The UAE now runs a voluntary alternative to end-of-service gratuity: employers can pay a monthly contribution into a regulated investment fund instead of accruing a lump sum on their own books. The contribution is 5.83% of monthly basic salary for employees with under five years of service and 8.33% for those beyond five years, transferred within 15 days of the start of each calendar month. The scheme was created by Cabinet Resolution No. 96 of 2023 under Article 51(8) of the Labour Law.
This guide reads that resolution directly rather than summarizing the marketing. It covers who can join and who decides, the contribution mechanics including the rule that catches long-serving employees out, what happens to gratuity you had already accrued, the investment options and who carries the loss, when and how you get paid, the penalties on an employer that stops paying, and the conditions under which an employer can leave the scheme again.
What the Savings Scheme Replaces, and What It Does Not
The scheme is an optional replacement for the traditional gratuity accrual. Once an employee is enrolled, the employer must stop applying the traditional end-of-service system to that employee, and instead pays a monthly contribution into a licensed investment fund. The employee receives the contributions plus any investment returns instead of a gratuity calculation at the end.
Article 2 of Cabinet Resolution 96 of 2023 sets out three objectives, and the first is the one that matters to employees: ensuring workers receive their end-of-service benefits and protecting them from inflation, default or bankruptcy. Under the traditional system your gratuity is an unfunded promise sitting on the employer’s balance sheet. Under the scheme it is money already transferred to a regulated fund in your name.
The scheme does not change the underlying Labour Law entitlement for anyone not enrolled. If your employer has not joined, the standard gratuity calculation of 21 or 30 days per year continues to apply exactly as before, along with the two-year cap on the total set out in the UAE Labour Law reference.
Who decides whether you join?
Not you. Article 10(1) makes the scheme optional for employers, and Article 10(2) then states that for employees the employer selects, subscription is mandatory. Employers may enroll all employees, specific groups, or selected professional categories. An employee cannot opt into the scheme if the employer has not joined, and cannot opt out if the employer has enrolled them.
What an employee does control is the voluntary top-up, and the investment option applied to it. Those are genuinely elective and are covered below.
Contribution Rates and the Rule That Catches People Out
The employer contributes 5.83% of monthly basic salary for a beneficiary with less than five years of service, rising to 8.33% beyond five years. Critically, Article 6(2) states that the rate is determined by the continuous service period beginning from the date of employment, not the date of subscription.
That single sentence is the most commercially significant line in the resolution and the one most often misread. An employee who has already served seven years when the employer joins the scheme goes straight onto 8.33%. The clock does not reset on enrollment. Employers modeling the cost of joining routinely underestimate it by assuming a workforce-wide start at the lower rate.
The percentages are not arbitrary. Twenty-one days of basic wage per year is roughly 5.83% of annual basic pay, and thirty days is roughly 8.33%. The scheme is engineered to fund the same entitlement, month by month, rather than to be more or less generous. What differs is that the money is invested along the way.
| Mechanic | Rule | Source article |
|---|---|---|
| Rate under 5 years of service | 5.83% of monthly basic salary | 6(1)(a) |
| Rate over 5 years of service | 8.33% of monthly basic salary | 6(1)(a) |
| Which rate applies | Set by continuous service from the date of employment, not the date of subscription | 6(2) |
| Part-time and other work patterns | The same percentages, applied to the basic salary calculated under the Labour Law | 6(1)(b) |
| Payment deadline | Within 15 days of the first day of the calendar month | 6(3) |
| Deduction from salary | Prohibited. The basic subscription is the employer’s cost and is not refundable to the employer | 5(4) |
The prohibition in Article 5(4) is worth stating plainly: the employer may not deduct the basic subscription from the employee’s salary, and the amounts are not refundable to the employer. If your payslip shows a deduction described as a savings scheme contribution, that is either the voluntary top-up you agreed to or an error.
What Happens to the Gratuity You Already Earned
Article 5(3) requires the employer, before applying the alternative system, to calculate the benefits due under the Labour Law up to that point and to pay them on termination of the employment relationship, based on the beneficiary’s basic salary at the time of participation.
Read carefully, this creates two separate pots. Service before enrollment stays under the traditional calculation and is frozen at the basic salary you were on when the scheme started. Service after enrollment is funded through the scheme. Both are paid when you leave.
The freeze is the detail to interrogate. Under the traditional system, gratuity is calculated on your last basic wage, so pay rises lift the value of every past year. Once the pre-enrollment period is fixed at the salary applying at the date of participation, later pay rises no longer lift it. For a long-serving employee expecting significant salary growth, that is a real change in outcome, and it is the question to put to HR before enrollment rather than after.
Investment Options and Who Carries the Loss
Fund managers must offer at least three categories: a capital guarantee portfolio, risk-based portfolios with varying levels of risk and expected return, and Sharia-compliant options. An unskilled worker gets the capital guarantee option. A skilled worker who selects a risk-bearing option carries any losses personally and cannot claim against the employer.
Article 8(2) is unusually direct about this. A beneficiary registered in an option that does not include a capital guarantee is liable for the losses and consequences, may not bring a claim against the employer for them, and the fund service provider is not responsible either, except where the provider acted in bad faith, breached its obligations intentionally, or was grossly negligent.
That is a genuine transfer of investment risk to the employee, and it does not exist under the traditional gratuity system, where the entitlement is a fixed formula regardless of market conditions. The protection is that the employer’s basic subscription amounts are ring-fenced from the risk allocation in the same article, and that unskilled workers are placed in the capital guarantee option by design. Anyone choosing a risk option should treat it with the same care as any other long-term investment decision as a UAE expat.
Voluntary top-ups: the separate pot
Employees enrolled in the scheme may contribute on top of the employer’s basic subscription, either monthly through a payroll deduction or as a lump sum transferred directly to the fund. Article 7 caps the voluntary contribution at 25% of total salary, monthly or annually for a lump sum, and lets the beneficiary change the percentage without limit on the number of amendments.
Three features distinguish voluntary money from the employer’s contribution. It can be withdrawn in part or in full at any time during employment, subject to the fund manager’s terms. The beneficiary can choose the investment option for the voluntary portion only, and if no choice is made it goes into the capital guarantee fund. And Article 7(7) states that voluntary subscriptions are not included in the beneficiary’s entitlement to end-of-service benefits, so they are savings held alongside the entitlement rather than part of it.
Getting Paid When You Leave
The beneficiary is entitled to all basic subscription amounts paid by the employer plus any returns, within a period not exceeding 14 days after termination of employment. Where the beneficiary has died, the heirs receive the same within not more than 10 working days from the date of death.
The 14-day window mirrors Article 53 of the Labour Law, which requires wages and all other entitlements to be paid within 14 days of the end of the contract. The 10-working-day rule on death is faster, and is a meaningful improvement on the traditional route where a gratuity claim can sit in an estate.
You are not obliged to take the money out. Article 9(2) allows the beneficiary or their heirs to notify the fund manager in writing within those periods that they wish to keep the funds invested, and states that the funds may then be withdrawn at any time without restriction or condition. Leaving the UAE does not force a liquidation.
Two limits on that entitlement. Under Article 9(3), the employer may request amounts legally owed by the worker from these entitlements, but only with Ministry approval or a judicial decision. And under Article 10(7), the employer may recover the basic subscription amounts only where the employment relationship terminates within one year of its start date. Beyond twelve months, the employer cannot claw the contributions back.
One further protection that has no equivalent in the traditional system: Article 10(8) states that subscription amounts paid by the employer are not subject to judicial enforcement, seizure, liquidation or bankruptcy procedures. If the employer collapses, the money is already outside its estate. That is the practical answer to the concern that drives most unpaid-entitlement complaints to MOHRE.
What Happens If the Employer Stops Paying
Article 12 sets out an escalation with dates attached, which makes it unusually easy to check whether your employer is current.
| Elapsed time | Consequence |
|---|---|
| Within 30 days of the due date | The fund manager must notify the employer in writing, requiring payment within 5 business days of the notification |
| Within 15 days of that notice | The fund manager must notify the Ministry of the non-payment |
| 2 months overdue | The Ministry ceases issuing new work permits to the employer and may take further administrative action |
| 4 months overdue | A penalty of AED 1,000 per beneficiary per month is imposed on the employer |
The work permit freeze at two months is the sharper of the two sanctions for most employers, because it stops hiring entirely. The AED 1,000 monthly penalty multiplies by headcount, so for a company with fifty enrolled employees it reaches AED 50,000 a month. MOHRE receives labour complaints about the scheme and investigates violations found during inspections, while the Securities and Commodities Authority handles complaints about fund manager performance.
Can an Employer Leave the Scheme?
Yes, with Ministry approval and four conditions under Article 13: a minimum subscription period of one year, no outstanding fines or pending labour disputes on the employer’s file, a credit report provided to the Ministry to ensure beneficiaries receive their benefits, and beneficiaries’ rights left unaffected by the withdrawal.
The consequences are asymmetric in the employee’s favor. The employer cannot recover the subscription amounts already paid. The beneficiary may withdraw their dues on termination of employment or keep them invested without further contributions. And for the period after withdrawal, end-of-service gratuity reverts to the standard Labour Law calculation. In effect the employee ends up with a funded pot for the scheme years plus a traditional accrual for everything after.
The scheme applies to private sector employers and employees including free zones. Financial free zone authorities are separately required to develop and approve their own alternative end-of-service arrangements for establishments within their jurisdiction, so DIFC and ADGM employers operate under their own framework rather than this resolution, in the same way that they sit outside the federal Labour Law generally. The wider position for employees working in ADGM follows that separate track.
Frequently Asked Questions
What is the UAE alternative end-of-service savings scheme?
It is a voluntary system created by Cabinet Resolution No. 96 of 2023 under Article 51(8) of the Labour Law, in which an employer pays a monthly contribution into a licensed investment fund instead of accruing a traditional end-of-service gratuity. The employee receives the accumulated contributions plus investment returns when the employment ends.
How much does the employer contribute to the savings scheme?
5.83% of the employee’s monthly basic salary where continuous service is under five years, and 8.33% where it exceeds five years. The rate is set by service measured from the date of employment, not the date of joining the scheme, so a long-serving employee enters at the higher rate immediately. Contributions must reach the fund within 15 days of the start of each calendar month.
Can I choose to join the savings scheme myself?
No. Participation is optional for employers, not employees. The employer decides whether to join and which employees or categories to enroll, and for those selected, subscription is mandatory under Article 10(2). What you can choose is whether to make voluntary top-up contributions and how the voluntary portion is invested.
What happens to gratuity I earned before my employer joined?
It is preserved but frozen. The employer must calculate the benefits due under the Labour Law up to the date of participation and pay them when your employment ends, based on your basic salary at the time of participation. Later pay rises will not lift the value of that earlier service, which is the main point to check before enrollment.
Can my employer deduct the savings scheme contribution from my salary?
No. Article 5(4) requires the employer to calculate and pay the basic subscription without deducting it from the beneficiary’s salary, and the amounts are not refundable to the employer. Any deduction on your payslip should be a voluntary contribution you agreed to, not the employer’s basic subscription.
Who bears the loss if the investment falls in value?
A beneficiary who chose an option without a capital guarantee bears the losses personally, cannot claim against the employer, and cannot claim against the fund service provider except where that provider acted in bad faith, intentionally breached its obligations or was grossly negligent. Unskilled workers are placed in the capital guarantee portfolio, which preserves capital.
When do I get my money after leaving the job?
Within 14 days of the termination of employment for the basic subscription amounts and their returns. If the beneficiary has died, the heirs receive the same within not more than 10 working days from the date of death. You may instead notify the fund manager in writing that you want to stay invested, and withdraw later at any time without restriction.
Is the money safe if my employer goes bankrupt?
Subscription amounts paid by the employer are not subject to judicial enforcement, seizure, liquidation or bankruptcy procedures under Article 10(8). Once transferred to the fund, the money sits outside the employer’s estate, which is the central protection the scheme was designed to provide compared with an unfunded gratuity promise.
What are the penalties if an employer stops paying into the scheme?
The fund manager must notify the employer in writing within 30 days of the missed payment, giving 5 business days to pay, and must notify the Ministry within 15 days of that notice. At two months overdue the Ministry stops issuing new work permits to the employer. At four months overdue a penalty of AED 1,000 per beneficiary per month applies.
Does the savings scheme apply in DIFC and ADGM?
Not directly. The resolution applies to the private sector including free zones, but Article 10(4) requires financial free zone authorities to develop and approve their own alternative end-of-service arrangements for establishments within their jurisdiction. DIFC and ADGM employers therefore operate under their own framework, consistent with their separate employment laws.
Official Sources
- Cabinet Resolution No. 96 of 2023 Regarding an Alternative End of Service Benefits System, full text
- The Official Portal of the UAE Government – End of service benefits for workers in the private sector
- Ministerial Resolution No. 668 of 2023 Regarding Subscription under the Alternative End of Service Benefits System
- Ministry of Human Resources and Emiratisation
- Securities and Commodities Authority – licensing and supervision of investment fund providers
Information is current as of August 2026. Limitations are stated rather than smoothed over. Every article reference, percentage, deadline and penalty above was read from the full English text of Cabinet Resolution No. 96 of 2023 as published on the Government of the UAE portal, retrieved through an archived copy because the live PDF returned an empty response to us. That translation carries the Ministry’s own disclaimer that it was produced by a third party and that the Ministry is not responsible for discrepancies with the original Arabic, so where a precise wording matters, check the Arabic text. Ministerial Resolution No. 668 of 2023, which governs subscription mechanics for work patterns other than full time, is cited as the governing instrument but its text was not retrievable from our network and is not relied on for any figure here. The list of approved fund managers changes over time and is maintained by the Securities and Commodities Authority; the Government of the UAE portal names the Daman Investments End of Service Programme as one approved fund, and that is not an endorsement. This article explains published rules and is not financial, tax or legal advice. Investment options that do not carry a capital guarantee can lose value, and the resolution places that loss on the employee. Confirm your own position with MOHRE, your employer and a licensed adviser before making an election.
