- The scheme replaces the deferred gratuity with monthly contributions into an invested, employee-owned account.
- Employer contribution is 5.83% of basic salary monthly for the first five years, rising to 8.33% after.
- DIFC has used this model since 2020; ADGM followed with its own regulations in April 2025.
- Enrollment remains voluntary for most UAE employers as of early 2026, but mandatory rollout is expected.
- The monthly contribution changes payroll cash flow from a deferred liability to a steady monthly outflow.
- Employers transitioning existing staff need to address gratuity already accrued under the old system.
The traditional end-of-service gratuity is being phased out in favor of a funded savings scheme, following the pattern DIFC set in 2020 with DEWS. Employers contribute 5.83% of basic salary monthly for the first five years, rising to 8.33% after that.
As of early 2026, enrollment is still voluntary for most UAE employers outside DIFC. MoHRE’s public consultation signals a mandatory rollout is approaching, likely phased by company size.
This guide covers how the savings scheme actually works, why it differs fundamentally from the old gratuity calculation, and what employers should budget for before enrollment becomes mandatory.
Why this is a savings account, not a gratuity formula
Traditional gratuity was calculated once, at the end of employment, based on final salary and years of service. It sat as a liability on the employer’s books the whole time.
The new scheme works differently. Employers pay monthly contributions into an invested, ring-fenced account held in the employee’s own name.
The employee can generally see the account grow in real time, rather than waiting until departure to find out what they’re owed. This is a genuinely different financial relationship between employer and employee.
| Detail | What applies |
|---|---|
| Employer contribution, years 1-5 | 5.83% of basic salary monthly |
| Employer contribution, year 6+ | 8.33% of basic salary monthly |
| DIFC status | Own scheme (DEWS), mandatory since 2020 |
| ADGM status | Own regulations, in force since April 2025 |
| Mainland/other free zones | Currently voluntary; mandatory rollout expected |
“A gratuity you calculate once at the end is a promise. A savings account you fund every month is money the employee can already see. That difference changes how employees think about staying, not just how they get paid on the way out.”
Why DIFC moved to this model years before the rest of the UAE
DIFC replaced its traditional gratuity with DEWS back in 2020, well ahead of the wider UAE conversation. As a financial free zone with a large expatriate professional workforce, DIFC had strong reasons to modernize.
The old gratuity system left employees with an unfunded promise, dependent entirely on the employer’s solvency at departure. A funded, invested scheme removes that dependency.
ADGM followed with its own equivalent regulations in April 2025. The rest of the UAE, including mainland and most other free zones, has been watching these two implementations before its own mandatory rollout.
Consider a mainland company with 40 employees, budgeting for the still-voluntary savings scheme ahead of an expected mandatory rollout. The founder initially assumed enrollment would cost roughly the same as the old gratuity accrual.
In practice, the monthly contribution model meant cash left the business steadily rather than accumulating as a deferred liability. The founder had to adjust monthly payroll cash flow projections, since the new model front-loads cost in a way the old accrual-based gratuity never did.
Why employers currently have more flexibility than they might expect
MoHRE’s November 2025 guidance confirmed employers may choose to enrol all employees, specific groups, or selected professional categories, at least while enrollment remains voluntary. This gives employers room to pilot the scheme before any mandatory deadline arrives.
A founder wanting to test the scheme’s cash flow impact before committing company-wide can enrol a smaller group first. This is a meaningfully different approach than waiting for a mandatory deadline and enrolling everyone at once.
Once mandatory rollout begins, expected to be phased by company size and sector, this selective enrollment flexibility will likely narrow. Acting during the voluntary window is the only chance to test the model gradually.
Why this changes the real cost of hiring, not just year-end payouts
A founder budgeting the true cost of a new hire needs to add this monthly contribution on top of salary, visa, insurance, and other standard costs. It’s not a distant, deferred cost anymore.
See our guide on what a UAE company’s first employee actually costs to hire for the fuller per-hire cost breakdown this monthly contribution now adds to.
The contribution rate step-up after five years also means longer-tenured staff cost more per month than newer hires, a detail worth factoring into workforce planning for founders scaling a team over several years.
Why this belongs in year-one-and-beyond cost planning, not just hiring budgets
The savings scheme contribution is a recurring cost that continues for as long as an employee stays, not a one-time hiring expense. It needs its own line in ongoing operating budgets.
See our guide on the real cost of running a UAE company after year one for how recurring workforce costs like this compound as a company scales past its first year.
How this interacts with Emiratisation quota planning
Companies subject to Emiratisation quotas are already tracking UAE national headcount closely. The savings scheme applies to eligible employees regardless of nationality, adding another payroll variable to an already carefully monitored compliance area.
See our guide on how mainland workforce quota rules changed for SMEs in 2026 for how workforce compliance planning increasingly needs to account for multiple overlapping requirements at once.
Why growing families add a parallel cost employers should anticipate
Employees building a life in the UAE around a stable job often bring dependents, which carries its own visa and sponsorship cost separate from the savings scheme itself. A comprehensive total employment cost picture includes both.
See our guide on the cost and requirements behind sponsoring family in the UAE for how family-related costs layer onto the direct compensation and savings contribution costs covered here.
Why the savings scheme needs its own banking and fund relationship
Contributions flow into an invested master trust or an approved Qualifying Alternative Scheme, not directly into an employee’s personal bank account. Employers need to establish this administrative relationship correctly from the outset.
See our guide on UAE corporate bank account documents, timeline, and minimum balance for the broader banking relationship a growing company needs to have in order before adding scheme administration on top.
What an employee actually receives when they leave
Under the old gratuity system, an employee received a lump sum on departure, calculated from final salary and years served. Disputes over that calculation were common, particularly around what counted as basic salary.
Under the savings scheme, the employee owns the account balance directly. There’s no end-of-employment calculation dispute, since the account has already been tracking contributions and investment growth the entire time.
This removes a genuine source of friction at offboarding. Employers spend less time defending a gratuity calculation, and employees leave with a number they’ve already been able to see and verify along the way.
Who actually qualifies for enrollment under current rules
Eligibility generally follows standard UAE private-sector employment categories, covering employees on standard limited and unlimited contracts. Certain categories, such as domestic workers, typically fall under separate schemes entirely.
Employers with a mixed workforce spanning several visa and contract categories should confirm which specific employees the scheme actually covers, rather than assuming blanket coverage across every payroll line.
This confirmation step matters most for companies with contractors, part-time staff, or secondees on non-standard arrangements, where eligibility isn’t always obvious from the contract type alone.
Why the “invested” part of the scheme carries its own considerations
Unlike a simple deferred liability, contributions under the savings scheme are actually invested, meaning the account balance can fluctuate with market performance rather than growing at a fixed, guaranteed rate. Most schemes offer a choice between more conservative and more growth-oriented investment options.
Employers typically aren’t responsible for investment performance once contributions are correctly paid into the scheme, but employees may have questions about how their own balance is invested. A basic understanding of the available options helps HR teams answer employee questions credibly.
This is a genuine shift in how UAE employees think about their own end-of-service benefit, moving from a fixed formula they didn’t think about until departure, to an investment account they can track and have some input into.
How this connects to the Wages Protection System employers already use
UAE employers already route salary payments through the Wages Protection System, which verifies wages are paid correctly and on time. Savings scheme contributions are a separate payment stream from WPS salary payments, requiring their own tracking and remittance process.
A payroll system built purely around WPS compliance needs a genuine addition, not just a line-item adjustment, to correctly handle scheme contributions alongside standard wage payments. Treating the two as the same process risks errors in either the wage payment or the contribution itself.
Founders setting up payroll for the first time, or reviewing an existing setup ahead of the scheme’s expected mandatory rollout, should confirm their payroll provider or software genuinely supports both processes running correctly in parallel.
What happens to gratuity already accrued before enrollment
An employer enrolling existing staff into the savings scheme generally needs to address the gratuity liability already accrued under the old system before the transition, rather than simply switching payroll treatment going forward with no reconciliation. This existing liability doesn’t disappear on its own.
Some employers settle the accrued amount directly with the employee at the point of transition. Others fund an initial lump sum into the new scheme account to represent the value already earned.
Whichever approach a company takes, it needs to be documented clearly, since an ambiguous transition creates exactly the kind of dispute risk the new scheme was designed to eliminate in the first place. See our guide on what a complete UAE compliance checklist actually covers for how a transition like this should be documented as part of a broader compliance record, not handled informally.
Businesses that treat this transition as purely an HR conversation, without a written record either party can point back to later, are the ones most likely to face a dispute months or years after the fact when memories of the original agreement have faded.
Employers operating across multiple emirates or free zones should also confirm whether any jurisdiction-specific variations apply to the standard scheme, since a company with staff spread across different registration types may find enrollment mechanics differ slightly depending on where each employee is actually registered.
Common mistakes when planning for the UAE savings scheme
- Assuming the monthly contribution costs the same as the old deferred gratuity accrual.
- Not adjusting payroll cash flow projections for the shift from deferred liability to monthly outflow.
- Waiting for a mandatory deadline instead of piloting enrollment while it’s still voluntary.
- Overlooking the contribution rate step-up after five years when budgeting for longer-tenured staff.
When professional help is worth it
A small, straightforward payroll can often model the contribution cost directly using MoHRE’s published rates. Where guidance is worth the cost is any company planning enrollment ahead of the expected mandatory rollout, since getting the fund administration relationship set up correctly the first time avoids a disruptive correction later.
e.zone’s workforce planning specialists can help model the contribution cost against your specific payroll before enrollment. See e.zone’s guide on how UAE labour law has evolved for the broader legislative context this savings scheme sits within.
Frequently asked questions
Is the UAE end-of-service savings scheme mandatory?
As of early 2026, enrollment is still voluntary for most UAE employers outside DIFC, though MoHRE guidance signals a mandatory rollout is approaching.
How much do employers contribute to the savings scheme?
Employers contribute 5.83% of basic salary monthly for the first five years of an employee's service, rising to 8.33% monthly after that.
How is this different from the traditional gratuity?
Traditional gratuity was a lump sum calculated once at departure. The savings scheme is a funded, invested account that grows monthly and is owned directly by the employee.
Does DIFC use the same scheme as the rest of the UAE?
DIFC has run its own version, DEWS, since 2020. ADGM introduced its own equivalent regulations in April 2025, separate from the mainland scheme.
What happens to gratuity already accrued before enrolling in the new scheme?
Employers generally need to address the existing accrued liability directly with the employee or fund an initial lump sum into the new scheme account, documented clearly to avoid future disputes.
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