The savings scheme is not cost-neutral. The break-even is your pay rise.

What the scheme is, in one paragraph

Cabinet Resolution No. 96 of 2023 — issued 10 October 2023, in force 14 October 2023 — lets a private-sector employer stop accruing end-of-service gratuity for chosen employees and instead pay a monthly contribution into an investment fund licensed by the Securities and Commodities Authority. Ministerial Resolution No. 668 of 2023, issued 25 October 2023, sets the subscription mechanics. Four providers are currently listed by MOHRE: Ghaf Benefits, Daman Investments, National Bonds and First Abu Dhabi Bank. At the end of service the worker takes the accumulated contributions plus whatever the fund earned, instead of a gratuity calculated under Article 51.

"Voluntary" describes the employer, not you. Article 10(1) makes the scheme optional for employers. Article 10(2) then says it "shall be mandatory for workers who have been selected by their employer to participate". Article 5(2) lets the employer pick which categories and professional levels to enrol, so the same company can run both systems side by side. An employee nominated for the scheme has no statutory opt-out and no route back to gratuity for the enrolled period.

The rates, and the clause almost every summary gets wrong

Article 6(1) sets the basic monthly subscription for a full-time beneficiary at 5.83% of monthly basic wage where the service period does not exceed five years, and 8.33% where it exceeds five years. Those are the statutory accrual rates expressed monthly: 21 days ÷ 360 = 5.8333%, and 30 days ÷ 360 = 8.3333%, using the same ÷30 daily convention the gratuity calculator applies.

Now Article 6(2), which is where the drafting does something specific:

"…the basic subscription rate shall be calculated based on the beneficiary continuous service period as of the date of commencing his service with the employer, and not from the date of subscription to the system."

The five-year step runs from your hire date, not your enrolment date. An employee with seven years of service whose employer joins the scheme this month is contributed for at 8.33% from the first month — not at 5.83% for another five years. This is worth checking on the first payslip after enrolment, because the natural way to build a payroll rule is off the enrolment date, and the natural way to read a summary that says "5.83% for the first five years" is that the clock restarts. On a basic wage of AED 12,000 the error is AED 300 a month, and it compounds inside the fund.

Where the value actually moves

Both systems accrue at the same rate. They differ in which wage they accrue on.

Statutory gratuity	Article 51(2) calculates the whole entitlement on the basic wage at the end of service. Every promotion retroactively repriced all your prior years.
Savings scheme	Article 6(1) contributes a percentage of this month's basic wage. Year one is funded at year-one salary and stays there, apart from investment returns.

With a flat wage the two are identical to within rounding. With a rising wage they are not, and the gap grows with both the rate of increase and the length of service. Ten years of service, basic wage starting at AED 10,000:

All figures in AED, contributions modelled monthly at 5.83% for the first five years of service and 8.33% thereafter, gratuity at 21 and 30 days of final basic wage per year on the ÷30 daily convention. The last column is the compound annual return, net of all fees, at which the fund balance equals the gratuity that would otherwise have been paid.

Read the last column as the whole trade in one number: the fund has to beat your pay rises. It is not a coincidence that the break-even sits just below the salary-growth rate — it is arithmetic. Statutory gratuity is, in effect, an unfunded liability indexed to your basic wage; the scheme replaces it with a funded pot indexed to the market. Whether you come out ahead depends on which grows faster over your specific tenure, and nobody publishes that comparison because it has no single answer.

Two consequences that follow from the same fact:

• Fast risers should look hard at the numbers. Someone on a steep promotion track gives up the most and needs the highest return to stand still. Someone on a flat or near-flat wage — which is most of the market at the lower skill levels — gives up almost nothing and keeps every dirham the fund earns.
• Fees are not a detail here. The break-even is stated net. A portfolio returning 5% gross with 1% of annual charges is a 4% net portfolio, which does not match a 5% salary path. Ask each provider for total annual cost, not headline performance.

A very small point of arithmetic, in the employer's favour. The exact fractions are 5.8333…% and 8.3333…%. The resolution truncates them to two decimals. Over ten years on a flat AED 10,000 basic, that truncation is AED 40 — the −40 in the table above. It is not worth arguing about; it is worth knowing that the table's zero-growth row is not exactly zero.

The second transfer: your pre-scheme years get frozen

Article 5(3) obliges the employer to keep the gratuity accrued before enrolment — but read how it is to be valued:

"…the employer shall be committed to calculate the gratuity due to the beneficiary before implementing the alternative scheme in accordance with the provisions of the decree law. The employer shall pay such gratuity upon termination of the work relationship, calculated on the value of the beneficiary basic wage at the time of participation in the alternative scheme."

Outside the scheme, those years would have been repriced at your leaving wage. Inside it, they are fixed at your wage on the day the company enrolled you, and paid out years later in nominal dirhams. For an employee with six years of service enrolled at a basic wage of AED 12,000 who leaves eight years later on AED 18,000, the legacy portion is worth AED 66,600 (185 days × 12,000 ÷ 30) rather than the AED 99,900 the same six years would have been worth at the final wage. The difference — AED 33,300 — is not a deduction anyone announces; it is the arithmetic of the valuation date.

The mirror image is the reason a finance director likes the scheme: it converts an open-ended, salary-indexed provision into a fixed historic number plus a predictable monthly cash cost. MOHRE's own introductory guide states it plainly among the benefits for employers — enrolment "costs less on the medium term in comparison with the current end-of-service scheme". That is a true statement, and it is the same sentence as the one above, read from the other side.

What the worker gets that gratuity never offered

The trade is not one-way. Four protections in the resolution are real and have no equivalent under Article 51:

• Ring-fencing (Article 10(8)). Contributions already paid "shall not be included in a judicial enforcement, seizure, liquidation or bankruptcy procedures imposed on the employer". Statutory gratuity is an unsecured promise from a company that may not exist when you leave; money already in the fund is outside the wreck. For anyone who has watched an employer fold, this alone can outweigh the salary-indexation loss.
• Deductions need someone else's approval (Article 9(3)). The employer may demand deduction of amounts legally due to him "after the approval of the Ministry or in implementation of a judicial ruling". Compare Article 29 of the Executive Regulation, under which an employer deducts from a gratuity payment first and argues afterwards. In the scheme the burden of getting to the money is on the employer.
• A payment deadline with a named payer (Article 9(1)). Entitlements are due within 14 days of the end of the employment relationship, or to the successors within 10 working days of death — paid by the fund, not by the employer whose cash flow ended the relationship in the first place.
• Nothing is forfeitable. There is no clause anywhere in the resolution allowing a dismissal, a disciplinary finding or a resignation to reduce the pot. The one recovery right the employer has is narrow and early: under Article 10(7) he may recover the basic subscriptions only if the relationship ends before one year has passed from its start — which mirrors the one-year qualifying period for gratuity itself. After twelve months, the money is the worker's whatever happens. (Gratuity is not forfeitable either — see Article 44 dismissal — but that has to be argued; here there is nothing to argue about.)

One matching restriction: under the same Article 10(7), you cannot touch the basic pot before the employment relationship ends. No early withdrawal, no hardship access, no borrowing against it.

Voluntary contributions are a different animal

Article 7 lets the beneficiary add money on top, either deducted from wages monthly by the employer or paid directly to the fund as a lump sum. The rules are unusually flexible, and one of them is easy to misread:

• The cap is 25% of total wage — total, not basic — monthly, or the same proportion per year if paid as a lump sum (clause 2).
• You may change the percentage without any limit on the number of changes (clause 6).
• Unlike the basic pot, voluntary money can be withdrawn during service, in part or in full, subject to the fund manager's own controls (clause 4).
• You choose the investment option for voluntary money only; with no choice made it defaults to the capital guarantee option (clause 5).
• The right to keep contributing ends when the employment relationship ends, but you may leave the money invested (clause 3).
• Clause 7: voluntary contributions "shall not be counted among the beneficiary end of service gratuity entitlements." They are your savings sitting in the same vehicle — not part of any end-of-service calculation, and not a reason for an employer to contribute less.

Investment options — and an ambiguity worth knowing about

Article 8(1) requires each fund manager to offer a capital guarantee portfolio, risk-based portfolios, and Sharia-compliant options. Article 8(2) lets a skilled beneficiary choose freely; an unskilled one must be in the capital guarantee portfolio. "Skilled" is defined in Article 1 as a worker in professional levels one to five who receives a monthly salary of not less than AED 4,000, under the classification system approved by Cabinet Resolution No. 2/2 W of 2022.

Then the English text of Article 8(2) says something that does not sit easily with the rest of the sentence. Having made the beneficiary responsible for losses in a non-guaranteed option, it continues: "Provided that such losses shall not include the basic subscription amounts made by the employer, and the beneficiary shall not be entitled to file any claim against the employer for those losses."

Two readings, and we are not going to pretend to settle it. Read narrowly, the proviso is about who you can sue — losses on employer contributions are not the employer's problem. Read literally, it carves the employer's principal out of what can be lost at all. The difference is the whole downside of a risk-based portfolio, and the UAE Legislation portal states that the Arabic text prevails over the English translation. Before selecting anything other than the capital guarantee option, read the specific fund's offering document on this point and ask the provider in writing whether employer principal can fall below the sum contributed. Do not take the answer from a summary — including this one.

The employer's side: dates, penalties, pauses and the exit

Payment. Article 6(3) requires the monthly subscription to reach the fund's account within 15 days from the first day of each calendar month. Article 5(4) forbids deducting it from the worker's wage and makes it non-refundable to the employer.

Late payment ladder (Article 12). Four steps, each with its own clock:

Within 30 days	The fund manager sends a written warning; the employer has 5 working days from receipt to pay.
+15 days	Still unpaid 15 days after the warning was sent — the fund manager notifies the Ministry.
2 months	MOHRE stops issuing new work permits to the employer until the arrears are cleared, or takes other administrative measures.
4 months	An administrative fine of AED 1,000 per month for each beneficiary.

The last line is the one to model before enrolling a large workforce. It is per beneficiary per month, so an establishment with 60 enrolled employees four months in arrears is accruing AED 60,000 a month in fines on top of the arrears — while already unable to issue a work permit. Set against a contribution of roughly 5.83% of basic payroll, the penalty for not paying it is an order of magnitude larger than the obligation.

Pausing contributions (Ministerial Resolution No. 668 of 2023, Article 5). Contributions may be temporarily suspended with the Ministry's approval in six situations: proven financial failure of the establishment; the beneficiary's unjustified absence, where the employer has taken all necessary legal measures; imprisonment or detention by court order with salary suspended; restructuring, transfer of ownership, merger, acquisition or division; failure to return from annual leave on time; and unpaid leave. The application must state the period and carry the evidence. Two conditions attach:

• When the suspension ends, the employer must pay the subscriptions for the suspended period — except where the worker was not entitled to wages under the Decree-Law and its regulation (Article 5(3)). Unpaid leave and unjustified absence fall in that exception; a merger does not.
• If the employment relationship ends during a suspension, the end-of-service entitlement from the date of suspension is calculated under the Decree-Law, not the scheme (Article 5(4)). You fall back to statutory gratuity for that stretch.

Getting out (Article 13 and MR 668 Article 3). Withdrawal requires the Ministry's approval and four conditions: at least one year in the scheme, no outstanding administrative fines and no labour dispute pending settlement, a credit report submitted to the Ministry showing enough solvency to pay gratuity to the beneficiaries, and no effect on beneficiaries' rights. Inside the first year there are exactly three exceptional exits, and Ministerial Resolution No. 668 lists them: an application to cancel the establishment card, an acquisition or transfer of ownership, and proven bankruptcy or insolvency. "We changed our mind" is not on the list.

Withdrawal is also asymmetric by design (Article 13(2)): the employer cannot recover the subscriptions already paid, the beneficiary keeps them in or out of the fund as he prefers, and service after the withdrawal date goes back to accruing statutory gratuity. Joining is reversible; the money is not.

Part-time and other work models

Ministerial Resolution No. 668 gives the formula and works the example. The percentage is scaled by contracted hours: divide the hours in the part-time contract by the hours in a full-time contract, and multiply the result by the applicable rate. For a four-hour contract against an eight-hour full-time norm, the ratio is 0.5, and the rates become 2.415% under five years of service and 4.165% after. Note that the scaling is applied to the rate, not a second time to a pro-rated wage — the same double-discount trap set out in the employer's gratuity guide.

Where things actually stand in 2026

The scheme is still voluntary, and it is worth being precise about what has and has not happened, because the market commentary has run ahead of the record.

• MOHRE ran a public consultation on the scheme, "The Voluntary Alternative End-of-Service Benefits System", from 1 March 2025 to 28 February 2026, with the stated objective of "developing the policies of the alternative savings scheme … to enhance the protection of employees' rights". Its published outcome file is a newspaper feature about the scheme's advantages, dated November 2024 — not a policy decision.
• No decision making the scheme mandatory has been published, in whole or phased, as at the date on this page. Cabinet Resolution No. 96 of 2023 remains in force in its original form and Article 3 still describes it as applying "voluntarily". Commentary predicting a mandatory rollout is inferring it from the existence of the consultation.
• MOHRE's guidance page and its consultation page name the approved providers differently — Ghaf Benefits on one and Lunate on the other. They are the same provider; the customer guide MOHRE hosts is filed under both names. Check the current list on the Ministry's guidance page before signing anything, since the roster changes.

Financial free zones are outside all of this. Article 10(4) leaves DIFC and ADGM to develop their own alternative-scheme rules for entities under their jurisdiction, and requires Ministry and Authority approval before they extend such a service beyond it. In the DIFC the equivalent regime is already mandatory and works differently — see DIFC doesn't pay gratuity, it pays DEWS.

If you are being enrolled: five things to establish

1. The valuation of your legacy years. Get the pre-scheme gratuity figure in writing, with the basic wage and the service dates it was calculated on. Article 5(3) fixes it at your wage on the day of enrolment; that number should exist on paper from day one, not be reconstructed at your exit.
2. Which rate you are on. If your continuous service already exceeds five years, the rate is 8.33% from the first contribution — Article 6(2), measured from your hire date.
3. Which portfolio you are in, and its total annual cost. Unskilled workers are in capital guarantee by law. Everyone else chose something, or had something chosen. Fees come off the break-even in the table above.
4. Whether the contributions are actually arriving. The fund gives you a savings account and a statement; the fifteenth of the month is the deadline. Non-payment is a labour complaint to MOHRE like any other (MR 668, Article 6), and the ladder in Article 12 runs on its own once the fund manager reports it.
5. What happens when you move. On changing employer you may withdraw or leave the money invested; a new employer may take over contributions into the same fund or register you with a different one (Article 10(9) and MR 668, Article 2(3)). Nothing is lost by moving — but nothing follows you automatically either.

What has not been published

Three gaps, stated plainly so nobody fills them with a guess:

• No mandatory implementation timetable, phase-in by company size, or sector list has been issued.
• The resolution does not set a fee cap, a minimum guaranteed return, or a benchmark that fund managers must meet. Article 10(12) lets the Authority direct a percentage of contributions into the domestic economy; no such requirement has been published.
• Article 10(14) sets the minimum employer participation at one year and lets the Ministry and Authority extend it "to ensure the success of the system". No extension has been published, and no criteria for one.

One drafting note for anyone reading the source: the official English translation of Ministerial Resolution No. 668 numbers two consecutive provisions "Article (3)" and then jumps to "Article (5)". The article on the minimum subscription period and the article on the calculation basis are both numbered 3. Cite them by subject, not by number.