Employer Action Code: Monitor
The Dubai International Financial Centre (DIFC) has released draft amendments to the employment law and regulations pertaining to its Employee Workplace Savings (DEWS) plan, which was launched in February 2020 (see Global News Brief: New mandatory savings plan expected to launch February 1, 2020). Under the DEWS plan, DIFC employers must provide funded defined contribution (DC) benefits to their foreign employees, through either the default DEWS master trust arrangement or a Qualifying Alternative Scheme (QAS), with the latter subject to DIFC Authority (DIFCA) approval. Among other changes, the draft amendments would significantly restrict the types of arrangements permitted as a QAS. Notably, the background accompanying the draft amendments indicates that plans are being considered to expand DEWS to parts of the rest of the Emirate of Dubai, starting with other free-trade zones there.
The draft amendments would require that a QAS be established as a money purchase (or DC) plan in the DIFC with both its trustee/operator and administrator being established in the DIFC and regulated by the Dubai Financial Services Authority. Exemptions by the DIFCA to these new requirements would be on a specific employer/employee basis, in either of the following cases:
- The employer is under a clear statutory duty in another country to make pension, retirement, saving, gratuity or any substantially similar contributions into a plan in respect of the employee(s) concerned.
- The employer is making payments into a “bona fide group scheme/plan” with the prior written consent of the employee(s) concerned and where the value of such payments exceeds the mandatory core benefits under the DEWS plan. Bona fide group plans do not include arrangements set up only for a DIFC employer or its subsidiaries with the sole purpose to be directed into an international savings plan domiciled elsewhere (i.e., it must have been put in place for the whole employer group and be available to its employees in multiple jurisdictions). Any QAS that has been issued an exemption in respect of specific employees may not be marketed to other employers in the DIFC.
Employers considering the introduction of a QAS should be mindful of the proposed changes. They would significantly restrict, though not necessarily preclude, the use of non-DIFC statutory or employer-provided plans as a QAS for foreign employees working in the DIFC. Employers that already had put in place a QAS that does not meet the new requirements would have 12 months from enactment to come into compliance. Employers that have existing international pensions or savings plans, or that are considering implementing such a plan across multiple countries, may wish to consider whether this vehicle should be used for DIFC employees as an alternative to DEWS. Employers outside of the DIFC should also monitor developments closely in the event this is rolled out to other Dubai free zones in the future. The DIFCA intends to publish the final changes, and their effective date, after reviewing any comments it received on the proposed amendments (the consultation period ended on March 28, 2021).