GCC Nationals Pension Contributions Across the GCC: What Employers Need to Know

Employing GCC nationals across the Gulf can create specific pension and social insurance obligations that are often misunderstood by employers. Across the GCC, there are approximately 24,500 GCC nationals employed in the private sector of another GCC member state. In the United Arab Emirates (UAE) alone, GCC nationals in the private sector has increased by over 3,000% since 2007. The most common mistake is assuming that the pension rules of the country of employment always apply, whereas in reality, GCC nationals are generally protected through a cross-border pension framework known as the GCC Insurance Protection Extension System.

This system allows a GCC national who works in another GCC member state to continue being insured under the pension scheme of their home country, even while they are employed in another GCC jurisdiction. For example, a Saudi national working in the UAE would generally remain subject to the Saudi pension scheme, while the UAE employer would still have registration and payment obligations through the UAE’s applicable pension process.

The purpose of the system is to ensure that GCC nationals do not lose pension protection simply because they are working in another GCC country. It also ensures that pension contributions continue to be paid to the relevant pension authority in the employee’s home country, subject to the rules, contribution rates and salary definitions of that home jurisdiction. The employer’s contribution is generally capped at the rate that would have applied in the country of employment, and where there is a shortfall between the employer contribution in the work country and the employee’s home-country pension requirement, the employee may be required to bear the difference or in some instances employers may settle the difference by paying that out as part of the employees’ End of Service Gratuity (EOSG), or, if the employee works in the DIFC, paying it as part of their DIFC Employee Workplace Savings Scheme (DEWS).

The GCC Pension Extension Framework

The Gulf Cooperation Council (GCC) Insurance Protection Extension System applies across the six GCC member states, which are the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain and Oman. Each country has separate pension laws , pension authorities, contribution rates and salary caps.

It is important to understand that each jurisdiction has its own set of regulations around pensionable salary. This means that whilst one country might consider just the basic salary as pensionable salary, another country might consider the basic salary plus specific allowances, or even the gross salary. Monthly contributions are made by both employee and employer into the pension and social security schemes.

UAE

For UAE national employees, the main federal pension authority is the General Pension and Social Security Authority (GPSSA), although Abu Dhabi and Sharjah have separate pension authorities for certain categories of employees. Federal Decree-Law No. 57 of 2023 introduced a new pension framework for UAE nationals joining employment for the first time from 31 October 2023 in the relevant federal, government and private sectors. Employees who were already contributing under Federal Law No. 7 of 1999 generally remain under the previous scheme. In the UAE, for UAE national employees working, under the current GPSSA 2023 law, the pensionable salary for the government sector, this is the basic monthly salary + cost-of-living allowance + children’s social allowance + UAE national social allowance + housing allowance, capped at AED 100,000. For the private sector, it is the wage agreed in the employment contract, capped at AED 70,000 and not less than AED 3,000.

For other GCC national employees working in the UAE, the UAE employer must register with GPSSA under the GCC Insurance Protection Extension System. The UAE employer’s share is generally not required to exceed the UAE employer contribution that would apply to UAE nationals. This means that where an Employer in the home-country might be required to pay more than 15% (which is the current employer cap in the UAE), they would only be required to pay a maximum 15%.

* these contribution rates are as of the date of this Article and shall remain subject to increase as per local regulations and requirements. Always refer to the most up-to date information

Saudi Arabia

Saudi pension and social insurance is administered by the General Organization for Social Insurance (GOSI). For Saudi nationals, the annuities branch has historically been funded at 18% of contributory wage, split equally between employer and employee. Saudi Arabia has also introduced a new Social Insurance Law with phased contribution increases for certain categories of new entrants. In Saudi Arabia, the pensionable salary is considered as the basic wage + housing allowance. Where housing is provided in kind, GOSI treats its contributory value as equivalent to two months of basic salary. KSA has set a cap on the contributory salary of SAR 45,000.

New System (Post July 2024 hires)

If the employee was first registered with GOSI after 3 July 2024, rates are slightly higher and increasing gradually:

For GCC nationals working in Saudi Arabia, GOSI acts as the work-location authority. The employee is registered with GOSI, however, home-country pension scheme contribution rates apply to these GCC nationals, and the Saudi employer must process contributions in line with the GCC extension rules.

* these contribution rates are as of the date of this Article and shall remain subject to increase as per local regulations and requirements. Always refer to the most up-to date information

For support with your GCC employees and pension registration and management requirements, please contact us.