The Ministry of Human Resources and Emiratisation (MoHRE) has initiated a regulatory consultation following its evaluation of the Alternative End-of-Service Benefits (EOSB) Savings Scheme, introduced pursuant to Cabinet Resolution No. (96) of 2023. The consultation reflects a continuing evolution in the employment regulatory framework of the United Arab Emirates.
The Alternative EOSB Savings Scheme establishes an optional, investment-based model as an alternative to the traditional gratuity regime under UAE Labour Law.
Regulatory Background
Under Federal Decree-Law No. 33 of 2021 (UAE Labour Law), private-sector employees are entitled to end-of-service gratuity calculated on the basis of basic salary and length of service. Employers traditionally accrue this liability internally and settle it as a lump-sum payment upon termination of employment.
The Alternative EOSB Savings Scheme introduces a funded contribution structure whereby employers remit periodic contributions into approved investment funds on behalf of employees. Participating employers may substitute the traditional accrual-based gratuity obligation with this regulated savings mechanism, subject to compliance requirements.
The scheme remains voluntary and operates within a supervised regulatory framework.
Key Legal and Compliance Considerations
Employers assessing participation should undertake a comprehensive legal review addressing:
Transition of Existing Liabilities
- Treatment of accrued gratuity entitlements prior to enrolment
- Preservation of employee rights under existing contracts
- Transitional compliance obligations
Clear structuring is required to mitigate exposure to retrospective claims or disputes.
Contractual Documentation
- Amendments to employment contracts or issuance of addenda
- Formal employee acknowledgment
- Disclosure of contribution methodology and investment framework
Proper documentation is essential to avoid claims of misrepresentation or unilateral modification of statutory benefits.
Contribution Compliance and Governance
- Accurate calculation of statutory contribution amounts
- Timely remittance to approved funds
- Internal governance controls and reporting mechanisms
- Alignment of HR policies with the new framework
Regulatory non-compliance may result in penalties or labour disputes.
Allocation of Investment Risk
Unlike the traditional gratuity model, which guarantees a statutory minimum payment, the alternative scheme may introduce market-linked variability depending on selected fund options. Legal clarity is required regarding:
- Risk allocation between employer and employee
- Scope of regulatory safeguards
- Dispute resolution procedures
Implications for Employees
Employees should assess the comparative value of the alternative scheme against the traditional gratuity system, including:
- Potential long-term investment returns
- Risk exposure
- Portability of accumulated funds upon job change
- Protection mechanisms in cases of employer insolvency
Stakeholder feedback during the consultation phase has highlighted the need for enhanced transparency, simplified procedures, and increased awareness to support informed decision-making.
Policy Context
MoHRE has indicated that consultation outcomes will inform future regulatory refinements aimed at strengthening employee protections, enhancing financial sustainability, and aligning the UAE’s employment framework with internationally recognised funded end-of-service and retirement savings models.
The initiative represents a structural policy shift from an unfunded employer liability model toward a regulated, contribution-based savings system. Employers and employees are advised to monitor further implementing guidance and assess legal and financial implications prior to participation.