Savings system/ provident fund for expats: How it works until July 2027
Concerning the expatriate workforce, the decision states that the implementation of the savings system or the provident fund scheme for expatriates will now be implemented from July 19, 2027, instead of in 2026 as mentioned before.
What is the savings system or the provident fund scheme?
As per Article 135 of the Social Protection Law, the savings system is a defined contribution system, and the regulation shall specify the provisions governing the savings system. Article 136:
The provisions of the savings system shall apply compulsorily to non-Omani workers within the limits of the amount of compulsory savings stipulated in Article 139(1) of this law.
The provisions of the savings system shall also apply voluntarily to the following categories:
Article 137: The savings system replaces the end-of-service grant or gratuity disbursed by the employer to non-Omanis.
Article 138: The employer shall pay the end-of-service grant or gratuity for the service period before the date of commencement of the contribution provisions stipulated in article 139(1) of this law to the non-Omani worker under the provisions of the Labour Law or other related employment systems upon the end of the service, or shall settle it under the provisions of the Labour Law to the savings system or the worker.
The savings due from the savings system are disbursed for the period following the date of commencement of the contributions stipulated in article 139(1) of this law to the insured non-Omani in the cases stipulated in article 143 of this law.
Article 139: The financing of the savings system shall be as follows:
1. 9% (
nine percent
) of the monthly basic wage of the insured non-Omani.
2. Any amounts of savings paid by the employer, the insured, or others to the system to make savings in favour of the covered groups under the provisions of the regulation.
3. Gifts, bequests, and donations allocated to this system and approved by the board.
4. Loans approved by the board for the savings system after the approval of the Ministry of Finance.
Article 140 The regulation shall specify the dates for the payment of the contributions stipulated in Article 139 of this law and the additional amounts imposed on the employer in the event of non-compliance with these dates.
Article 141: The saver shall be entitled to the sum of the contributions, the amounts deposited in his account, and the returns on his investment. It is permitted for the regulation to specify a minimum for the investment returns.
Article 142: It is permitted, based on an application by the saver, to disburse his savings in one of the following ways, in the manner specified by the regulation:
1. One-time payment. 2. An annual or monthly instalment, taking into account the additional returns collected until the end of the savings period
Article 143: The saver is entitled to his savings from the fund in any of the following cases:
1. The end of the employment relationship for the non-Omani worker, unless he engages in another employment contract within the period specified by the regulation.
In case of the death of the saver, the savings are disbursed to the legal heirs.
The savings are transferred to the savings system in the absence of those entitled under the provisions of the clause.
5. Permanent disability. It is also permitted to use the savings to pay the contributions of the insured in the branch of insurance of the elderly, disability, death, and the branch of insurance against work injuries and occupational diseases in the cases specified by the regulation.
Article 144: If the saver leaves the savings system or loses any of its conditions, he shall notify the fund in the manner specified by the regulation. The regulation shall also specify the administrative fines resulting from the failure to notify the fund.
Earlier, the Ministry of Labour had clarified how gratuity (end of service) of both the Omani workforce and expatriates will be calculated as per Article 61 of the Labour Law until the implementation of the savings system, which is now scheduled for July 2027.
For expatriates
Under the previous Labour Law, the worker's gratuity was calculated at a rate of 15 days' wages for each year of service for the first three years, and one month's wages for each subsequent year. But effective from July 31, 2023, gratuity will be calculated at one basic salary for each year of service, based on the employee's most recent basic salary.
Gratuity calculation example.
A worker continued to work for the employer until the effective date of the new Labour Law on July 31, 2023.
For example: An expatriate employment Start Date: August 1. 2021 Basic Salary: RO500.
If the employment relationship between the worker and the employer ends after the new law comes into effect, how is the end-of-service gratuity calculated?
For the period from the start of employment on August 1, 2021, to the effective date of the new law on July 31, 2023, the gratuity shall be calculated at half of a basic salary per year of service (RO250 for each year), as this period falls under the provisions of the previous law.
For the period following the enactment of the new law, le gratuity shall be calculated at one full basic salary per year of service (RO500 for each year), under the new law's requirement that the end-of-service gratuity shall not be less than one basic salary for each completed year of service.
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