UAE’s New End-of-Service Savings Scheme: A Smart Way For Employees to Grow their Gratuity.

Ministry of Human Resources & Emiratisation (MOHRE) is now encouraging private companies to get enrolled with the New Savings Scheme, a modern substitute to the traditional gratuity system.
The new savings scheme is a shift to investment-based end-of-service benefits, where your gratuity will be invested in any reputable funds, and at the end of your service, you will get your invested amount with good returns on this investment.
This guide will give you all the insights about this scheme, the complete process, who is eligible, and its importance for employers and employees.

If you are working in the UAE, you probably have heard of end-of-service gratuity, as per the federal decree law (33) of 2021. Traditionally, gratuity is the accrued amount that you receive at the end of your service based on your basic salary and employment duration.

Saving scheme is a modern shift toward an investment opportunity after cabinet resolution 96 of 2023, it’s an optional scheme by which selected employers will contribute subscription amount every month on behalf of their employees in any reputable funds and in return beneficiaries (employee) will receive basic subscription amount along with investment returns therefrom, at the end of their employment called as end-of-service compensation in place of traditional end-of-service gratuity.

• Boost the Economy of the UAE: By promoting a culture of investment.
• Protect Employees’ Savings: Protect them from inflation and uncertain circumstances.
• Get the benefit of Investment: To encourage employees to benefit from different investment and economic opportunities in the UAE and increase their revenue.
• Attractiveness of Labor Market: Enhance the attractiveness and flexibility of the labor market by supporting workers through quality services.

• The employers and employees of the private sector and the public sector, and those who work in the free zones.
  • It is an optional benefit plan for employers to enter into the scheme, but for employees, it is mandatory by their employers.
• Self-Employed individuals, independent entrepreneurs for investment purposes.
• Non-UAE Nationals working for government institutions, entities, and affiliated businesses.

• Capital Guaranteed Portfolio: By MOHRE, all the unskilled workers must be entitled through this investment option only in which the invested capital return is guaranteed and secure, so it’s a risk-free investment.
• Sharia-compliant Fund
• Many other investment portfolio options: Skilled workers are free to invest in any investment option as per the financial return they desire and capacity to bear risk accordingly, it’s a risk based investment.

These are reputable investment funds licensed by Securities and Commodities Authority (SCA); they ensure that your funds are in secure hands.

• Daman Investments
• Ghaf Benefits
• First Abu Dhabi Bank
• National Bonds

• Employer will submit a request to MOHRE for registration.
• Employer contract with any of the investment fund companies licensed by the Securities and Commodities Authority (SCA).
• Enroll and open savings accounts of beneficiaries (employees) through the fund administrator (SCA designated to operate as broker).
• Employees who will be selected, their current end-of-service benefits systems will be discontinued, and entitlements from previous duration will be preserved.

• Basic Subscription Fees: Employer will submit monthly basic subscription fees for full-time employees as follows.
  • 5.83 % of the basic salary of their employee if the employee has not completed 5 years of service.
  • 8.33 % if the employee has served for more than 5 years.
• Additional Voluntary Subscription: In addition to the basic subscription amount, if employees wish to contribute an extra % age from their salary, considering their future needs, that additional contribution will be deducted from their salaries.
  • That contribution cannot exceed 25 % of the total wage, and in case of a lump sum payment, cannot exceed the same percentage annually.
• Employer will submit regularly, within the first 15 days of every month, the basic subscription amount and the additional voluntary subscription.

• On termination of Contractual Employees: To initiate the legal entitlement process, the employer will terminate the contract by cancelling the work permit through MOHRE, then the employee has a choice to receive benefits or continue investing. If willing to receive benefits employer will forward the case to the fund administrator, and the employee will receive the benefits amount within 14 Days.
• Withdrawal of Additional Voluntary Contribution: Employee will request funds administrator for withdrawal of part or full, additional voluntary contribution, and will receive their contribution with earned returns on their investment, at any time during employment, or continue investing as an individual. (Basic subscription can only be drawn at the termination of the contract).
• Moving to a New Employer: If an employee is moving to a new employer, they have the option not to withdraw their funds, and the new employer continues submitting contributions to the same fund manager or through a different fund manager.

• MOHRE & SCA will supervise, monitor, inspect, and ensure the scheme works in accordance with the approved legislation.
  • MOHRE responsible for labor complaints related to the scheme.
  • SCA is responsible for addressing complaints against the service providers of the investment funds.
• Financial Free Zone authorities are responsible for matters within their territory.

• Attract and retain talent.
• Easy way to meet EOSB liabilities.
• Employee’s job loyalty and productivity.
• Infrastructure of investment funds through approved service providers.
• Focus on commercial activities and capital gain.
• Good shield against inflation.
• Best cash flow management (costs less in the medium term rather than current end-of-service payments).

• Easy and effective way of savings.
• Can easily withdraw or transfer to an individual option if you leave your employer.
• The best way to cope with inflation and protect from any unforeseen future financial crisis.
• With voluntary subscriptions and investment, enhance financial awareness and help to invest as individual investor after they leave their job.
• Skilled workers can increase their end-of-service benefits by investing in high-return investment funds.
• Diverse investment options ensure more financially stable and prosperous labor markets.

Smooth shifting from the old system to the new system is important. As employer enroll their employees in the new system, their traditional end-of-service benefits system will be discontinued, and the previous benefits will be preserved. All benefits from the new system and the old system collectively will be disbursed at the end of employment.
If you are deciding to enter into a new scheme, it’s better to understand what your gratuity would be under the traditional system. A free online gratuity calculator is a helpful tool for you to get an estimate of your end-of-service benefits and help you to take more informed decisions.

The new end-of-service savings scheme shows the interest of the UAE’s government to make its workforce more prosperous, ensure attractive labor market policies to retain talent from around the world, and turn it into a global business hub.