End of Service Gratuities in the DIFC – Are you change ready? has been saved
End of Service Gratuities in the DIFC – Are you change ready?
We are pleased to welcome you to Deloitte’s dedicated webpages on End of Service Gratuities and the change to Funded Workplace Savings, which was introduced into law in the Dubai International Financial Centre with effect from 1 February 2020.
The objective of these pages is to support all our clients who are directly or indirectly impacted by the changes, providing a central repository for relevant documents such as the DIFC’s Regulations and Law as well as access to Deloitte’s latest insights, key updates and our thoughts on how to embed the new regime, which represents one of the most significant changes in employee reward in this part of the Middle East.
We will continually update these dedicated webpages with latest information provided by the DIFC and our own insights on what these mean for employers in the region. To read our most recent updates, please click here. Alternatively please do speak with any of the specialist contacts listed here.
What has changed?
End of Service Gratuity payments in the Dubai International Financial Centre (the “DIFC”) have been replaced with Funded Workplace Savings from 1 February 2020. This represents a significant shift in the approach given that historically, ESG payments have had no funding requirements, in most cases existing as unfunded ‘on-balance sheet,’ defined benefit-style liabilities for employers.
All employers and employees operating in the DIFC will be directly impacted by these rules, and employers have been required to participate in a ‘qualifying’ workplace savings plan from 1 February 2020 (although employers had until 30 April 2020 to make contributions into their chosen plan, backdated to 1 February).
The changes also have broader implications in terms of setting a benchmark for reward best practice and talent attraction in the Middle East.
So what can you find on these pages?
For employers operating in the DIFC, where the impact and operational challenges of becoming and maintaining compliance with the new rules is likely to be significant, we hope that you will find it helpful to stay in touch with our Roadmap. The roadmap sets out some key milestone dates for employers as they continue to embed the new rules into practice and consider their options for 2021.
These pages will also house key publications and recordings of webinars that we broadcast. We hope to provide you with a “one stop” source of knowledge, information and, importantly, insights on the transition from End of Service Gratuities to Funded Workplace Savings.
We will also of course provide our perspective on any updates from the DIFC as they arise.
How can Deloitte help?
We can help you to develop, embed and evolve your approach to the introduction of Funded Workplace Savings in the DIFC. Deloitte has, for a long time, supported organisations to design, build and implement the most appropriate solution for employee savings and pension arrangements across the globe. Imparting our breadth of experience across tax, regulation, governance and market practice, we have assisted organisations of varying sizes across different sectors to deal with the challenges associated with employee reward plans.
Chris and his team at Deloitte assisted us with setting up an approved qualifying alternative scheme (QAS) in the DIFC. Thanks to the team’s extensive knowledge of the market, timely insights and their review of all of our plan documentation plus the application submission, we were able to navigate the complexity and successfully obtain approval for our plan.
Combining the strength of our global practice, with the insight and focus of our Middle East offices, Deloitte has built a reputation for bringing the right support to our clients in dealing with the challenges that the Funded Workplace Savings requirements present for employers, particularly in the context of their broader reward strategy and long term growth ambitions.
This support can be provided in a number of different ways, including:
- Strategy – evaluating current approach to Funded Workplace Savings based on your employee demographic in both the DIFC and the wider Middle East region.
- Plan design – helping you to design, build and implement the right solution for your employees. This can involve helping you to structure your own plan or could be support with vendor selection to identify the right suppliers for your plan.
- Communication – helping employees understand the Funded Workplace Savings requirements, how this differs from historic End of Service Gratuities, how your plan will work and what employees need to do in moving into this “defined contribution” style long terms savings environment.
- Shari’a compliant funds – Deloitte’s dedicated Middle East team can assist in the Shari’a compliant certification of fund options that need to be provided under a plan.
- Plan certification – submitting and seeking annual approval for any qualifying plan in accordance with the criteria prescribed by the DIFC.
- Historic liabilities – what, if anything, will employers do to fund historic End of Service Gratuity liabilities? How do you value the cost today vs tomorrow and what are the pros and cons of funding these liabilities?
- Governance – how will employers manage the ongoing operation of the plan? What framework is necessary to ensure the efficient operation of the plan whilst maintaining a focus on compliance and a positive employee experience.
Above all, Deloitte are able to assist you with the various stages of responding to these changes – helping you manage projects in line with key deadlines and necessary approvals.