Is the 11% contribution for insured individuals deducted from their gross or basic salary?

Hello,

According to the new UAE law, the monthly contributions for insured individuals are set at 26% of the deductible salary. Newly hired employees bear 11% of this amount, while the employer pays 15%.

The 11% should be deducted from the employee's basic salary, not the gross salary.

Dear Client,

Thanks for your question! I hope you are doing well. I will assist you in this matter.

The new UAE pension law (Federal Decree-Law No. 57 of 2023) applies to newly hired Emiratis from October 31, 2023.

The total monthly pension contribution is 26% of the employee's salary, with employees contributing 11% and employers 15%.

The 11% employee contribution should be deducted from the gross salary, which includes basic salary and incentive payments.

For private sector employees, there's a maximum contribution account salary of AED 70,000 and a minimum of AED 3,000. Always calculate the 11% deduction based on the full salary, up to the maximum cap if applicable.

Thanks & Regards,

ABDUL WAHIED

The monthly contribution to retirement is 26% of the pensionable salary, distributed as follows:

- 11% paid by the employee (insured).

- 15% paid by the employer (private sector). (In some cases, the government bears 2.5% of the employer's contribution.)

Retirement Salary: Contributions are calculated based on the basic salary only. Basic Salary is the monthly salary specified in the employment contract, excluding allowances such as housing, transportation, and other benefits.

Contributions are not deducted from the total salary, which includes allowances.

If the employee's salary is:

- Total salary: 20,000 dirhams

- Basic salary: 15,000 dirhams

- Allowances: 5,000 dirhams

Then, Monthly employee contribution (11%): 15,000 x 11% = 1,650 dirhams

Employer contribution (15%): 15,000 x 15% = 2,250 dirhams

The new law for newly hired Emiratis is related to the mandatory insurance scheme for employees in the private sector.

Under this law, the monthly contributions for insured individuals have been set at 26% of their deductible salary.

This means that the total amount of the employee's salary that is subject to insurance contributions is determined by deducting a certain amount (deductible salary) from their total salary.

For newly insured employees, they are required to bear 11% of the total insurance contributions, while the employer is responsible for paying the remaining 15%.

This means that the employee's share of the contributions will be deducted from their salary, while the employer's share will be paid by the company.

Good Morning,

Pension contributions for Emirati employees are calculated based on the basic salary. Some specific allowances can be counted as well if part of the "contribution account salary."

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