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December 19, 2023

UAE introduces voluntary alternative end-of-service benefits scheme

  • The Ministry of Human Resources and Emiratization of the UAE, in coordination with the Securities and Commodities Authority, has implemented a voluntary, alternative end-of-service benefits scheme.
  • The scheme is open to private-sector employers and employees, including those located in the free zones, and is part of the UAE's broader strategy to attract and retain global talent by providing a more secure and beneficial financial system to its expatriate workforce.
  • The new scheme allows employers to invest monthly end-of-service contributions in an investment fund, instead of having to make a lump-sum payment at the end of the employees' service.

Executive summary

On 10 October 2023, the Ministry of Human Resources and Emiratisation (MoHRE), in conjunction with the Securities and Commodities Authority (SCA), issued Cabinet Resolution No. (96) of 2023, according to the United Arab Emirates (UAE) Government website. The resolution introduces a voluntary, alternative end-of-service benefits scheme (Savings Scheme) for employers and employees in the private sector. The resolution is effective from the day following its publication.

The Savings Scheme allows employees to invest their end-of-service payouts in recognized investment funds and enables employers to make monthly end-of-service payments in place of a lump-sum payment at the end of the employees' service tenure. Employers who choose to participate in the Savings Scheme should make a monthly contribution to an investment fund, and employees can assess the amount they would like to contribute, aligning it with their specific needs and requirements. The Savings Scheme serves to protect employees from inflation, default or bankruptcy, and provides for a flexible investment program.

Detailed discussion


The UAE has been following a traditional end-of-service benefit scheme, whereby payouts are made as lump-sum amounts at the end of the employment contractual relationship. The newly introduced Savings Scheme addresses the need for a savings or investment component and provides retirement security for employees. The Savings Scheme is also part of the UAE's broader strategy to attract and retain global talent by providing a more secure and beneficial financial system to its expatriate workforce.

Highlights of the Savings Scheme

Requirements for employer participation in the alternative Savings Scheme

To participate in the Savings Scheme, employers must:

  • Submit a request to the MoHRE, in accordance with the procedures prescribed by the ministry
  • Select one of the licensed investment funds
  • Decide which category of employees should be included in the alternative scheme (for employees selected by their employers to participate in the alternative system, subscription becomes mandatory)
  • Discontinue the use of current end-of-service benefits for employees who are selected to participate in the alternative scheme
  • Calculate and pay the basic subscription amount without deducting it from the beneficiary's salary (amounts are not refundable to employers)

Employers are required to calculate the monthly subscription amount as follows:

  • For members with less than five years of service: 5.83% of the basic monthly salary
  • For members with five years of service or more: 8.33% of the basic monthly salary

Employers are required to transfer the contributions to the investment fund within 15 calendar days of the first day of the month.

General provisions for employees selected to participate

In addition to the basic employer subscription amount detailed above, it is possible for employees to contribute an additional percentage of their salary toward the scheme. The voluntary subscription percentage cannot exceed 25% of the total salary.

For additional monthly voluntary subscriptions, the employer will deduct the additional amount from the employee's wages and transfer the amount to their investment account.

Beneficiaries' right to voluntary participation ends with the termination of their employment relationship with the employer; however, they can retain their funds in the investment account after the termination if they wish to do so.

Beneficiaries are entitled to choose the investment fund they would like to use for their voluntary subscription. If unspecified, the investments will be automatically incorporated into the Capital Guarantee Fund.


In the implementation of the Savings Scheme in the UAE, employers may require expatriate employees to enroll in this defined contribution plan, necessitating mandatory monthly contributions from the host employer and careful tax planning to accommodate the changes.

Under a tax equalization approach, it is important for the home entity to factor in these monthly payments before initiating an assignment to the UAE. In addition, planning around the timing of the cash-out payment should be considered to avoid any unexpected liability in the home country.

While the Savings Scheme provides flexibility and choice regarding the end-of-service benefits structure in the UAE, it is essential to thoroughly assess the implications before making any decisions.


For additional information with respect to this Alert, please contact the following:

EY Consulting LLC, Dubai

Ernst & Young LLP (United States), Middle East Tax Desk, New York

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor