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Pension, Social Security Law No. 7 explained

Legal View By Samir El Azrak
Filed on August 5, 2007

Samir El Azrak represents Al Moutawaa Wa Al Azrak, Advocates and Legal Consultants. Readers may e-mail their questions to ktedit@emirates.net.ae or send it to Khaleej Times Dubai P.O. Box 11243.

Q: We have a UAE national who has been working with us much before 1999, that is, before the implementation of the Federal Law No.7 for Pension and Social Security. We are accumulating his gratuity as per the UAE Labour Law at the rate of 21 days’ basic salary for the first five years of service, and 30 days’ basic salary for service beyond five years. With effect from the year 1999, we are also contributing 12.5 per cent of his monthly salary towards the UAE Pension and Social Security Fund. Are we required to bear both gratuity and pension for a UAE national employee?

1. Regarding the accrued gratuity up to the year 1999:

a) What about gratuity accrued in the books from the employee’s date of joining to the year 1999?

b) Should the accrued gratuity up to the year 1999 be transferred to the Pension Fund even though the Federal Law on Pension and Social Security came into force in 1999?

c) Should the accrued gratuity up to the year 1999 be retained and paid to the employee when he leaves the employment?

d) Can the accrued gratuity from the date of joining up to the year 1999 be transferred to the Pension Fund at the employee’s request even though the employee is still in our employment?

2. Concerning accrued gratuity from the year 1999 onward:

a) What about the gratuity accrued from the year 1999 till now. Is this still required to be accrued in addition to the pension contribution of 12.5 per cent per month?

b) Can we reverse the accrued gratuity from the year 1999 till now and stop accruing for gratuity since pension contribution is also being made?

c) Do we also have to transfer the accrued gratuity from the year 1999 till now to the Pension Fund?

Answer: As per the Pension and Social Security Law No. 7 of the year 1999, applicable only to UAE locals working in public and private sectors, please refer to the following:

The Government of the United Arab Emirates is working hard towards providing pension and social security laws that offer an insurance protected umbrella to the workforce of UAE locals in the state. Therefore, the Public Corporation of Pension and Social Security has been incorporated as per the abovementioned law in order to provide social security system for protection for UAE citizens in all fields of work.

The above mentioned law is based on the following principles:

1. Providing comprehensive pension and social security umbrella for all working UAE citizens.

2. Encouraging UAE citizens to work for maximum working periods.

3. Amending pension salary to include basic salary and allowances.

The abovementioned law has supremacy over any other law. Therefore, it becomes the only applicable law in relation to the rights of working UAE citizens. In this capacity, the Labour Law No. 8 is inapplicable to UAE citizens at the end of their service. As such UAE citizens are entitled to a pension salary from the Public Corporation of Pension and Social Security as per the rules and regulations applied therein.

We would like to draw your attention to the fact that a monthly allocation is kept apart from the monthly salary of any worker and the same shall be dedicated to the payment of the pension as per the law, along with another portion paid by the state.

In view of that, the UAE citizen who worked in your company before the issuance of the new law mentioned herein, the Law No. 7 of 1999 is applicable to him. As for the period before the issuance of such law, it shall be added as per the Pension Law and in this capacity, he is not entitled to end of service gratuity as in the Labour Law (which is not applicable to UAE citizens). — Compiled by Ahmed Shaaban


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