New Pension Law in the UAE and Emiratisation

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The new Federal Decree Law No. 57 of 2023 on Pension and Social Security is applicable to Emirati employees who join the labour market for the first time on or after 31 October 2023. Employees registered before 31 October 2023 will continue to be covered by the provisions of Federal Law No. 7 of 1999.

Public and private entities across the United Arab Emirates (UAE) must register their Emirati employees with the General Pension and Social Security Authority (GPSSA) from the first month of their employment. In this write-up, we have given an overview of the new pension law, its applicability, rates as well as the connection with UAE’s Emiratisation policy.

Applicability

The new pension law has a broad scope, covering both government and private sectors. In the private sector, the law encompasses employers in all emirates except Abu Dhabi. To be eligible for employer contributions, an employee must be a UAE national, aged between 18 and 60, and medically fit according to GPSSA-approved reports. Emirati nationals become entitled to a pension upon reaching 60 years and completing a 15- year insured service period.

Maximum pensionable salary

The contribution structure for the new pension law varies for government and private sector employees. Government employees contribute based on their employee account salary, with a maximum limit set at AED 100,000 per month. In contrast, private sector employees make contributions based on their employee account salary, provided it falls within the range of AED 3,000 to AED 70,000 per month.

Contribution Rates

The new contribution rate, effective from October 2023, is set at 26% of the total salary, with 11% allocated to the employee's share and 15% to the employer's share in both government and private sectors. For private sector employers with Emirati employees earning less than AED 20,000 per month, the government bears 2.5% on behalf of the employer, resulting in a reduced employer contribution rate at 12.5%.

Administration

Two approved pension funds/authorities administer these contributions: the General Pension and Social Security Authority (GPSSA) for Dubai and wider GCC National employees, and the Abu Dhabi Pension Fund (ADPF) for Abu Dhabi-based employees. 

Emiratisation

The UAE has implemented stringent measures to enforce Emiratisation targets, a strategic initiative aimed at increasing the participation of Emirati nationals in the workforce. Companies are required to register their Emirati workforce with one of the approved pension funds/authorities in the country before 31st December 2023. For companies failing to meet the annual targets by the end of 2023, notable penalties include an AED 84,000 payment for each UAE national not appointed by December 31, 2023. Additionally, non-compliant companies will face a suspension of new work permits for non-UAE nationals from January 2024 and may be downgraded and reclassified to Ministry of Human Resources and Emiratisation (MoHRE) Category 3.

Conclusion

The UAE’s pension law is in line with the international standards. There is a larger responsibility on the companies to register their employees (including targeted Emirati employees) and adhere to compliance under the pension law. It is pertinent to note that while there are separate pension laws for the UAE and Abu Dhabi, a GCC citizen can working in another GCC country can continue to be governed by the pension laws of his/her own country in accordance with the Insurance Protection Extension Program. 

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