UAE’s new end-of-service savings scheme explained for employees

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Abu Dhabi: The Ministry of Human Resources and Emiratization (MOHRE) has called on private sector companies to enroll in the Voluntary Savings Scheme, an alternative to the traditional end-of-service gratuity system.

The initiative offers significant benefits to participating companies by enabling them to invest employee end-of-service benefits in four leading and approved investment funds.

In its latest issue of Labour Market Magazine, the Ministry outlined 12 key advantages of the scheme for both employers and employees.

The four approved investment funds under the scheme are:
  • FAB Fund (First Abu Dhabi Bank)
  • Lunate Fund
  • Waha Capital’s “Waha Investment Fund”
  • The National Bonds Sukuk Fund

These funds are designed to offer secure and flexible investment options that help companies manage employee savings effectively—ensuring financial well-being and enhancing talent attraction and retention.

Broad benefits for participating companies

The Ministry highlighted that the scheme enhances companies’ reputations as forward-thinking, employee-centric organizations that prioritize financial security and future planning. It also helps boost employee loyalty and productivity, attract top talent, support long-term financial health, and strengthen resilience during crises.

Notably, the cost to employers under the savings scheme is lower in the medium term compared to the traditional gratuity payout, as contributions are based on the basic salary at the time of payment, rather than at the time of termination—when salaries are typically higher.

Investment returns for participating employees

For employees, the system offers multiple advantages, including asset growth, reliable investment returns on their savings, enhanced financial wellness, and greater family stability—since gratuity payouts are guaranteed regardless of an employer’s financial situation.

Employees also benefit from increased financial awareness and the ability to manage personal savings strategically. The scheme allows employees to maintain and grow their entitlements even after leaving a job, should they wish to keep their savings invested.

Employees may also make optional additional contributions—up to 25% of their total annual salary—to further grow their investments. Partial or full withdrawals of these contributions and returns are permitted in accordance with the scheme’s terms and conditions.

Skilled workers have the freedom to select from the full range of investment portfolios, while non-skilled workers are automatically placed in capital-guaranteed portfolios.

For employees whose companies opt into the scheme, any service period prior to enrollment will have end-of-service entitlements calculated according to traditional labour law. From the date of enrollment onward, benefits will be accrued under the new savings system. All accumulated benefits—both old and new—will be paid out at the end of the employment relationship.

New categories eligible for participation

The Ministry also announced the extension of voluntary participation in the scheme to three additional categories.

These include:

  • Self-employed individuals and freelance permit holders
  • Non-UAE nationals working in government entities, institutions, and affiliated companies
  • UAE nationals employed in both the public and private sectors

These groups may now opt into the Voluntary Savings Scheme to securely preserve and grow their savings, which can then be withdrawn as an end-of-service payout. Employers must continue to contribute on behalf of UAE nationals to relevant pension and social security schemes, as required by law.

Accessing employee entitlements

Employees moving to a new employer have the option to withdraw their savings from the fund or keep them invested. The new employer may continue contributions to the same fund or choose a different fund manager.

How are benefits disbursed?

To initiate the disbursement of legal entitlements, the employer must first terminate the contractual relationship by canceling the employee’s work permit via MOHRE. The employee then chooses either to withdraw the savings or continue the investment without making additional contributions.

Voluntary contributions can be withdrawn at any time upon request through the designated administrative service provider, with the returns paid out according to the employee’s preference and within the timeframe specified in the system.

 

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