Understanding New GPSSA Contribution Rules For Emirati Employees And Employers

The General Pension and Social Security Authority (GPSSA) has recently highlighted key details regarding the contribution account salary, an essential component for calculating the pension or end-of-service benefits for insured Emiratis. This clarification comes as part of the "Know Your Law" awareness campaign, aiming to educate Emirati employees and employers about their obligations and benefits under Federal Law No.57 of 2023 concerning pension and social security.

Under the new federal law, which became effective starting 31st October 2023, the total contribution to an insured Emirati's pension is set at 26 percent of the contribution account salary. Of this, insured Emiratis are responsible for contributing 11 percent, while employers contribute 15 percent. This system is designed to ensure that the longer an individual contributes, the greater their pension or end-of-service benefits will be.

In a move to support Emiratis working in the private sector, the government will contribute an additional 2.5 percent for employees whose contribution account salaries are below AED20,000. This initiative reflects the government's commitment to encouraging Emirati participation in the private sector by easing their financial burden.

Contribution Account Salary Defined

The contribution account salary for government sector employees encompasses basic salary, cost of living allowance, social allowance for children and the insured, and housing allowance, with a cap at AED100,000. For private sector employees, it is determined by their employment contract but must fall between AED3,000 and AED70,000. Those employed in regional, international, or foreign missions in the UAE have their contribution account salary based on their basic salary plus any work-related benefits, bonuses, or allowances.

Adjustments for Existing Employees

Employees who joined the workforce before 31st October 2023 fall under the provisions of Federal Law No.7 of 1999 and its amendments. For these individuals, a total contribution of 20 percent is required, with the insured contributing five percent and the remaining 15 percent shared between the government and private sector employers.

Special Provisions for Certain Sectors

The GPSSA's Board of Directors holds the authority to determine what elements are included when calculating the contribution account salary in instances where an employer's salary schedule deviates from standard provisions. This flexibility ensures that all employees are fairly assessed according to their actual earnings.

The introduction of Federal Law No.57 of 2023 marks a significant shift in how pension contributions are calculated and emphasizes the UAE government's dedication to enhancing social security benefits for its citizens. By adjusting contribution rates and defining clear guidelines for contribution account salaries across different sectors, the law aims to provide a more robust financial safety net for Emirati employees throughout their careers.

With inputs from WAM