United Arab Emirates
Updates on the
Social Security
Scheme for
Emirates
employees
December 2023
1.New Scheme rates and applicable salary details;
In accordance with the 2023 Pensions Law, contributions should be made on a
monthly basis to the GPSSA and calculated with regard to the employee’s full
salary inclusive of any incentive payments (for example, bonuses or
commission). The respective contributions are as follows:
a) Employer: 15% OR 12.5% - Increase from 12.5% where the insured
applicable salary is AED 20,000 or more.
b) Employee: 11% - Increase from 7.5%
c) Government: 2.5% - New addition in cases where the monthly
applicable salary is less than AED 20,000, this is borne by the
government as a form of support and motivation for employers to hire
Emiratis.
The total new contribution therefore is 26% where the monthly salary is AED
20,000 or more and 23.5% in case the salary is lower, the 2.5% difference will
be borne by the Government.
2. Pensionable Cap
The new law has increased the maximum salary threshold to which the pension
rates can be applied to for the below sectors;
a) Public (Government) sector employees, salary cap has increased to
AED 100,000 (prev. AED 50,000)
b) Private Sector: salary cap has increased to AED 70,000 (prev. AED
50,000)
On 2 October 2023 (the “Effective Date”), UAE Federal Decree Law No. 57 of
2023 (the “2023 Pensions Law”) was published and came into effect. The 2023
Pensions Law is the most significant change to the pensions landscape since
the UAE Federal Law No. 7 of 1999 as amended (the “1999 Pensions Law”) was
first published.
The decree has announced reformations to the contribution scheme with 6 key
provisions:
1. Increase in monthly contribution rates ( New scheme);
2. Increase in pensionable salary cap;
3. Definition of service periods;
4. Retirement guidelines and exceptions
5. Accuracy of data submitted to authorities
6. Calculations and Payments of contributions amounts due to GPSSA.
The new law aims to
improve the policies
of the GPSSA and its
work system, to
ensure the efficiency
and sustainability of
the financial
resources of
pensions, and to
honor the Authority’s
future commitments.
In brief
In detail
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~ GPSSA Publication
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Social Security
Rates
Employee
Contribution – 11%
Employer
Contribution - 15%
OR 12.50%
Government
Support - 2.5%
Basis of Social
Security
Contributions
Average of last six
years (or all)
salaries applicable
for social security
payments.
Salary and
Contribution
Threshold
Minimum: AED
3,000 per month
Maximum: AED
70,000 per month
in private sector
Maximum: AED
100,000 per month
in public sector
Start and end of
contributions
Full month in the
joining month. No
contributions due
in the termination /
resignation month.
3.Elaboration on eligible service periods
In accordance with the provisions of the new Decree Law, the insured employee
is authorized to consolidate previous periods of service, for any employer to
whom this Decree Law is applied, to their total pension. The insured can also
consolidate the period of service prior to acquiring the nationality of the UAE,
and the periods of prior service in any entity approved by the UAE Cabinet at
the suggestion of the Authority's Board of Directors.
The 2023 Pensions Law provides that all contributions (employer, employee
and government) should continue to be made during periods of leave, even
where that leave period is unpaid (for example, where an individual takes more
than 45 calendar days of sick leave, any further sick leave is taken on an unpaid
basis). Contributions should also continue to be made during periods of
secondment and study leave. However, where an individual is suspended
without pay, has agreed a period of unpaid leave with their employer, or is
otherwise not entitled to salary, contributions can be withheld. This provision
also applies to those individuals governed by the 1999 Pensions Law.
Notwithstanding this, for those individuals subject to the 2023 Pensions Law,
where an individual takes a period of unpaid leave for either study leave or
childcare (female employees only), they may request that the contributions
continue throughout the period of leave, provided that the individual pays all
contributions due during that period.
4.Retirement guidelines and exceptions
The minimum age for the insured person to be entitled for a retirement
pension is 55 years, with a minimum subscription period of 30 years. In
support of the family’s vital role in society, the new Law grants working
mothers’ more flexibility and benefits. It stipulates that the working mother
can apply for retirement pension entitlement in younger age and shorter
subscription period. She is also authorized to maintain her optional
subscription if she has chosen to take leave to care for her children, in
accordance with the terms and conditions. The new Law authorizes the insurer
to benefit from optional subscription in case they requested an unpaid leave to
pursue postgraduate study. The new law allows the insured to request the
purchase of a nominal period of adjoining to be added to their actual service
periods provided that they have worked actual period of service of at least (25)
years when submitting the purchase request, or a period of (15) years if they
have reached the age of (60) years. The period required to be purchased should
not exceed (5) years for both men and women.
5.Accuracy of data submitted to authorities
The employer is committed to accuracy in all the statements, data or
documents submitted, including details of the insured’s salaries and all the
necessary documents for the purpose of calculating the arranged contributions
in accordance with the provisions of this legal decree, since this will affect
balance statements created at a later stage by the General Pension and Social
Security Authority.
6. Calculations and Payments of contributions amounts due to
GPSSA.
To unify general rules between government and private sectors, the pension
calculation mechanism is determined based on the average contribution
account salary of the last six (6) years of subscription period (or, if less, the
entire contribution period) for employees of both government sector and
private sector
The employer in the private sector is mandated to pay the monthly
contribution salary on behalf of the entity and the insured, in the following
ways:
a) For existing employees, continuing to pay contributions for the months
of October, November and December 2023 at the current rates (20%),
provided that the difference is paid according to the new rates on
January 1,2024.
b) For new employees effective 01 October 2023, pay monthly
contributions at a rate of (26% OR 23.5%) in accordance to the new
Law No. (57) of 2023 in full, starting from the date the insured joins
work in October 2023, regardless of the date of joining,
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The employer will not
bear any additional
amounts as a result of a
delay in paying the
contribution
differences for the
three months until
December 31, 2023.
Keynote
Our PwC Payroll team is here to help:
1. Maintain records of social security contributions due to the employees at month end and reconcile
with any payments made towards the fund.
2. Calculate retroactive dues based on the new law and its provisions for all Emirati employees and the
impact they would have on payroll.
3. Prepare UAEFTS payment files as per banking standards to ensure the new contributions are being
made appropriately and are reflected accurately by GPSSA.
4. Enable correct entity and employee registrations and timely payments in line with the deadlines
applicable by the Authority.
How PwC can help:
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Let’s talk
For a discussion on the new Executive Regulation and if it might affect your business, please contact:
Mohammed Yaghmour
Partner, Middle East Tax & Legal Services
Leader
+971 (0) 56 406 3384
Junaid Hanif
Partner, Middle East TLS Managed Services
Leader
+971 (0) 50 744 3136
6
Farida Faddoul
Manager, Middle East TLS Managed Services
+971 (0) 56 385 5405
Jochem Rossel
Partner, Middle East Tax M&A and
International Tax
+971 (0) 50 225 6909
Tax and Legal Services PwC Middle East
If you wish to discuss the above, please feel free to reach out to Farida Faddoul directly.
Bhavesh Pandya
Senior Manager, Middle East TLS Managed
Services
+971 (0) 56 683 7329
The updates on the 2023 Pensions law in the UAE aims to promote the hiring of Emirati
nationals and to set detailed guidelines on how companies are to implement the new
contribution rates in order to comply with legal regulations.
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The takeaway
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Please see www.pwc.com/structure for further details. This publication has been prepared for general guidance on matters of interest only, and does
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