UAE Employers Alert: New MoHRE Rules Revolutionize ‘End of Service’ Benefits

The UAE has taken a significant step toward modernising employee benefits with new guidance issued by the Ministry of Human Resources and Emiratisation (MoHRE) in November 2025, reshaping how private sector employers can manage End of Service Benefits in the UAE (EOSB). These updates clarify the voluntary Alternative EOSB Savings Scheme introduced under Cabinet Resolution No. 96 of 2023, offering employers and eligible non-GCC employees an investment based alternative to the traditional lump sum gratuity system.

Understanding the Alternative End of Service Benefits Scheme

A shift from lump sum gratuities to savings based planning

The Alternative EOSB Scheme allows employers to replace future gratuity accruals with monthly contributions into a regulated savings and investment fund. Instead of a single payment at the end of employment, EOSB is accumulated over time, providing employees with greater transparency and protection while allowing employers to better forecast long term liabilities.

Who Can Participate in the Scheme

Employer led participation with defined conditions

Participation in the Scheme is voluntary for private sector employers operating in the UAE (excluding certain financial free zones, subject to confirmation). Employers must commit for a minimum period of one year, renewable thereafter, and may choose which eligible employee categories to enrol. Non-GCC employees are the primary beneficiaries under the current framework.

Contribution Structure and Financial Commitments

Mandatory monthly contributions linked to basic salary

Employers enrolling employees into the Scheme are required to make monthly contributions equivalent to 5.33% of the employee’s basic salary for the first five years of service and 8.33% thereafter. These contributions fully replace future EOSB gratuity accruals for enrolled employees, while any entitlements accrued before enrolment remain protected under Federal Decree Law No. 33 of 2021.

Protection of Accrued End of Service Benefits

Safeguarding employee rights during transition

EOSB accrued prior to enrolment in the Scheme must be preserved and calculated based on the employee’s basic salary at the date of enrolment, not their final salary. This ensures that existing employee rights are maintained while enabling employers to transition to the new system without retroactive risk.

Investment Options and Employee Flexibility

Balancing security with growth potential

Employers must select one MoHRE approved fund provider, such as Ghaf Benefits, Daman Investments, National Bonds, or First Abu Dhabi Bank. Employees may choose from available investment options, with a Capital Guarantee Fund applied by default for risk averse participants. Employees may also make voluntary additional contributions and withdraw those voluntary amounts at any time.

Access to Funds and Payment Timelines

Clear rules on withdrawals and payouts

Upon termination of employment, completion of service, or death, employees are entitled to receive the full accumulated balance, including employer contributions and investment returns. The Scheme requires payments to be processed promptly, generally within 14 days or 10 working days, enhancing certainty and financial security for employees.

Compliance, Governance, and Employer Obligations

Regulatory oversight and payroll integration

The Scheme is jointly overseen by MoHRE and the Securities and Commodities Authority, ensuring regulatory compliance and fund security. Employers must discontinue traditional EOSB accruals for enrolled employees, maintain accurate records, integrate contributions into payroll systems, and manage the transition carefully, particularly where accrued gratuities are concerned.

Strategic Implications for UAE Employers

Attracting talent while managing long term risk

By shifting toward a defined contribution model, the Alternative EOSB Scheme helps employers mitigate inflation risk, protect against insolvency exposure, and improve cash flow predictability. At the same time, it enhances the UAE’s appeal to global talent by offering a more transparent, portable, and investment driven approach to end of service benefits.

Conclusion

The MoHRE guidance marks a pivotal development in UAE employment law, requiring employers to carefully assess whether the Alternative EOSB Scheme aligns with their workforce strategy, financial planning, and compliance obligations. Early legal and strategic advice is essential to ensure a smooth transition and to safeguard both employer and employee interests.

For businesses seeking guidance, Al Kabban & Associates, with over 30 years of experience in UAE law and recognition by Legal 500, stands ready to help corporations build resilience against legal risks while ensuring compliance with local and international standards. For more information or to schedule a consultation, contact us at +971 4 453 9090 or visit www.alkabban.com. You can also follow us on social media for more updates on everything law related in the UAE: @Alkabban_Law

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