionals in effectively managing company cash flow, and avoid having to grapple with a growing liability that would incur upon the employee’s termination. The monthly contributions requirement may also benefit employees, by providing them with a sense of greater financial security. Furthermore, granting employees the opportunity to invest may allow them to play a more active role in securing their future finances.

Recent Developments  

As mentioned, employers are only expected to make monthly payments into DEWS for expatriate employees, as GCC nationals are qualified to register with the GPSSA. However, recent changes were announced by way of DIFC Law Amendment Law No.1/2024 (the “Amendment Law”). The Amendment Law requires employers to make top-up payments into a qualifying scheme for GCC national employees where there is a gap between their monthly pension contributions, and what they would have received had they been enrolled in DEWS. However, note top-up payments will only be required where the difference is greater than AED 1,000. Prior to the Amendment Law’s introduction, GCC nationals may have been prevented from receiving end of service benefits that were fully comparable to the benefits given to their expatriate counterparts through DEWS, due to statutory pension caps. The “top up requirement” may then work to alleviate this imbalance.

The Amendment Law also introduced provisions that apply in circumstances where an employee is a “Sanctioned Person” and is unable to be enrolled in DEWS or an alternative qualifying scheme due to their status. The Amendment Law defines a “Sanctioned Person” as “any individual, entity, body or organisation listed on a sanctions list issued and passed by the United Nations security Council, any consolidated list of financial sanctions issued by the Federal Cabinet of the UAE or any other sanctions that may apply to a Qualifying Scheme or its trustee or administrator”. The Amendment Law requires employers to accrue ESG for the sanctioned employee until their employment is terminated, or until they are no longer considered to be a Sanctioned Person. The explicit obligation in the Amendment Law to accrue gratuity may provide the sanctioned employee with greater protection in comparison to the DIFC Employment Law.

In October 2023, the UAE Cabinet announced the introduction of a voluntary alternative scheme through Cabinet Decision No.96/2022 (the “Cabinet Decision”). The scheme is applicable onshore and in free zones that follow the Federal UAE Labour Law. However, note that it has also been made available to non-Emirati employees working in the public sector. According to the Cabinet Decision, employers can grant employees the option to opt into the voluntary alternative scheme. The scheme operates in a similar manner to DEWS, as it requires employers to make monthly contributions to the employee's account and releases the benefit to the employee upon termination. Furthermore, employees are also given the opportunity to select from a range of investment options.

Future Trends

The development of alternative schemes outside of DEWS may hint at the possibility of the introduction of pension schemes for expatriates in the UAE in the future, which may lead to greater numbers of expats choosing to reside in the country throughout retirement. This in turn may assist the UAE achieve its goal of becoming a popular destination for retirees, as evidenced by its launch of the 5-year retirement visa.

The developments in the UAE must also be observed in connection to the growing calls for the introduction of expat pensions schemes in the GCC. Answering these calls with modern, simplified solutions like online platforms may grant Gulf countries the opportunity to not only support their expatriate populations and attract new global talent, but to also gain a competitive edge over other global economic hubs.