New MoHRE Guidance On The UAE's Alternative End‑of‑Service Benefits Scheme

The UAE Ministry of Human Resources and Emiratisation (MoHRE) has recently issued new guidance on the voluntary alternative end-of-service benefits (EOSB) scheme for private sector employers (the Scheme). This article summarises the key features of this recent update and the Scheme itself, as well as practical steps for compliance.

Background

Prior to the introduction of the Scheme, end-of-service benefits for UAE mainland and most free zones were governed by the gratuity system. Under this system, employers paid a lump-sum gratuity to employees upon termination of employment, calculated based on the employee's final basic salary and length of service. There was no requirement for employers or employees to make any ongoing contributions and there was no formal pension scheme for expatriate employees in the private sector.

Specifically, the Scheme does not apply to entities operating in the Dubai International Financial Centre or the Abu Dhabi Global Market, as these free zones have their own end-of-service schemes governed by their respective employment regulations.

The Scheme

On 10 October 2023, the UAE Cabinet issued Cabinet Resolution No. 96 of 2023 which established the Scheme.

The Scheme allows employers to elect to make monthly contributions to approved investment funds on behalf of enrolled employees rather than make a lump-sum gratuity payment at the termination of an employee's employment. Employees may also make voluntary contributions to their individual savings accounts under the Scheme.

Participation in the Scheme is voluntary for employers and for those participating, such participation must be for at least one year. Once that initial one-year period has lapsed, an employer may opt out from the Scheme.

The following is a summary of the key characteristics of the Scheme:

• participating employers shall make monthly contributions at either 5.83 percent of base salary for service under five years or at 8.33 percent of base salary for five years or more to an approved investment fund;
• employees can make additional voluntary contributions of up to 25 percent of their salary;
• on termination, employees receive the accumulated contributions and investment returns within 14 days of their termination, alternatively, their accumulated fund may be left invested;
• pre-enrolment gratuity entitlements are guaranteed and payable on termination, while post-enrolment, employer contributions are guaranteed under the Scheme and voluntary employee contributions follow the Scheme's fund rules; and
• employees can choose from a range of investment options, including capital-guarantee, risk-based and Sharia-compliant funds.

The aims of the Scheme are to provide retirement security, protect the value of gratuity from inflation or insolvency and improve employer cash-flow predictability. Employers may also continue offering enhanced contractual severance schemes alongside participation in the Scheme. MoHRE and the Securities and Commodities Authority jointly oversee implementation of the Scheme, requiring timely contributions and compliance with approved fund selection.

November 2025 MoHRE Guidance

MoHRE's November 2025 guidance provides clarity on the implementation and administration of the Scheme. The key points covered by the guidance include:

• employers wishing to participate must submit a request to MoHRE and may only select one of the pre-approved investment funds. Current approved providers include Ghaf Benefits, Daman Investments, National Bonds and First Abu Dhabi Bank (a Fund Administrator). This list may evolve from time to time and employers should monitor the MoHRE's website for any changes;
• employers must subsequently register participating employees through the selected Fund Administrator, who opens individual savings accounts for each beneficiary;
• employers remain obligated to preserve and pay out pre-enrolment gratuity accrued under the UAE Labour Law. Post-enrolment entitlements are governed by the Scheme;
• employers must transfer the basic subscription amounts for enrolled employees to the Fund Administrator. Employees may also make additional voluntary contributions, either through payroll deduction, which the employer transfers to the Fund Administrator, or as a direct lump-sum payment to the Fund Administrator;
• on termination, employees may withdraw accumulated funds, including contributions and investment returns or leave them invested. Beneficiaries may also withdraw part or all of their voluntary contributions and associated returns at any time, with payments processed by the Fund Administrator in accordance with the Scheme rules;
• employers are required to ensure timely contributions, accurate record-keeping and compliance with approved fund selection and Scheme rules; and
• employers must discontinue the use of the current end-of-service benefits system for employees who are selected to participate in the Scheme.

Employee Selection

The decision as to which employees are to be registered for the Scheme is at the employer's discretion. Once an employee is enrolled onto the Scheme, participation is mandatory for that employee and there is no mechanism under the current framework for an enrolled employee to choose to remain under the traditional end-of-service gratuity system.

In practice, many employers may choose to consult with employees before finalising enrolment and may enrol only employees who indicate that they wish to participate.

Accrued End-of-Service Benefits Prior to Enrolment

Preserved gratuity entitlements are calculated as at the date of enrolment into the Scheme, based on the employee's basic salary at that date. Employers are not required to make retroactive contributions covering prior periods of service.

Conclusion

The introduction of the Scheme marks a significant shift in how end-of-service benefits are managed in the UAE. Employers considering participation should carefully review their payroll, investment and administrative processes to ensure compliance with MoHRE guidance and to communicate effectively with employees about the implications and options available under the Scheme.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.