DIFC Employee Workplace Savings Plan

Sajin Rasheed, Director

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    Dubai International Financial centre, a special economic zone in Dubai, has introduced a workplace savings scheme, which replaces the existing end-of-service gratuity benefits. The new plan titled DEWS (DIFC Employee Workplace Savings) requires employers to make compulsory monthly contributions to a savings plan which will commence from February 1, 2020; and this will have an impact on the payroll process in UAE. All DIFC employers must opt for  this funded defined contribution plan or any other qualifying plan approved by DIFC.

    The amendment is in line with the DIFC employment law No 2 of 2019, that was passed few months back and it states that the employer contribution towards an investment or pension scheme should not be less than the monthly gratuity accrual.

    This plan is set to be launched with  effect from 1st February 2020. The deadline for employers to enrol into a qualifying scheme is 31st March 2020 and the initial contribution must be made on or before 21st of April. The first payment should include the contribution starting from 1st February, 2020 onwards. Even though the mandatory contribution is calculated as a percentage on basic salary, there won’t be deductions of any sort from the salary of the employee.

    The contribution percentage for Employees with service period less than five years  is 5.83% of basic salary and  8.33% of basic salary for service period more than five years. Minimum basic salary should be 50% of total fixed monthly salary.

    What happens to End of Service Gratuity (EOSG) accrued up to the Changeover Date i.e. 31st January 2020?

    At the changeover date, employers have the following options with regard to their accrued EOSG

    1. Employer can continue to manage it
      In this case, Employer will keep the accrued amount of Gratuity from the employees’ joining date till 31st January 2020.  At service termination the employer will be liable to pay the  accrued End of service Gratuity  in line with the service period as at the changeover date (31st January 2020) and to be recalculated based on the employees last drawn salary
    2. Employer can transfer the accrued EOSG with employee consent to DEWS
      The employer can transfer an agreed amount into the DEWS plan, with the written permission of the employee. The amount should not be less than the entitlement calculated by reference to a termination payment under DIFC Employment Law. Upon termination of the employment, the employer need not have to pay the accrued EOSB to the employee, even if there are any future salary increases or changes in the length of service. The employee will also be ready to take care of the ongoing investment risk.
    3. Employer can transfer the accrued EOSG without employee consent
      The amount can also be transferred without the permission of the employee. But in doing so, the employer will be responsible for settling the employee’s accrued EOSB entitlement when they leave their job. The accumulated benefit will be held as a pooled fund under the employer’s name and it’s up to the discretion of the employer on how to invest the amount.

    An example for better understanding

    DIFC Employee Workplace Savings Plan

    DIFC Employee Workplace Savings Plan

    DIFC Employee Workplace Savings Plan

    Options for Employers

    1. Employer can continue to manage it

      Employer will have to pay an amount of AED 46,361.10/- to the employee at the time of final settlement

    2. Employer can transfer the accrued EOSG with employee consent to DEWS

      Employer needs to transfer an amount of AED 37,088.88/ to DEWS Account on or before 21st April 2020. No gratuity to be paid by the employer at the time of final settlement.

    3. Employer can transfer the accrued EOSG without employee consent

      Employer needs to transfer an amount of AED 37,088.88/ to DEWS Account and an amount of AED 46,361.10/- to the employee at the time of final settlement. Employer can claim the amount from DEWS account including the return for the period.

    Monthly Process

    Employers must upload a file onto the DEWS portal, that consists of information related to employees who are part of DEWS plan. The file should have details about the contributions made, and also if there are any new joiners or leavers, it must be included in the file. The next step involves, transferring the total contribution amount from the registered bank account of employer to the bank account of master trustee.

    DIFC Employee Workplace Savings Plan

    Key Points:

    •  Plan- DEWS (DIFC Employee Workplace Savings)
    • Applicable Companies- All Companies registered in DIFC (Dubai International Financial Center)
    • Not applicable: UAE nationals or GCC nationals who are accruing a social security benefit separate from the requirements of the Employment Law
    • Mandatory or optional- Mandatory
    • Effective start date – 1st February 2020
    • Last date for Company registration with DEWS- 31st March 2020
    • Last date for Employee registration -31st March 2020
    • Last date for submitting first contribution – 21st April 2020
    • Date for submitting monthly contribution- 21st of following month
    • Minimum Basic Salary: 50% of total fixed salary
    • Employer Contribution Percentage per month
      1. Service period less than five years – 5.83% of Basic Salary
      2. Service period five years and above – 8.33% of Basic Salary
    • Employee contribution percentage per month – Not Applicable

    Monthly contribution calculation
    Few scenarios for better understanding

     

    FAQ

    1. What is DEWS?
      It is an Employee Workplace Savings plan that requires employers to make compulsory monthly contributions to a savings plan.
    2. Is the plan voluntary?
      All DIFC employers will be obliged to enroll as a participating employer with the DEWS Plan or another Qualifying Plan (as defined in the Employment Law). A Qualifying Plan will require a Certificate of Compliance from the DIFC Authority and shall have to adhere to the Qualifying Plan requirements that will be set out in the Regulations to the Employment Law.
    3. What is the commencement date of the plan?
      February 1, 2020.
    4. What is the deadline for employers to enrol into a qualifying scheme?
      March 31, 2020
    5. Is the plan applicable to UAE nationals?
      No, it is only for expatriate workers
    6. How are mandatory contributions calculated?
      Employees with service period less than five years is 5.83% of basic salary and 8.33% of basic salary for service period more than five years.
    7. Do partners in a business have to be enrolled into DEWS?
      Only if their remuneration structure includes basic salary.
    8. Can an employee make voluntary contributions into DEWS?
      Yes; employees have the option to pay a certain amount of their salary as voluntary contribution into the DEWS plan.
    9. How can employers submit data to the DEWS platform on a monthly basis?
      A file that carries information about all the employees enrolling into the DEWS plan, along with details of their contributions, will have to be uploaded onto the portal in a standard template.
    10. What currency will be used for DEWS plan?
      US Dollars is the currency for DEWS; contributions can be made in USD or AED. A standard exchange rate of USD1: AED3.675 will be applicable if the amount is transferred in AED.
    11. Which bank account will used for DEWS contributions?
      The account of the Master Trustee, Equiom, will be used for DEWS contribution. Once employers enrol into DEWS, they will be given details regarding the bank account and a dedicated Virtual Bank Account Number (VBAN). The account is with Standard Chartered Bank UAE.
    12. In the case of employees on probation, should employers make contributions?
      An employer need not have to pay the contribution amount if the employee is on probation. Upon successful completion of the probation period, the employer must make the back payment from the start date. Cases wherein the probation was not successful, there won’t be any due payment. If the payment was done initially, but the probation turned out to be an unsuccessful one, the employee will still receive the amount from DEWS.
    13. Do employers need to pay any fees as processing charges?
      Employers won’t be charged any fee as processing charge. However, an all-inclusive charge that ranges between 1.26% and 1.33% based on the selected fund, will be applicable.
      The members are liable to pay the charge, which will be built into the unit price of the funds into which the contributions are made. There aren’t any extra charges such as entry or exit fees, switch charges or fixed annual fee.
    14. How the contribution is calculated when there is unpaid leave deduction in a month?
      DEWS contribution amount must be calculated based on the monthly basic salary that was paid to the employee for the respective month after deducting unpaid leave.
    15. How the contribution is calculated when there is half paid sick leave or unpaid sick leave deduction in a month?
      DEWS contribution amount must be calculated based on the monthly basic salary that was paid to the employee for the respective month after deducting half paid sick leave or unpaid sick leave. No contribution is required for unpaid portion of sick leave.

     
    DIFC DEWS plan replaces the existing UAE end-of-service gratuity benefits which is applicable in all over the UAE except DIFC. For a comprehensive understanding of UAE gratuity accrual and settlement, please refer to our article on UAE gratuity policy and settlement.

    Disclaimer:

    Whilst every effort has been made to ensure the accuracy of this information, HLB HAMT will not accept any liability arising out of errors or omissions. Please note that this blog is not all inclusive. Our guidance is designed only to give general information on the issues/topics covered. It is subjected to change and not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

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    The Role of Accountants in Detecting Fraud in UAE

    Sumesh Krishna, Partner

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      Accounting is not just about numbers; it’s much more than that. The field of accounting has undergone a significant transfiguration in the last decade, which is mainly due to the technology involved in it.

      Accounting service plays a significant role in decision-making as accountants come up with novel strategies for the enhancement of the organisation. To add to all these, the profession also contributes immensely in detecting and reducing corruption. Accountancy is about transparency, trust, integrity and accountability, and these characteristics help in identifying and preventing fraud.

      Fraud can happen anywhere, in any sector and different layers of designation disregarding the director or stores attendant.  An accountant ensures that the systems of control are in the right place, which in turn lessens the chances of corruption. They help identify fraud in procurement, distribution, accounts and finance and inventory management. Here are some of how accountants help an enterprise in detecting and preventing corruption;

      • Identify & investigate about duplicate payments
      • Detect fraud through financial statements
      • Validate the transparency of the transactions
      • Spotting gaps in process flows
      • Analyse irregularities in real-time

      In an era where financial crimes are on the rise, there is no other person than an accountant who can defend their company from such mishaps and support the stakeholders. Their expertise in the finance and accounting bestow them the prowess to detect fraud at the initial stage itself. Incidents of accountants detecting fraud and saving their organisation from loss of money and reputation are many.

      The chances of corruption in workforce lessen with the increasing number of accountants. Accountants can help organisations deter fraud and perform better.

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      Dubai Future District

      Jay Krishnan, Partner

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      HLB HAMT - Accounting Firm in UAE
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      Mobile:- +971 55 160 1291
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        2019 was a significant year for UAE, with numerous new policies, amendments and developments. 2020 is not going to be any different; it is going to be the beginning of a huge developmental leap. The year has just begun, and the government of the country has announced the launch of a new space dedicated to the development of the future economy. Titled ‘Dubai Future District’, the space will be Middle East’s biggest future economy-focused district.

        Dubai Future District will connect DIFC, Emirates Towers & Dubai World Trade Centre, and will house an economy research centre, incubators & accelerators and an innovative space for future economy pioneers.

        The new district will boost the business sector of the country and will provide various financing and legislative facilities and options for businesses.

        According to His Highness Sheikh Mohammed bin Rashid Al Maktoum, “Dubai will become the world’s capital of the new economy. The new economy will be a major focus on the 50 goals agenda that we seek to achieve in the next five years. The Dubai Council will focus on opening new economic sectors for the emirate and transform its existing sectors. We aim for a major shift in Dubai’s foreign trade through stimulation and revitalisation with continuous development of all its logistical, legislative and service tools, in addition to building new international partnerships.”

        Ten initiatives that intend to support the economy of the future, have been announced. The first one is the Dubai Future Economy Fund, wherein an amount of AED 1 billion will be dedicated to future economy entrepreneurs in Dubai. Tech startups will need support in the initial stage of their business and this will fund will be beneficial for them to avail the facilities they need.

        An office for future economy companies will be established as part of the second initiative and the office will be responsible for issuing special five-year residency visas to future entrepreneurs, licenses for innovative projects and many more such initiatives.

        The third initiative makes it possible for future economic entrepreneurs to obtain legislative licenses, with which they can test their innovations in designated areas.

        Future economy pioneers can make use of available housing options at a lesser price, and this will be the fourth initiative. While the fifth initiative will offer a unified platform for entrepreneurs, experts and investors in the future economy.

        The sixth initiative promises a stock exchange for future economy companies, that will make it easier for them to obtain financing. A space for future economy companies’ incubators and accelerators will be developed as part of the seventh initiative. The space will be the largest incubator of its kind in the MENA region.

        A Future Economy Research Centre that will provide a platform for scientific research will be the eighth initiative and the ninth initiative is a programme that intends to consolidate the culture of entrepreneurship and inspire students to start economy companies.

        As a part of the tenth and last initiative, various global events and conferences will be hosted. This will provide future economy leaders the opportunity to explore growth prospects and present their projects before a vast audience.

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        Five-year multi-use visa for Tourists in UAE

        Lavin Nalinababu, Business Consultancy

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          UAE has welcomed 2020 with a great news for tourists; a five-year multi-use visa. The visa will be implemented in the upcoming four months and people of all nationalities can avail it.

          UAE is one of the most preferred tourist destinations across the globe and the recent move further enhances its status. This will also boost the tourist and real estate economy of the country, as there will a substantial increase in tourist spending as a result of longer stays.

          Currently in UAE, a 90 days multi entry visa is provided to tourists. With the new initiative, tourists can enter the country multiple times in five years, and this saves them the cost of applying for each entry. This comes as a boon for people who visits UAE regularly as it will lessen the procedures and cost associated with applying for visa.

          More than 21 million tourists make it to UAE every year and around 25 million visitors are expected to be a part of Expo 2020, that is set to begin in October.

          The UAE government had earlier introduced a series of initiatives aimed towards ease of doing business in the country, which was highly appreciated by the business community. Now, with the alteration in the tourist visa policy, the government has made it easier for tourists as well.

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          The Scope of AI in Auditing and Accounting in UAE

          Jay Krishnan, Partner

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          HLB HAMT - Accounting Firm in UAE
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            Audit firms in the UAE have recently witnessed a transformation which has changed traditional audit styles, and this is mainly due to the emerging technologies such as artificial intelligence.

            The impact of this shift is unimaginable, and it is quickly evolving the industry and profession. In terms of scope, the traditional concepts of bookkeeping, auditing and consulting are undergoing massive changes. Consultants can now spend more time on the quality of audits rather than on lengthy clerical procedures. The opportunities arising from AI are evident in the examples of its implementation.

            A leading US audit firm is using AI to substitute their traditional physical inventory count with robots. Within ten minutes, a huge warehouse inventory can be verified with complete accuracy, removing the need for time consuming and sometimes imprecise human processes. Some firms are using AI for invoice processing. Manual posting has become obsolete: clients’ invoices can just be scanned into the system within minutes, and again, with absolute precision. With AI, the job of three accountants can be done by one. Consulting has also seen benefits from adopting AI technology.

            However, AI can also become a threat if not implemented correctly. In the absence of cybersecurity audits, cybercrime can be encouraged, and data can become easily manipulated. A cybersecurity audit is necessary before implementing AI to avoid these risks.

            Companies should implement AI while also focusing on having the right resources to successfully support this process.

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