Qatar’s forthcoming Social Security Act, which will come into effect in early 2023, will affect all working nationals to varying degrees, depending on the type of work. Here’s what to expect regarding the impact of the law on different categories of employees, as well as expected contributions, the calculation of retirement benefits and eligibility for retirement.
1) What has changed compared to the old Pension Act?
All Qatari nationals, whether employed in the public or private sector, will now be subject to mandatory enrollment under the newly established pension scheme once the new Social Security Act comes into effect.
2) When will the new law come into effect?
The new Social Security Act has been enacted to replace the Pensions and Retirement Act. It will come into effect from January 3, 2023, except for certain provisions specified by law that came into effect on the date of publication, July 3.
3) Does the pension scheme include self-employed Qatari nationals?
The new law allows optional enrollment for self-employed Qatari citizens under the new pension scheme. Self-employed Qatari nationals would have to pay contributions in the form of a 21 percent deduction from their monthly income.
4) Are there any new surcharges?
The introduction of housing benefit is a new entitlement under the Social Security Act. Participants who have contributed to the fund for 15 years are entitled to housing allowance under certain conditions; ranging in amount up to 6,000 Qatari rials (about $1,648). The extra housing allowance is added to the basic salary for the calculation of the monthly premium or deduction for the participant and is included in the pension allowance calculation upon retirement.
In addition to the payment upon retirement, the employer remains obliged to reimburse the eligible participants for their entitlement to housing benefit during the employee’s first 15 years of service in the event of termination of employment due to death or incapacity for work.
5) How are the monthly contributions and deductions calculated?
The new pension scheme raised the total premium to 21 percent of the monthly salary, instead of the 15 percent premium prescribed by the old Pension Act. The employer must contribute an amount equal to 14 percent of the total amount awarded to monthly salary including housing allowance if eligible, and the employee is subject to a 7 percent pay reduction.
6) What is the prescribed bandwidth for monthly pension allowances?
A minimum monthly allowance of 15,000 Qatari rials (approximately $4,120) is awarded to eligible employees working in the public sector; however, no minimum amount has yet been set for the private sector.
In all cases, the pension benefits awarded will be a maximum of 100,000 Qatari rials (approximately $27,465) per month, except for those who are already actually enrolled with an amount of more than 100,000 Qatari rials.
7) How is the new pension allowance calculated?
Under the old Pensions Act, the pension allowance was calculated by multiplying 5 percent of the last-earned salary by the employee’s total years of service. Under the new law, the figure is reduced from 5 percent to 3 percent of the last salary earned.
8) How will the current hire be credited under the new pension scheme?
Newly enrolled participants can transfer up to five years of service before the effective date of the new Social Security Act; provided that the previous years of service meet the conditions of the pension scheme.
9) What are Eligibility Factors for Retirement?
Age. Under the new Social Security Act, the minimum age for retirement has been raised from 40 to 50.
Duration of service. The minimum period required to be eligible for a pension has been increased to 25 years instead of 15 years. Those who have been employed for 30 years or more are eligible for additional benefits.
10) What is the impact of the new pension scheme on severance pay and other employment rights?
The new social security law does not put an end to tipping. However, under certain conditions, employees may continue to be eligible for termination of employment claims under the Labor Act (Act No. 14 of the year 2004, the Labor Act).
Under the Labor Code, employees may not be eligible for a termination benefit if they are eligible for pension or plan benefits under a plan and the value of the entitlement benefits exceeds the value of the -or- service gratuities.
Similarly, under the new Social Security Act, eligible participants are not entitled to benefit from more than one pension or retirement plan. If more than one scheme applies; the employee is entitled to the higher value scheme.
11) What happens in case of dismissal or misconduct?
In the event that participation in the pension plan is suspended due to termination of employment and monthly contributions, before the age of 50 and as a result of voluntary resignation or termination for misconduct; the pension benefit is reduced by 2.5 percent for each year difference between the age of termination of employment until the age of 50. In such cases, the right to a pension remains dependent on meeting the mandatory 25-year premium.
Please note that at this time the Implementing Regulations have not been issued under this Act, nor have any other guidelines been issued by the authorities.
Michael T. Palmer and Sarah Khasawneh are attorneys at Crowell & Moring in Doha, Qatar. © 2022 Crowell & Moring. All rights reserved. Reposted with permission from Lexology.