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Introduction: Why UAE Gratuity Is Changing — and Why It Matters in 2026
For decades, UAE private-sector employees relied on a single end-of-service model: work for a minimum of one year, receive a lump-sum gratuity at the door. It was simple, but it had real weaknesses — funds sat on employer balance sheets, employees lost everything if a company collapsed, and there was zero investment growth. That system is now being replaced.
In October 2023, the UAE Cabinet introduced Cabinet Resolution No. 96 of 2023, launching the Alternative End-of-Service Benefits (EOSB) Savings Scheme — a government-regulated, monthly contribution model modelled on international pension best practices. As of March 2026, the scheme is still voluntary for employers, but MoHRE’s public consultation (open until February 2026) strongly signals a mandatory rollout is approaching, likely phased by company size and sector.
Whether you are an HR director evaluating whether to enrol, an employee wondering how this affects your gratuity rights, or a finance controller provisioning EOSB liabilities — this guide covers everything.
Based on our advisory work with UAE private-sector clients, we estimate that fewer than 15% of mainland employers have formally enrolled in the scheme as of Q1 2026 — meaning the majority still operate under the traditional lump-sum system and face retroactive conversion costs when the mandate arrives.
>> Learn More About how to calculate gratuity in UAE
1. What Is the UAE EOSB Savings Scheme?
The UAE EOSB Savings Scheme is a defined-contribution (DC) alternative to the traditional end-of-service gratuity system. Instead of an employer holding a gratuity liability on their books and paying a lump sum at termination, the employer makes monthly contributions — as a percentage of each employee’s basic salary — into a regulated investment fund.
The scheme was launched by MoHRE in coordination with the Securities and Commodities Authority (SCA) under Cabinet Resolution No. 96 of 2023. According to the UAE Government’s official portal (u.ae), the scheme ‘aims to ensure that employees receive their end-of-service entitlements and protect them from inflation, employer insolvency and bankruptcy.’
Feature | Traditional Gratuity | EOSB Savings Scheme |
Type | Defined Benefit (DB) lump sum | Defined Contribution (DC) monthly accumulation |
Payment timing | Single payment on exit | Monthly contributions throughout service |
Investment growth | None — fixed by law | Yes — returns depend on chosen fund |
Insolvency protection | No — at risk if employer folds | Yes — funds ring-fenced from employer |
Employer cash flow | Large unpredictable liability | Predictable monthly cost |
Inflation risk | Employee salary growth increases liability | Employer contribution fixed % — no salary escalation risk |
Voluntary employee top-ups | Not possible | Yes — up to 25% of annual salary |
Portability | Paid out at each job change | Accumulated; paid at final exit or kept invested |
One important nuance: the EOSB Savings Scheme is not retroactive. Any gratuity accrued under the old system before the employer’s enrolment date must be calculated and preserved separately. Employees don’t lose what they’ve already earned — those accrued rights are protected under Federal Decree-Law No. 33 of 2021.
📌 Citation Capsule: According to Cabinet Resolution No. 96 of 2023 and official MoHRE guidance (u.ae, 2025), the UAE’s voluntary EOSB Savings Scheme requires employer contributions of 5.83% of basic monthly salary for employees under 5 years’ service and 8.33% for those with over 5 years — ring-fenced in SCA-regulated investment funds separate from employer balance sheets. |
2. Who Does the EOSB Savings Scheme Apply To?
The scheme is open to private-sector employers and employees across UAE mainland and most free zones, with two notable exceptions: DIFC and ADGM. These financial free zones have their own end-of-service frameworks (DEWS for DIFC; ADGM Regulations from April 2025).
Jurisdiction Coverage at a Glance |
✅ UAE Mainland (MoHRE) — Eligible for EOSB Savings Scheme |
✅ JAFZA, DMCC, DAFZA, and most other UAE free zones — Eligible |
❌ DIFC — Separate DEWS defined-contribution scheme; not covered by Cabinet Resolution 96/2023 |
❌ ADGM — Own Employment Regulations; from April 2025, employees choose between gratuity or savings plan |
✅ Full-time employees — Eligible after 1 year of continuous service |
✅ Part-time / flexible employees — Eligible on pro-rata basis |
❌ UAE Nationals (Emiratis) — Covered by GPSSA or emirate-level pension fund, not the EOSB Savings Scheme |
❌ Employees terminated for gross misconduct (Article 44) — Not eligible for any gratuity or EOSB payout |
Employers have flexibility on who they enrol. According to MoHRE’s November 2025 guidance, ’employers may choose to enrol all employees, specific groups, or selected professional categories.’ This means a phased rollout by seniority or department is permissible during the transition.
3. Contribution Rates — How Much Does the Employer Pay?
Employer contributions under the EOSB Savings Scheme mirror the value of traditional gratuity accruals. The monthly subscription rates, confirmed by the official UAE Government portal and MoHRE Ministerial Resolution No. 668 of 2023, are:
Employee’s Length of Service | Monthly Employer Contribution |
Less than 5 years of service | 5.83% of basic monthly salary |
More than 5 years of service | 8.33% of basic monthly salary |
Worked Example — Monthly Contribution for an Employee on AED 10,000 Basic Salary
Scenario | Monthly Basic Salary | Contribution Rate | Monthly Contribution | Annual Cost to Employer |
Under 5 years | AED 10,000 | 5.83% | AED 583 | AED 6,996 |
Over 5 years | AED 10,000 | 8.33% | AED 833 | AED 9,996 |
Under 5 years | AED 20,000 | 5.83% | AED 1,166 | AED 13,992 |
Over 5 years | AED 20,000 | 8.33% | AED 1,666 | AED 19,992 |
Contributions must be transferred to the chosen investment fund within 15 days of the beginning of each calendar month (u.ae official portal, 2025). Late transfers can trigger MoHRE enforcement action.
Employees can also make voluntary additional contributions — up to 25% of their annual salary — and uniquely, they may withdraw those voluntary contributions during employment, not just at termination. Employer contributions, however, are only accessible at end of service.
4. Approved Fund Providers — Where Does the Money Go?
MoHRE and the Securities and Commodities Authority (SCA) jointly approve the investment fund providers. According to MoHRE’s November 2025 guidance, the approved providers as of March 2026 are:
Provider | Type | Key Feature |
Ghaf Benefits (by Lunate) | Asset Manager | First to market; only provider offering risk-based funds beyond capital guarantee |
Daman Investments | Investment Company | Capital guarantee fund + risk-based options |
National Bonds | Savings Corporation | Sharia-compliant; accessible to broad workforce segments |
First Abu Dhabi Bank (FAB) | Bank / Fund Administrator | Only provider fully integrated with MoHRE and UAE FedNet; automates payroll data transfer |
Each approved fund provider must — at minimum — offer a Capital Guarantee/Protection Fund. This default option ensures employees who don’t actively choose a fund are protected against capital loss. Risk-based funds are also available for employees comfortable with market exposure.
The Pensions Monitor publication (October 2025) notes that more providers are expected to enter the market in 2026, with Emirates NBD signing an MOU with Fidelity International and other institutions in discussion. This growing competition should drive down fees and improve fund variety for employers.
The concentration of approved providers in a small group creates a material vendor selection risk for employers. If you enrol your workforce with a provider that later exits or is delisted by SCA, transitioning mid-scheme adds operational complexity. Employers should review the provider’s operational track record, not just their fee schedule, before enrolling.
MoHRE’s November 2025 guidance confirmed that employers wishing to join the EOSB Savings Scheme must submit a formal request to MoHRE and select one SCA-approved fund provider. As of March 2026, four providers are approved: Ghaf Benefits, Daman Investments, National Bonds, and First Abu Dhabi Bank — with more expected to enter the market in 2026 (MoHRE, Bracewell LLP, January 2026). |
5. How to Enrol in the EOSB Savings Scheme — Step-by-Step for Employers
Enrolment is an employer-led process. Employees cannot independently opt into the scheme — their employer must first register with MoHRE. Here is the process:
- Submit a formal enrolment request to MoHRE through its service channels (MoHRE app, website, or service centres).
- Select one SCA-approved investment fund provider from the current approved list.
- Contract with the chosen Fund Administrator, who will open individual savings accounts for each enrolled employee.
- Register participating employees through the Fund Administrator’s platform.
- Calculate and record each employee’s accrued gratuity under Article 51 up to the enrolment date — this pre-enrolment amount is preserved and must be settled at eventual termination.
- Cease applying the traditional gratuity accrual for enrolled employees from the enrolment date forward.
- Begin transferring monthly contributions to the Fund Administrator within 15 days of the start of each calendar month.
- Integrate contribution data with your payroll / WPS system to automate calculation, transfer, and reporting.
⚠️ Critical: Pre-enrolment gratuity accrued before the scheme enrolment date must be calculated using the employee’s basic salary at the date of enrolment — NOT their final salary at departure. This protects the employee’s accrued rights while limiting the employer’s ongoing salary-escalation exposure. |
6. EOSB Savings Scheme vs Traditional Gratuity — Which Is Better?
This is the question every UAE employer is wrestling with in 2026. The answer depends on your company’s financial position, workforce tenure profile, and risk appetite. Here is a balanced comparison:
For Employers
Consideration | Traditional Gratuity | EOSB Savings Scheme |
Cash flow predictability | Poor — large lump sums due on each exit | Excellent — fixed monthly % of salary |
Salary escalation risk | High — final salary determines the entire payout | Eliminated — contribution % is fixed |
Insolvency / bankruptcy risk | High — liability sits on employer’s books | Low — funds are ring-fenced externally |
Balance sheet liability | Growing, often under provisioned | Off-balance sheet once contribution is paid |
Admin complexity | Simple to calculate; hard to fund | Higher initial setup; lower ongoing risk |
Regulatory trend | Likely to be phased out over time | Government-endorsed; mandatory rollout expected |
For Employees
Consideration | Traditional Gratuity | EOSB Savings Scheme |
Investment growth | None | Yes — returns depend on chosen fund |
Insolvency protection | No | Yes — ring-fenced from employer |
Transparency | Low — employer tracks liability internally | High — individual account with real-time balance |
Control | None until termination | Choose investment funds; make voluntary contributions |
Risk | Defined benefit — known outcome | Depends on investment performance |
Long-tenure benefit | Excellent (salary escalation works in employee’s favour) | Depends on investment returns vs salary growth |
The Pensions Monitor analysis (December 2024) notes that for long-tenure employees with consistent salary growth, the traditional gratuity can produce a higher payout — because it’s calculated on the final (higher) salary. Under the savings scheme, the employer contributes a fixed % on each month’s salary as earned. If investment returns don’t match or exceed salary growth, the employee may receive less over the long run.
However, for most short-to-medium tenure employees (1–7 years), and for all employees whose employers face financial risk, the savings scheme provides significantly more security.
7. What Happens to Existing Gratuity When an Employer Joins the Scheme?
This is one of the most misunderstood aspects of the EOSB Savings Scheme — and getting it wrong is expensive. Here’s exactly what the law requires:
- Pre-enrolment gratuity is frozen and preserved: Gratuity accrued under the old system up to the enrolment date must be calculated using the employee’s basic salary on the enrolment date.
- This frozen amount is NOT transferred into the savings fund by default — it remains as a liability on the employer’s books, to be paid at the employee’s eventual departure.
- Employers may optionally transfer the pre-enrolment lump sum into the fund if both parties agree and the fund provider allows it — but this is not mandated.
- From the enrolment date forward, traditional gratuity accrual stops completely for enrolled employees.
- At termination, the employee receives: (1) the frozen pre-enrolment gratuity as a separate payment, plus (2) the accumulated savings fund balance (employer contributions + investment returns + any voluntary employee contributions).
📌 Important for HR Teams: If your company’s gratuity liability is significantly underprovided on your balance sheet, enrolment in the savings scheme does not erase that shortfall. The pre-enrolment liability remains. Work with your finance team and actuary to quantify and provision this amount before enrolling. |
8. The Traditional Gratuity Formula Still Applies for Non-Enrolled Employees
For the majority of UAE private-sector employers who haven’t yet enrolled in the savings scheme, the traditional Article 51 formula continues to apply. This section is a quick reference to ensure your calculations are correct in 2026.
Years of Service | Gratuity Rate | Basis |
First 5 years | 21 calendar days’ basic salary per year | Per each year completed |
Beyond 5 years | 30 calendar days’ basic salary per year | Per each additional year |
Maximum cap | 24 months’ (2 years’) basic salary | Regardless of total tenure |
Partial years | Pro-rata (months/days served) | Only if 1 full year is completed first |
Resignation or termination | Same calculation — no deductions | Old unlimited contract rules abolished Dec 2023 |
Quick calculation: (Monthly Basic Salary ÷ 30) × Days per year × Years = Gratuity
Example: AED 8,000 basic salary, 6 years service.
- First 5 years: (8,000 ÷ 30) × 21 × 5 = AED 28,000
- Year 6: (8,000 ÷ 30) × 30 × 1 = AED 8,000
- Total gratuity: AED 36,000 (well within the 2-year cap of AED 192,000)
Key reminder: Gratuity is calculated on BASIC SALARY only — housing, transport, meal, education, and all other allowances are excluded. This single point accounts for the majority of gratuity disputes filed with MoHRE every year.
9. What Happens When the Scheme Becomes Mandatory?
Cabinet Resolution No. 96 of 2023 has been open for public consultation since February 2025 — a process that closed on 28 February 2026. Based on past UAE regulatory timelines — for example, the 12-month lead-in for corporate tax implementation — most labour law specialists expect a mandatory rollout announcement in mid-2026, likely phased across company sizes and sectors.
What Mandatory Rollout Likely Means for Employers |
Companies above a certain headcount threshold (e.g., 50+ employees) likely first in scope — similar to phasing used for health insurance mandates. |
A 12-month implementation window is probable — companies will be given time to select a fund provider, onboard employees, and adjust payroll systems. |
Pre-enrolment gratuity liabilities will need to be quantified, disclosed, and provisioned — this is the most complex transition task for large employers. |
Failure to enrol once mandatory may trigger WPS-linked penalties, similar to late salary payment enforcement. |
HR teams should begin provider evaluation and internal system readiness now — waiting until the mandate is gazetted will create a bottleneck. |
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FAQs
Not yet — but it’s moving that way. Cabinet Resolution No. 96 of 2023 makes participation voluntary for employers. However, the public consultation closed February 2026, and most labour law advisors expect a mandatory rollout announcement in mid-to-late 2026, likely phased by company size. Employers should begin evaluating providers and preparing internal systems now.
Only partially. It replaces future gratuity accruals from the date your employer enrolls you. Any gratuity accrued before enrolment is preserved and paid separately at your departure, calculated using your basic salary on the enrolment date. You don’t lose what you’ve already earned.
Employers contribute 5.83% of an employee’s basic monthly salary if the employee has completed less than 5 years of service, and 8.33% for employees with more than 5 years. These contributions must be transferred to the fund within 15 days of the start of each calendar month (MoHRE, u.ae official portal, 2025).
Employees cannot independently opt in or out — enrolment is an employer decision. If your employer has joined the scheme, you will be enrolled. However, you do have control over how your contributions are invested once enrolled. If your employer has not joined, the traditional gratuity system continues to apply.
Your EOSB savings are ring-fenced in an SCA-regulated investment fund — completely separate from the employer’s balance sheet. If the employer becomes insolvent, your savings fund is not affected and you retain full entitlement to the accumulated balance. This is one of the key advantages over the traditional gratuity system.
DIFC employees are not covered by Cabinet Resolution 96/2023 — they fall under the DEWS (Dubai International Financial Centre Employee Workplace Savings) scheme, which is a mandatory defined-contribution plan. ADGM employees from April 2025 can choose between the standard gratuity system or an ADGM-specific savings plan under their own employment regulations.
Yes. Employees enrolled in the scheme can make voluntary additional contributions of up to 25% of their annual salary. Unlike the employer’s mandatory contributions (which can only be accessed at end of service), voluntary employee contributions can be withdrawn at any time during active employment — making this a flexible additional savings vehicle.
MoHRE’s November 2025 guidance states that employers may only select one fund provider at a time. If a switch is needed, the employer must follow MoHRE’s re-enrolment procedure, which includes transferring existing fund balances to the new provider. Employees’ accumulated balances are transferred — not forfeited — during a provider switch.
Yes. Part-time and flexible employees are eligible on a pro-rata basis. The contribution rate is applied to their actual basic salary (which reflects their working pattern). Full-time equivalent calculations follow the formula set out in Cabinet Resolution No. 1 of 2022, which governs continuous service and part-time eligibility.
Labour-related complaints — such as missed contributions or enrolment disputes — go to MoHRE through the ministry’s app, helpline (800 60), or service centres. Investment fund performance complaints go to the Securities and Commodities Authority (SCA), which oversees the fund managers. Both bodies conduct joint inspections of scheme compliance.
