The UAE End-of-Service Savings Scheme Is Live in 2026: Should You Switch from Gratuity?

A practical, update-driven guide for HR, founders, and finance teams.

For decades, end-of-service in the UAE meant one thing: a lump-sum gratuity the employer calculated and paid when an employee left. That is no longer the only option. The Alternative End-of-Service Benefits Scheme — the "Savings Scheme" — is now live, with licensed investment providers operating and employers actively enrolling. And with MOHRE's 2026 public consultation signalling a possible move toward a mandatory rollout, the question for many employers has shifted from "what is this?" to "should we switch now?"

This guide explains what the scheme is, how it differs from traditional gratuity, the employer contribution rates, how your existing accrued gratuity is handled at enrolment, who is in and out of scope, and where the policy is heading — followed by a gratuity-vs-scheme comparison and an employer decision checklist.

Informational only — not legal or financial advice. This article summarises general principles as currently published by MOHRE and the UAE Government Portal, and is point-in-time (last updated August 2026). Scheme rules and contribution rates change, and investment involves risk. Verify current terms with MOHRE and take professional advice before enrolling.

What the scheme is

The Savings Scheme was established under Cabinet Resolution No. 96 of 2023 (with Ministerial Resolution No. 668 of 2023), introduced by MOHRE in coordination with the Securities and Commodities Authority (SCA). It replaces the "pay a lump sum at the end" model with a funded, monthly one:

• Instead of holding a growing gratuity liability on the books and paying it out on exit, the employer makes monthly contributions into a licensed, regulated investment fund on behalf of each enrolled employee.
• The contributions are invested and grow over time, and the accumulated balance — contributions plus investment returns — is paid to the employee at the end of service.
• The stated purpose, per the UAE Government portal, is to secure employees' end-of-service entitlements and protect them from inflation and from employer insolvency or bankruptcy.

In short: gratuity becomes a monthly, invested, ring-fenced contribution rather than a lump-sum promise settled years later.

How it differs from traditional gratuity

The two systems reach the same goal — an end-of-service benefit — by very different routes.

• Traditional gratuity (Article 51, Federal Decree-Law No. 33 of 2021): a lump sum the employer funds only at termination, calculated as 21 days' basic salary per year for the first five years and 30 days beyond, on basic pay, capped at two years' wage. The liability sits on the employer's books and is exposed to the employer's solvency.
• The Savings Scheme: a monthly employer contribution into a regulated fund, invested for growth, ring-fenced from the employer's balance sheet, and protected from employer insolvency. The employee may also gain (or, depending on the fund option chosen, bear investment risk on the returns).

The key conceptual shift is from an unfunded promise to a funded, invested account — better protection for the employee, and a predictable monthly cost plus removal of a growing liability for the employer.

The employer contribution rates

The monthly contribution mirrors the traditional gratuity accrual rate, calculated on basic salary:

• Less than five years of service: 5.83% of monthly basic salary.
• Five years of service or more: 8.33% of monthly basic salary.

These percentages are deliberately set to reflect the existing 21-day and 30-day gratuity accrual rates, so the ongoing cost broadly tracks what gratuity was already accruing. Contributions are calculated on the basic salary as at the scheme's implementation date for that employee, and are transferred monthly to the chosen fund. (Verify the current rates against MOHRE before enrolling, as scheme terms can be updated.)

To see what the equivalent gratuity accrual looks like on your own salary figures, use our gratuity calculator or the end-of-service calculator.

The voluntary employee top-up

The scheme is not limited to the employer's basic subscription. Employees may make voluntary contributions of their own — a percentage of salary or an additional amount, monthly or as a lump sum — into their savings account, choosing from the available investment fund options. Reported guidance caps voluntary employee contributions at up to 25% of salary. This turns the scheme into a broader personal-savings vehicle, not just a gratuity replacement — a genuine retention and benefit talking point for employers.

How accrued gratuity is handled at enrolment

This is the point that most worries employers, and the answer is reassuring: the scheme is not retroactive.

• Any gratuity an employee accrued under the old system before the enrolment date is frozen and calculated separately, and remains payable by the employer under the traditional Article 51 rules for that pre-enrolment period.
• From the enrolment date forward, the employer's obligation for that employee is the monthly contribution into the fund, not continued gratuity accrual.
• At termination, the employee receives two things: the frozen pre-enrolment gratuity (settled by the employer), plus the accumulated savings-fund balance (contributions + investment returns + any voluntary top-ups).

So switching does not erase or endanger what an employee has already earned — it preserves it and changes only how future end-of-service benefit is built. Because the freeze is calculated per employee at a fixed date, accurate service-date and basic-salary records matter more at enrolment than at any other point — see our guide to gratuity and leave accrual for how that liability builds month by month.

Who is in and out of scope

• In scope: private-sector employers under MOHRE's jurisdiction, including free-zone companies (the scheme is open to most free zones), may choose to participate. Participation is voluntary, and once an employer enrols, it must stay in for at least one year before it can opt out.
• Out of scope: the DIFC and ADGM, where the federal labour law does not apply. The DIFC already operates its own mandatory workplace savings scheme, DEWS, introduced in 2020 — the Savings Scheme is, in effect, a federal evolution in the same direction.

Licensed providers and where the policy is heading

The scheme moved from framework to reality when the first funds were approved: Lunate and Daman Investments were announced as the first authorised providers in 2024, opening the way for employers to enrol staff, with the SCA overseeing approved funds.

On direction of travel: MOHRE ran a public consultation in 2026 (open until late February 2026) aimed at refining the framework — a process widely read as a step toward a possible mandatory rollout in future. Nothing here should be taken as a confirmed mandate, but the signal is clear enough that employers are weighing whether to move ahead of any requirement rather than after it. Because this is a live policy area, treat the mandatory-rollout question as "watch this space" and verify the current status before deciding.

Weighing it up: what actually changes for the employer

Beyond the mechanics, the switch changes the shape of the end-of-service obligation in ways worth thinking through.

On the side of switching: the growing, unfunded gratuity liability comes off the balance sheet and becomes a predictable monthly cost, which is easier to budget and removes a large lump-sum shock when a long-serving employee leaves. The employee gains real protection — their benefit is ring-fenced from the employer's solvency and has the potential to grow rather than sit static. For hiring and retention, a funded, investable savings account (with the voluntary top-up) is a more modern, more attractive proposition than a promise of a lump sum years away.

On the side of caution: participation carries a one-year minimum commitment, so it is not a decision to reverse casually. The investment dimension introduces considerations that a simple lump sum did not — fund choice, fees, and who bears the investment risk on returns all matter, and employees need to understand what they are opting into. And because the scheme is still voluntary and the policy is evolving, some employers reasonably prefer to wait for the framework to settle before committing. There is no universally right answer; the right answer depends on your workforce profile, your cash position, and your appetite to move early.

Gratuity vs the Savings Scheme

Feature	Traditional gratuity	Savings Scheme
Legal basis	Art. 51, FDL 33/2021	Cabinet Resolution 96 of 2023
When funded	Lump sum at termination	Monthly contributions
Employer cost	Accruing liability, paid on exit	5.83% / 8.33% of basic, monthly
Where it sits	On the employer's books	Ring-fenced in a regulated fund
Growth	None (static liability)	Invested for potential returns
Insolvency protection	Exposed to employer solvency	Protected from employer insolvency
Employee top-up	Not applicable	Voluntary (reported up to 25% of salary)
Participation	Default statutory system	Voluntary (min. 1 year once enrolled)
DIFC / ADGM	Separate regimes (DEWS in DIFC)	Excluded (own frameworks apply)

Employer decision checklist

Work through these before deciding whether to switch:

• Model the cash-flow change — a predictable monthly contribution (5.83% / 8.33% of basic) versus a growing lump-sum liability settled at exit.
• Quantify your current gratuity liability — what is accrued today, per employee, that would be frozen and settled at enrolment.
• Confirm scope — that your entity is eligible (mainland or participating free zone; not DIFC/ADGM).
• Compare licensed providers — funds, fund options, risk profiles, fees, and who bears investment risk.
• Weigh the retention benefit — the voluntary top-up and inflation/insolvency protection as an employee value proposition.
• Plan the pre-enrolment settlement — how you will calculate and preserve accrued gratuity for each employee.
• Account for the one-year lock — you must stay enrolled for at least a year before opting out.
• Watch the mandatory-rollout signal — decide whether to move ahead of a possible future requirement.
• Verify current rates and terms with MOHRE before committing.

The bottom line

The Alternative End-of-Service Savings Scheme is no longer theoretical — it is live, with licensed providers and a clear framework, and the 2026 consultation suggests the direction is toward wider adoption. For employers, the choice is between a familiar unfunded lump-sum liability and a funded, invested, insolvency-protected monthly contribution at rates (5.83% / 8.33% of basic) that mirror what gratuity already costs. Switching preserves everything employees have already earned and changes only how future benefit is built. Whether to move now is a genuine business decision — model it on your own numbers, and verify the current terms with MOHRE first.

For the traditional-gratuity mechanics behind the comparison, see our gratuity calculator guide, try the free HR calculators, or explore RadixHR's payroll features.

Sources & references

This guide is based on the following official UAE government sources, current at the time of writing (verify the latest versions directly, as the law and MOHRE guidance are updated periodically):

• Cabinet Resolution No. 96 of 2023 establishing the Alternative End-of-Service Benefits (Savings) Scheme, with Ministerial Resolution No. 668 of 2023 on its implementation.
• Federal Decree-Law No. 33 of 2021 on the Regulation of Employment Relationships (as amended) and its Executive Regulations — including Article 51 on end-of-service gratuity. Published on the UAE Legislation portal.
• MOHRE (mohre.gov.ae) — Alternative End-of-Service Benefits Scheme guidance, employer enrolment, and the 2026 public consultation on the framework.
• Securities and Commodities Authority (SCA) — supervision and approval of the licensed investment funds operating under the scheme.
• UAE Government Portal (u.ae) — the official summary of the savings scheme for end-of-service benefits for private-sector employees.
• DIFC and ADGM — separate employment frameworks outside the federal scheme; the DIFC operates the mandatory DEWS workplace savings plan. Confirm the applicable regime with the relevant authority.

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Know your gratuity liability before you decide

RadixHR tracks end-of-service liability as it accrues — per employee, on live basic-salary and service-date records — so you can see exactly what would be frozen at enrolment and compare staying with gratuity against switching to the Savings Scheme on your real numbers, not estimates.

Book a demo →

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This article is for general information only and does not constitute legal, financial, or investment advice, and is point-in-time (last updated August 2026). The Alternative EOSB Savings Scheme is governed by Cabinet Resolution No. 96 of 2023 and related MOHRE and SCA rules, which are subject to change; investment carries risk, and returns are not guaranteed. The DIFC and ADGM operate separate frameworks. Verify current scheme terms and contribution rates with MOHRE and take professional advice before enrolling.