Since late 2023, UAE employers have had a second way to provide end of service benefits. They can keep paying a gratuity lump sum when an employee leaves, or they can join the Savings Scheme and pay a contribution every month into an investment fund in the employee's name.
In short
- The scheme is voluntary. Your employer decides whether to join, not you.
- The employer pays 5.83% of your basic salary a month for your first five years and 8.33% after that.
- The money is invested, so what you receive depends on the fund's performance.
- Gratuity you earned before your employer joined is still owed to you.
Where it comes from
The scheme was introduced by Cabinet Resolution No. 96 of 2023 and announced in October 2023 by the Ministry of Human Resources and Emiratisation together with the Securities and Commodities Authority, which regulates the funds. It is open to private sector employers, including those in free zones.
How it works
- The employer joinsIt picks an approved fund and enrols some or all of its employees.
- Contributions are paid monthlyThe employer pays a set percentage of each enrolled employee's basic salary into the fund.
- The fund invests the moneyEach employee has their own account within the fund.
- You are paid when you leaveAt the end of your employment you receive your savings and any returns, or you may be able to leave the money invested.
What the employer contributes
| Your service | Monthly contribution | On a basic salary of AED 8,000 |
|---|---|---|
| Less than 5 years | 5.83% of basic salary | AED 466 |
| 5 years or more | 8.33% of basic salary | AED 666 |
The percentages match the gratuity scale: 5.83% is 21 days of pay out of a 360-day year, and 8.33% is 30 days. Over a year the employer puts in roughly what a year of gratuity would have cost.
You can add your own voluntary contributions on top, up to a quarter of your annual salary.
Savings scheme or gratuity: what changes for you
| Gratuity | Savings scheme | |
|---|---|---|
| When the money is set aside | Nothing until you leave | Every month |
| Based on | Your last basic salary, for all your years | Your basic salary in each month |
| Can it grow? | No | Yes, and it can also fall |
| If the employer runs into trouble | You are one of its creditors | The money is already in a regulated fund |
One point deserves a second look. Gratuity is calculated on your last basic salary, so a pay rise late in your career lifts the value of every earlier year. Contributions are based on what you earned at the time. An employee whose salary rises quickly may find a gratuity would have been worth more. An employee with steady pay and decent investment returns may come out ahead in the scheme.
What happens to gratuity you have already earned
Joining the scheme does not wipe out your past service. The gratuity you built up before your employer enrolled you stays owed and is paid when your employment ends. From the enrolment date onwards, contributions take its place.
What to ask your employer
- Has the company joined the Savings Scheme, and from what date?
- Which fund is used, and what investment options do I have?
- How was my gratuity up to the enrolment date calculated, and when will it be paid?
- Can I make voluntary contributions through payroll?
If your employer has not joined, nothing changes. You remain on the normal gratuity rules and can check your figure with our gratuity calculator.
Frequently asked questions
Is the UAE savings scheme mandatory?
No. It is voluntary for employers. If your employer does not join, you stay on the gratuity system.
How much does the employer contribute?
5.83% of basic salary a month for employees with less than five years of service and 8.33% for those with five years or more.
Do I lose my existing gratuity if my employer joins?
No. Gratuity earned before enrolment remains owed and is paid at the end of your employment.
Can I choose the savings scheme myself?
The decision to join belongs to the employer. Once enrolled, you may have a choice of investment options within the fund.
Is it the same as DEWS in the DIFC?
No. DEWS is the DIFC's own plan. The Savings Scheme is the federal system for the rest of the private sector, although the contribution rates are the same.
Sources
- EY: UAE introduces voluntary alternative end of service benefits scheme.
- PwC Middle East: overview of end of service benefits in the UAE.
- MOHRE, which administers the scheme with the Securities and Commodities Authority.