Lets private-sector employers, including free zone employers, opt out of the gratuity system and instead pay monthly contributions into SCA-licensed investment funds: 5.83% of basic salary for employees with under five years' service and 8.33% thereafter, with voluntary employee top-ups and a mandatory capital-guaranteed option. Gratuity accrued before joining is preserved.
Cabinet Resolution No. 96 of 2023 lets private-sector employers replace the statutory end-of-service gratuity with a funded savings scheme. It was issued on 10 October 2023 and, under Article 16, took effect the day after publication in the Official Gazette. It has 16 articles and an annex on investment fund provider standards, and remains in force.
Article 3 opens the alternative system to private-sector employers and employees in the UAE, including free zones, on an opt-in basis. Participation is voluntary for the employer but, once the employer selects categories of staff, mandatory for those employees (Article 10). An employer applies to the Ministry of Human Resources and Emiratisation (Article 4), contracts with an SCA-licensed investment fund, stops accruing gratuity for the selected staff and pays the basic subscription without deducting it from wages (Article 5). Gratuity accrued before the employer joined remains payable at termination on the basic salary at the date of joining.
Article 6 sets the employer's monthly basic subscription at 5.83% of basic salary for employees with under five years' service and 8.33% for those with more, counted from the start of employment, payable to the fund within 15 days of the start of each month. Article 7 allows voluntary employee contributions by monthly deduction or lump sum, capped at 25% of total salary, which the employee may vary, withdraw during employment and keep after leaving. Article 8 requires fund managers to offer several options, including a capital-guaranteed option for unskilled workers and Sharia-compliant funds; losses on non-guaranteed options fall on the beneficiary unless the provider acted in bad faith or with gross negligence.
On termination the beneficiary receives the employer contributions and returns within 14 days, or heirs within 10 working days of death, and may leave the money invested (Article 9). Article 12 governs employer default: written notice from the fund manager within 30 days, five business days to pay, suspension of new work permits after two months' non-payment and a penalty of AED 1,000 per beneficiary per month after four months. Article 13 allows an employer to withdraw only with Ministry approval after at least one year, with no outstanding fines or disputes, and the standard gratuity calculation resumes thereafter. The Ministry and SCA supervise jointly (Article 11); free zone authorities supervise within their zones.
Private-sector employers in the UAE, including free zone employers, that choose to opt in, and the employees in the categories those employers select, for whom participation then becomes mandatory. Investment fund managers licensed by the Securities and Commodities Authority act as providers. Government employees and pension-covered nationals are outside it.
| Article 3 | Private-sector employers and employees in the UAE, including free zones, may opt to apply the alternative end-of-service benefits system. |
| Article 5 | The employer must contract a licensed fund, choose the covered staff and levels, stop the gratuity system for them and pay the basic subscription without deducting it from wages; previously accrued gratuity stays payable at termination. |
| Article 6 | Monthly basic subscription of 5.83% of basic salary for under five years' service and 8.33% thereafter, counted from the employment start date, paid to the fund within 15 days of the start of each month. |
| Article 7 | Employees may add voluntary contributions by monthly deduction or lump sum, capped at 25% of total salary, may change the percentage, withdraw during employment and keep the money after leaving. |
| Article 8 | Fund managers must offer several options including a capital-guaranteed option for unskilled workers, risk-based portfolios and Sharia-compliant funds; losses on non-guaranteed options fall on the beneficiary absent bad faith or gross negligence. |
| Article 9 | Beneficiaries receive employer subscriptions and returns within 14 days of termination, heirs within 10 working days of death; employers may recover sums only with Ministry approval or a court order. |
| Article 10 | Participation is optional for employers but mandatory for selected employees; contributions are in AED, protected from seizure, transferable between employers and funds, with a minimum one-year participation period. |
| Article 12 | On missed contributions the fund manager gives written notice within 30 days and five business days to pay; after two months the Ministry stops new work permits and after four months a penalty of AED 1,000 per beneficiary per month applies. |
| Article 13 | Employer withdrawal requires Ministry approval, at least one year of participation, no outstanding fines or labour disputes and a credit report; contributions cannot be reclaimed and standard gratuity resumes. |
Article 12: after two months of unpaid contributions the Ministry suspends issuance of new work permits to the employer; after four months a penalty of AED 1,000 per beneficiary per month applies. The fund manager must first give written notice within 30 days and a five-business-day cure period, and must inform the Ministry within 15 days of that notice.
We raise this option with employer clients who would rather fund gratuity as it accrues than carry an unfunded liability on the balance sheet, and with those whose bankers or auditors ask how end-of-service obligations are provided for. The arithmetic is simple: 5.83% of basic salary approximates 21 days' pay a year and 8.33% approximates 30 days, so the cash cost mirrors the statutory accrual but leaves the employer with no lump sum at exit. We warn that the switch is one-way for at least a year, that selected employees cannot opt out, and that the AED 1,000 per employee per month penalty and permit freeze follow quickly if contributions lapse. For most SME clients we model both routes before they apply to the Ministry.
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