What are the Components of the UAE’s Social Security System?

The UAE’s social security system encompasses several key elements aimed at protecting employees’ rights and ensuring financial security. Employers and employees are both responsible for certain contributions, as prescribed by law.

Here are the essential components of the UAE’s social security and employee benefit system:

1. Pension Contributions (for UAE Nationals only)
2. End-of-Service Gratuity (for expatriates and nationals)
3. Medical Insurance (mandatory in certain Emirates)
4. Occupational Injury Compensation
5. Sick Leave Entitlements
6. Maternity, Parental, and Other Leave Entitlements

These components ensure employees have access to financial support during retirement, health coverage, and compensation in the event of illness, injury, or leave entitlements.

What Are the Contribution Requirements for Each Social Benefit?

1. Pension Contributions (UAE Nationals Only)

Pension contributions are a shared responsibility between employers, employees, and the UAE government for UAE nationals only.

• Employer Contribution: 12.5% of the salary (increased to 15% in some cases, such as federal entities and local government bodies).
• Employee Contribution: 5% of the salary.
• Government Contribution: 2.5% (for employers in the private sector employing UAE nationals with salaries below AED 20,000).

🔄 How It Works
Employer contributions are paid to the General Pension and Social Security Authority (GPSSA) on behalf of the employee. The government may support employers’ contributions for certain employees under the salary threshold. UAE nationals are entitled to a pension after completing at least 15 years of contributions.

2. End-of-Service Gratuity (All Employees)

The end-of-service gratuity applies to both UAE nationals and expatriates. It is calculated based on the basic wage and years of service.

• Employer Contribution: The gratuity is calculated and paid in a lump sum when employment ends.

🔄 How It Works
Employees are entitled to 21 days’ basic salary for each of the first five years of service and 30 days’ basic salary for each subsequent year. The total gratuity must not exceed the salary of two years. If an employee’s service ends before completing one year, they are not entitled to gratuity.

3. Medical Insurance (Mandatory in Certain Emirates)

Medical insurance is mandatory in certain Emirates (e.g., Abu Dhabi and Dubai) for all employees, regardless of nationality.

• Employer Contribution: 100% of the cost of medical insurance for employees.

🔄 How It Works
Employers are responsible for ensuring that employees have access to medical insurance that covers healthcare costs, including hospital care, prescription medications, and general healthcare needs.

4. Occupational Injury Compensation

Employers must provide compensation if an employee is injured during the course of employment.

• Employer Contribution: 100% employer-funded as part of employment obligations.

🔄 How It Works
If an employee suffers a work-related injury, the employer must cover the costs of medical treatment and provide financial compensation as required under Federal Decree-Law No. (33) of 2021. If the injury results in total or partial disability, the employer must compensate the employee accordingly.

5. Sick Leave Entitlements

Employees are entitled to sick leave benefits, with partial salary payments.

• Employer Obligation: Provide up to 90 days of paid sick leave.

🔄 How It Works
Under UAE labor law, employees are entitled to 90 days of sick leave per year. The first 15 days are fully paid, the next 30 days are paid at 50%, and any remaining days are unpaid. Sick leave during the probation period is unpaid unless otherwise agreed.

6. Maternity, Parental, and Other Leave Entitlements

Employees are entitled to maternity, parental, and other leave benefits.

• Employer Obligation: Provide leave as per UAE labor law requirements.

🔄 How It Works

• Maternity Leave: Female employees are entitled to 60 days of leave, with 45 days at full pay and 15 days at half pay.
• Parental Leave: Both male and female employees are entitled to 5 days of paid parental leave.
• Other Leave: Employees are entitled to bereavement leave, study leave, and unpaid leave as stipulated in Federal Decree-Law No. (33) of 2021.
  
  

What is the Contribution Base and How is It Calculated?

For pensions, end-of-service gratuity, and other benefits, the contribution base is typically the employee’s basic salary. The UAE’s labor law mandates that the contribution base for pension calculations must include the following:

• Pension Calculation Base: The basic salary plus certain allowances (like housing and social allowances) as defined in Federal Law by Decree No. (57) of 2023.
• Gratuity Calculation Base: The basic salary only (excluding allowances).
  
  

Example of Contribution Calculations

Summary

Compliance with UAE’s mandatory social benefits system is essential for businesses operating in the country. Employers must understand the key obligations related to pension contributions, end-of-service gratuity, medical insurance, and leave entitlements.

Key Takeaways:

• Contribution rates vary by the nature of the benefit and the nationality of the employee.
• Employers must ensure timely payments to avoid penalties and ensure compliance.
• Employers should stay updated with UAE labor and pension laws to remain compliant and manage employment costs.

How Globaine PEO Can Help

Globaine PEO provides comprehensive EOR (Employer of Record) services in the UAE, helping businesses meet all mandatory social benefit requirements. Here’s how Globaine can support your business:

• HR Compliance: Ensure employee benefits are compliant with UAE labor laws, from pensions to end-of-service gratuity.
• Payroll Management: We manage payroll processing, social benefit deductions, and timely payments.
• Employee Benefits Management: Administer employee benefits, including medical insurance and leave entitlements.
• Local Expertise: Our experts ensure your business stays compliant with UAE labor laws and local regulations.