UAE Savings Scheme vs. Traditional Gratuity: What's the Difference?
October 23, 2026
MOHRE introduced an optional Savings Scheme (under Cabinet Resolution 96/2023) as an alternative to the traditional end-of-service gratuity system. Employers who join contribute monthly to an investment fund on the employee's behalf, instead of the employee relying on the 21/30-day formula paid out as a lump sum at exit.
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Traditional gratuity is calculated retroactively at the end of employment, using the formula and the final basic salary. The Savings Scheme instead builds up a fund balance through regular employer contributions during employment, which the employee accesses when leaving — similar in spirit to a defined-contribution retirement account rather than a lump-sum formula.
Why It Exists
The stated aim of the scheme is to protect employees from risks associated with the traditional system — including the impact of inflation on a long-deferred lump sum, and the risk of an employer being unable to pay a large gratuity bill if they become insolvent. Participation is optional for private-sector employers, so whether it applies depends entirely on your specific employer's choice.
Frequently Asked Questions
Is the UAE Savings Scheme mandatory?
No — it's an optional alternative that private-sector employers may choose to join; it doesn't replace traditional gratuity for employers who don't opt in.
How is the Savings Scheme funded?
Through regular monthly employer contributions into an investment fund on the employee's behalf, rather than a lump-sum gratuity formula applied at exit.
Why would an employer prefer the Savings Scheme?
It spreads the cost over time as regular contributions rather than a potentially large lump-sum liability at an employee's exit, and is positioned as reducing employee risk from inflation or employer insolvency.
How do I know which system applies to me?
Check with your employer or HR department directly — participation in the Savings Scheme is an employer-level choice, not something that applies automatically.