If you employ private-sector staff in the UAE, you have a decision to make. The Alternative End-of-Service Benefits Savings Scheme has been live since November 2023. It is voluntary today, but the Ministry of Human Resources and Emiratisation ran a public consultation through February 2026 that most labour-law advisers read as a clear signal: a mandatory rollout is coming, likely phased by company size from later this year.
TL;DR: UAE employers can voluntarily replace the traditional gratuity accrual with monthly contributions into an approved investment fund. Rates are 5.83% of basic salary for staff under 5 years' service, 8.33% for 5 years and above. DIFC and ADGM run separate schemes. MoHRE's February 2026 consultation points to a phased mandatory rollout. Opting in early de-risks the transition.
What Is the UAE EOSB Savings Scheme?
The scheme is a voluntary alternative to the traditional end-of-service gratuity. Instead of carrying a growing gratuity liability on your balance sheet, you pay a fixed monthly contribution into an approved investment fund for each enrolled employee. The employee owns the fund balance and takes it with them when they leave.
It was created by Cabinet Resolution No. 96 of 2023 and went live on 1 November 2023. The official aim is to protect employees from inflation, employer insolvency, and the disputes that come with delayed gratuity payouts (MoHRE, 2023).
Once you enrol an employee, statutory gratuity accrual stops from that date. Anything earned under the old system before enrolment is preserved and paid separately when the employee leaves.
How Much Do Employers Contribute?
The contribution rate matches the existing gratuity accrual, so the cash cost should not change. You pay 5.83% of the employee's basic monthly salary for staff with less than five years of service, and 8.33% for staff with five or more years (MoHRE Awareness Portal, 2024). Subscriptions are transferred to the fund within 15 days of the start of each calendar month.
The 5.83% figure is 21 days of pay annualised. The 8.33% figure is 30 days. These mirror the gratuity formula, so your payroll cost stays flat. What changes is timing: cash leaves the business every month rather than building up until termination.
In our experience, that is the part that catches finance directors off guard. The accounting liability disappears, but the cash drag arrives early. Plan the working-capital impact before you sign anything, especially if you are mid-way through a year-end planning cycle.
Which Investment Funds Can You Use?
Four providers were approved at launch and remain the main options in 2026: Ghaf Benefits, Daman Investments, National Bonds, and First Abu Dhabi Bank (Bracewell LLP, 2024). Each provider offers a default capital-preservation portfolio plus higher-risk options the employee can switch into.
You select the provider as the employer. The employee picks the risk profile within that provider's range. If they pick nothing, contributions go into the default capital-preservation fund automatically.
The provider charges fees against the fund balance, not against the employer. Fee structures vary by provider and portfolio, so ask for the TER (total expense ratio) on the default fund before you commit.
Who Is Excluded From the Scheme?
DIFC and ADGM employees are not covered by Cabinet Resolution 96/2023. They sit under separate workplace-savings frameworks.
DIFC has run DEWS (DIFC Employee Workplace Savings) since 2020. DEWS is mandatory for DIFC employers, not optional. ADGM introduced its own end-of-service savings plan in April 2025 (Lux Actuaries, 2025). ADGM employers can choose between traditional gratuity or the new ADGM savings plan.
If your business operates across mainland and a financial free zone, you will run two systems in parallel: the EOSB Scheme (if you opt in) for mainland staff, and DEWS or the ADGM plan for free-zone staff. We covered the wider mainland vs free zone decision in our mainland vs free zone guide, which is worth re-reading if you are reviewing your structure.
Why MoHRE's 2026 Consultation Matters
MoHRE published a public consultation on the future of the scheme that closed in February 2026. The consultation is in the official econsultation portal and asked for views on broadening participation, mandatory enrolment thresholds, and contribution-rate calibration.
Reading the consultation document closely, the direction is unambiguous: MoHRE wants broader coverage. Adoption has been slower than the Ministry expected, with industry commentary suggesting adoption remains below 20% across mainland private-sector employers as of Q1 2026. A phased mandatory rollout, similar to how DIFC moved on DEWS, is what most labour advisers now expect from late 2026 onwards.
What we tell clients: do not bet on the timing, but do prepare for the direction. If you decide to opt in voluntarily before the rule changes, you control the transition. If you wait for the mandate, you implement on the regulator's calendar, not yours.
Should Your Business Opt In Now?
The case for opting in early has three parts.
First, you remove the gratuity liability from your balance sheet. For an SME with 20-50 staff and average tenure above five years, that is often AED 500,000 or more sitting on the books. Replacing it with monthly cash contributions makes the financial position cleaner, which matters for investor conversations and any future sale.
Second, you de-risk a future mandatory rollout. The consultation answers point to phased enforcement starting with larger employers, but the cut-off and timeline are not published. Opting in now means you control the change project. You pick the provider, run the employee comms, and integrate payroll on your own schedule.
Third, the scheme is genuinely a benefit for staff. The accrued balance grows with investment returns rather than sitting as an unsecured employer debt. For roles where you compete with DIFC and ADGM employers (who already offer DEWS or the ADGM plan), it removes a real recruitment gap. We see this most often with mid-market firms that also have to keep WPS payroll filings clean every month.
The case against is short-term cash. Gratuity is a deferred liability. The scheme converts it to monthly cash out. If your business is cash-tight or scaling fast, that drag is real and worth modelling before you commit.
What Action Should You Take This Quarter?
Three steps work for most clients:
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Build the gratuity liability number. Pull current accrued gratuity per employee from your payroll system and total it. That is the liability the scheme replaces.
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Model the cash impact for 12 months under the scheme. Take basic salary, apply 5.83% or 8.33% per the tenure split, and project monthly outflow. Compare it to your current free cash flow.
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Request quotes from two of the four approved providers. Ask for the default fund TER, the historical 3-year return, and the onboarding timeline. Pick on substance, not relationship.
If the numbers work, opt in for new hires first. That avoids the dual-system administration of part-enrolling existing staff. You can expand to existing employees in tranches over 6-12 months.
Frequently Asked Questions
Is the EOSB Savings Scheme mandatory in 2026?
No, not yet. It remains voluntary for private-sector mainland employers as of May 2026. MoHRE's February 2026 consultation strongly suggests a phased mandatory rollout is coming, likely starting with larger employers from late 2026 or 2027, but no date has been officially confirmed. DIFC's DEWS scheme is separately mandatory for DIFC employers.
What happens to gratuity already accrued before joining the scheme?
The accrued amount is preserved. Once you enrol an employee, their gratuity stops accruing under the old system from that date forward. The pre-enrolment balance is calculated at the changeover, recorded, and paid out separately when the employee leaves, in line with the original gratuity rules.
Can employees add their own contributions?
Yes. Employees can make voluntary contributions of up to 25% of their annual basic salary on top of the employer contribution. Voluntary employee contributions can be withdrawn during employment, unlike the employer portion which is only accessible at end of service.
How long do funds take to reach an employee after they leave?
The employee receives the basic employer subscription amounts plus any investment returns within 14 days after termination of employment (MoHRE, 2024). That is a meaningful improvement on traditional gratuity disputes, which can drag on for months.
Does the scheme affect tax or visa obligations?
The scheme is an alternative to gratuity. It does not change WPS payroll obligations, residence visa rules, or corporate tax treatment of staff costs. Employer contributions remain a deductible staff cost for corporate tax purposes. Always confirm the treatment with your accountant against your specific facts.
If you want a second pair of eyes on the cash impact and the provider comparison before you commit, book a free consultation. We work with UAE employers across mainland, DIFC, and ADGM and can model the scheme against your current payroll and gratuity position.