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End of Service Benefit Reform

End of Service Benefit Reform

Old May 9th 2019, 5:37 am
  #16  
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Default Re: End of Service Benefit Reform

Originally Posted by Gavtek
Does that mean you don't get dinged for 2/3's of your EOSB if you resign?
Or if you do... who keeps it.
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Old May 9th 2019, 6:05 am
  #17  
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Default Re: End of Service Benefit Reform

Originally Posted by Gavtek
Does that mean you don't get dinged for 2/3's of your EOSB if you resign?
The accrual % is based on years of service. Once the money goes into the account in your name and held by the trust, the company cannot touch it unless the rules were defined in the plan rules and agreed by you in your contract.
I think you’re referring to limited contracts where by resigning you are breaking your contract in which case there might be claw back as part of your contract wording. Those rules will probably be written into plan rules and followed by the trustee in which case you may forfeit it, if that is what you agreed to in your contract with your employer. I believe that will be normal practice anywhere in the world.
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Old May 9th 2019, 6:06 am
  #18  
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Default Re: End of Service Benefit Reform

Originally Posted by Millhouse


Or if you do... who keeps it.
The employer, as it is their money.
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Old May 9th 2019, 6:21 am
  #19  
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Default Re: End of Service Benefit Reform

Originally Posted by shake2000

The employer, as it is their money.
You live in Dubai, right?
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Old May 9th 2019, 6:41 am
  #20  
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Default Re: End of Service Benefit Reform

Originally Posted by Millhouse


You live in Dubai, right?
Last I checked, yes.
As weird as it sounds, this does change everything. The trust will HAVE to return the money to the employer and the administrator will have to follow trust guidelines.
Also, the change is for DIFC where the calculation is simplified and has 21 days per 5 years and 30 days post so no forfeiture will apply. Either you get it or not, irrespective of contract type.

Last edited by shake2000; May 9th 2019 at 6:53 am.
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Old May 9th 2019, 7:00 am
  #21  
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Default Re: End of Service Benefit Reform

Originally Posted by shake2000

The accrual % is based on years of service. Once the money goes into the account in your name and held by the trust, the company cannot touch it unless the rules were defined in the plan rules and agreed by you in your contract.
I think you’re referring to limited contracts where by resigning you are breaking your contract in which case there might be claw back as part of your contract wording. Those rules will probably be written into plan rules and followed by the trustee in which case you may forfeit it, if that is what you agreed to in your contract with your employer. I believe that will be normal practice anywhere in the world.
It also applies for unlimited contracts. In the Labour Law, you get 21 days salary for each year worked subject to minimum employment of 12 months. However, if you resign for any reason, you only get 7 days salary for each year worked.
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Old May 9th 2019, 7:09 am
  #22  
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Default Re: End of Service Benefit Reform

Originally Posted by Gavtek
It also applies for unlimited contracts. In the Labour Law, you get 21 days salary for each year worked subject to minimum employment of 12 months. However, if you resign for any reason, you only get 7 days salary for each year worked.
You are right for onshore, that applies.
DIFC and majority if not all free zone employment law has a simplified calculation.
less than 1 year, you get nothing
Between 1 and 5 years, 21 days
Over 5 years, 30 days
There are no conditional reductions in DIFC and free zone employment law.
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Old May 9th 2019, 7:17 am
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Default Re: End of Service Benefit Reform

I worked in both JAFZA and DMCC, in both cases the EOSB was reduced to 7 days if you resigned. For both, the UAE Labour Law was adhered to, if there was a separate Labour Law used by the Free Zones, it certainly wasn't widely used.
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Old May 9th 2019, 7:27 am
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Default Re: End of Service Benefit Reform

Originally Posted by Gavtek
I worked in both JAFZA and DMCC, in both cases the EOSB was reduced to 7 days if you resigned. For both, the UAE Labour Law was adhered to, if there was a separate Labour Law used by the Free Zones, it certainly wasn't widely used.
I am definitely no expert in labour law but you are right, every free zone has their own employment law and some follow federal but the calculation rules are very clear in DIFC law (page 22)

https://www.difc.ae/files/4414/5448/....4_of_2005.pdf

The proposed changes are for DIFC only which means if others were to adopt it they will need to update their employment law.
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Old May 16th 2019, 1:41 am
  #25  
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Default Re: End of Service Benefit Reform

Originally Posted by Millhouse


I also did wonder how the catch up process would work. And of course the initial funding. Going to be a shock for some companies who have to pay out the balance on EOS for all employees on day one.

In our accounts, we have to accrue for EOS every month in case we had to pay out at that time. Assume all companies do the same? So even if they have to pay out, it should have been accrued/saved up for!

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Old May 16th 2019, 1:48 am
  #26  
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Default Re: End of Service Benefit Reform

EOS across free zones is the same as UAE labour law except for DIFC.


If any employee on an employment contract with undetermined term (unlimited contract) resigns in the first five years of employment, the end-of-service gratuity entitlement is reduced to 1/3rd if the employee has between 1 and 3 years of service, and to 2/3rd if the employee has between 3 and 5 years of service.
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Old May 16th 2019, 2:04 am
  #27  
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Default Re: End of Service Benefit Reform

Originally Posted by Ditzy
In our accounts, we have to accrue for EOS every month in case we had to pay out at that time. Assume all companies do the same? So even if they have to pay out, it should have been accrued/saved up for!
Theres a big difference between an accrual on the balance sheet and a cash outlay.
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Old May 16th 2019, 8:43 am
  #28  
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Default Re: End of Service Benefit Reform

Originally Posted by Millhouse


Theres a big difference between an accrual on the balance sheet and a cash outlay.
Exactly. Main reason why the reforms are happening, everyone says they "accrue" but not many set the cash aside. Also the reason why the DIFC scheme will start 01-01-2020 as almost 50% of organizations don't put the money aside and won't be able to fund past liabilities if asked.

It's interesting how it adds up and how it projects to grow in the future. I use the calculator below which seems to be the only accurate calculator considering the government calculator did not work for me. Please feel free to delete if it breaks any forum rules.
https://www.aonhewitt.ae/home/for-em...ent-calculator
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