The UAE Ministry of Human Resources and Emiratization (MHRE) has invited the public to provide their opinions and suggestions regarding the Alternative Savings Scheme (Savings Scheme). The public consultation aims at refining the existing framework. Comments can be provided until February 28, 2026 via https://sharik.ae/en.
Under the Savings Scheme, companies operating in the private sector, including those that fall within the jurisdiction of the MHRE, and companies operating in free zones (with the exception to the Dubai International Financial Centre and the Abu Dhabi Global Market) can choose to participate in the Savings Scheme instead of paying end-of-service gratuity to their employees.
The contribution rates to the Savings Scheme for full-time employees, which reflect the current accrual rate of statutory end-of-service gratuity, are
- 5.83% of the employee’s monthly basic salary if the period of service is less than five years; and
- 8.33% of the employee’s monthly basic salary if the period of service exceeds five years
An employee can also make voluntary contributions into the Savings Scheme. These contributions can either be deducted by the employer from the employee’s salary and transferred on the employee’s behalf into the Savings Scheme, or the employee can transfer the amounts directly to the Savings Scheme through one of the approved providers. Any voluntary contributions made by the employee should not exceed 25% of their annual salary.
The MHRE has approved a number of providers for the Savings Scheme, including Ghaf Benefits, Daman Investments, National Bonds, and First Abu Dhabi Bank.
Employers have the option to choose whether they want to enroll any or all of their employees to the Savings Scheme. If the employer opts to participate in the Savings Scheme, end-of-service gratuity will stop accruing from the date the Savings Scheme is implemented by the employer. On termination of employment, an employee’s entitlement to end-of-service gratuity will be calculated from the commencement date of employment until the Savings Scheme implementation date.
The calculation will be made based on the basic salary paid to the employee as of the Savings Scheme implementation date. The current regulations regarding the Savings Scheme do not provide an option to transfer any accrued end-of-service gratuity into the Savings Scheme.
Employers who choose to continue paying end-of-service gratuity to employees will do so based on the current accrual rates:
- 21 calendar days’ basic salary for each of the first five years of employment
- 30 calendar days’ basic salary per year for any period of service in excess of five years
If a company is considering opting into the Savings Scheme, it will be prudent to conduct a thorough analysis of the advantages and disadvantages of the scheme for the employer. Such considerations might include cash flow on the one hand (as the Savings Scheme contributions will no longer be on the employer’s books) and employee retention and competitiveness in the UAE market on the other.