As described in our previous article, the Dubai International Financial Centre (DIFC) is in the process of implementing the DIFC Employee Workplace Savings (DEWS) Plan, which will replace end of service gratuity (EOSG) – a lump sum payment payable to employees upon termination of employment.
The DEWS Plan Panel
In August of this year, the DIFC announced that the following internationally renowned service providers had been appointed to oversee the DEWS Plan (the Panel):
- Master Trustee: Equiom. Its function is to act as the independent legal owner of the contributions, while ensuring the beneficial interest lies with the employees.
- Plan Administrator: Zurich. It will provide support through a contact centre and a DIFC-based support team.
- Investment Adviser: Mercer.
Current status and timeline for implementation
In October of this year, the DIFC issued Consultation Paper No. 7 regarding proposed amendments to the recently amended Employment Law, DIFC Law No. 2 of 2019 and the proposed issue of new regulations in relation to the DEWS Plan. The deadline for comments on the proposals is 18 November 2019.
At the time of this alert's publication, the DIFC intends to issue the new legislation and regulations in time for a go-live date of 1 January 2020. In the event of any delays, it is expected that any extension will only be for a short period and the ultimate implementation will be backdated to 1 January 2020. Further announcements on implementation are expected during this month.
We also understand that Zurich will run town hall meetings this month and in December on the process for employers to arrange applications, which will be administered through an online portal.
Current plans regarding status of existing EOSG entitlement
Employees will continue to accrue EOSG until 31 December 2019, and this will only be paid out at the end of the employee/employer relationship. Calculation will be based on final salary and employers will have the option to transfer accrued EOSG into the DEWS Plan.
For employees who started their DIFC employment after 1 January 2019, they will not have accrued the minimum one year of service that is required for entitlement to EOSG. This has been acknowledged by the DIFC as a potential oversight and concerned parties are encouraged to communicate their concerns in replies to the consultation.
Employee control of the DEWS Plan
Once enrolled on the DEWS Plan, employees will have direct 24/7 access to the value of their funds. The default risk profiles of employee investments will be low/moderate but employees may elect to switch to one or more other funds. Switching is free and parties can elect to switch as often as they wish across the five different fund options that offer a low to high risk profile.
Action plan for employers
Given the short time frame before implementation, employers will need to consider the implications for their businesses, and there are fines for non-compliance. In particular, employers may wish to consider the following:
- whether to engage with appropriate members of the Panel;
- whether changes to employment contracts and employee handbooks are needed;
- whether they qualify for an alternative scheme and whether they wish to opt out of the DEWS Plan;
- whether to contribute accrued EOSG to the DEWS Plan;
- the implications for payroll systems; and
- preparing communications for employees who may wish to obtain investment/financial advice.
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