In a significant move towards enhancing employee benefits and financial security, the UAE government has introduced a voluntary initiative, the Alternative End of Service Benefits Scheme, for private sector employees and free zone workers.

This initiative is considered to promote a culture of savings and offer employees various investment options for their end-of-service benefits. Here is a comprehensive overview of what you should know about this saving scheme.

End-Of-Service Benefits for Full-Time Employees

Article 51 of Federal Decree-Law No. 33/2021, which regulates labour relations (Labour Code), governs the End-of-Service Gratuity for full-time workers in the UAE. National workers are entitled to end-of-service gratuity as per existing legislation governing pensions and social security. Foreign workers in a full-time pattern become eligible for gratuity after completing one year or more of continuous service.

Calculation and Maximum Gratuity

The gratuity is calculated based on the employee’s basic salary, with 21 days of remuneration for each year of service during the first five years and 30 days of remuneration for each year after the initial five years. Fractions of service are also considered, but days of absence without pay are not. The total gratuity for foreign workers must not exceed two years’ worth of remuneration.

Fractional years are also considered for those with at least one year of continuous service. Absences without pay are not factored into the service length calculation. The gratuity is based on the worker’s last basic salary if they are paid monthly, weekly, or daily and on the average daily wage if they are paid on a piecework basis.

Importantly, the total end-of-service gratuity for foreign workers should not exceed two years’ remuneration. Employers have the authority to deduct legally owed amounts from the gratuity, subject to specified conditions.

Voluntary Alternative End-of-Service Benefits Scheme

The Voluntary Alternative End-of-Service Benefits Scheme (Savings Scheme) is the latest initiative, managed by the Securities and Commodities Authority (SCA) in collaboration with the Ministry of Human Resources and Emiratisation (MOHRE). It’s open to employees in the public sector, private sector, and free zones.

Optional Participation

Both employers and employees can opt to participate in this scheme, with no minimum salary requirement. Employers are required to participate for at least one year once registered, while employees become eligible after completing one year of employment.

 Employer & Employee Contributions

The initiative is voluntary for employers to join, but they are required to participate in the system for a minimum of one year once registered. Employees become eligible for this scheme after completing one year or more in their employment.

The scheme does not have a minimum salary requirement and allows employees to make voluntary contributions. For full-time employees with less than five years of service, employers contribute 5.83% of their monthly basic salary to the investment fund. This contribution increases to 8.33% for employees with more than five years of service.

 Investment Options

The scheme offers three investment options, including risk-free investment, risk-based investment with varying risk levels, and Sharia-compliant investment. The choice of investment depends on the fund manager.

Fund Management

Investment funds are managed by approved fund managers who meet specific criteria. Employers must ensure that the employee entitlements from the previous period are preserved when they select employees to participate in the retirement fund.

Flexibility and Protection

Employees can make voluntary contributions on top of the employer’s contribution. Contributions are deducted from their salaries. The voluntary contribution percentage cannot exceed 25% of the total salary annually. Employees can withdraw part or all of the voluntary contributions and investment returns during their employment, as per fund manager terms.

Complaint Resolution and Free Zone Employees

Complaints related to the scheme are handled by the Ministry of Human Resources and Emiratisation. Free zone authorities can develop personalized end-of-service benefits based on their jurisdiction and require approval from both the ministry and the SCA.

Penalties for Non-compliance

Employers failing to make basic subscription payments may face penalties, including fines and suspension of new work permits for the company.


The Alternative End of Service Benefits Scheme marks a progressive step in the UAE’s labour landscape. It offers employees a chance to secure their financial future and provides a safety net against bankruptcy or defaults.


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