UAE labour law and end-of-service benefits: the floor, not the ceiling

UAE labour law sets the floor for end-of-service benefits. It does not set the ceiling, and the difference between the two is where the workplace savings conversation actually lives.

What does UAE labour law actually require on end-of-service?

UAE labour law requires private sector employers to pay an end-of-service gratuity to eligible employees on termination of employment. The entitlement is set out in Federal Decree-Law No. 33 of 2021 and its implementing regulations, and it applies to full-time employees who have completed at least one year of continuous service. The calculation is based on the employee's basic salary and length of service, capped at two years' total pay.

Gratuity remains an unfunded employer liability by default. Most UAE employers accrue for it on the balance sheet and pay it from operating cash when an employee leaves. This is the model the market has run on for decades. It is also the model Cabinet Resolution No. 96 of 2023 was designed to give employers an alternative to.

What is the UAE voluntary gratuity scheme?

The UAE voluntary gratuity scheme is the alternative end-of-service framework created under Cabinet Resolution No. 96 of 2023. It allows participating employers to fund gratuity monthly into a regulated savings vehicle rather than carrying the liability internally. Participation is voluntary for private sector employers. It is not a replacement for the statutory obligation. It is a mechanism for meeting that obligation in a funded form.

Under the scheme, employers contribute monthly amounts calculated on the same basic salary and service basis as statutory gratuity, and those contributions are invested in a qualifying investment fund selected by the employer. Employees can also opt into voluntary top-up contributions. Day-to-day operations are run by fund administrators, with assets held by regulated custodians.

Who administers the scheme and what does each party do?

The scheme sits across a network of regulated parties, each with a defined operational role. Employers are the sponsors. The Ministry of Human Resources and Emiratisation, together with the Capital Markets Authority, defines the regulatory perimeter. Fund managers manage the qualifying investment funds. Custodians hold the assets. Fund administrators run the day-to-day investment and scheme operations, including contribution processing, reconciliation, member records, and reporting.

An employer joining the scheme does not choose one party. The employer chooses a scheme, and the surrounding infrastructure comes with that choice. This is the point HR leads most often underestimate during initial research. The operational quality of the administration matters as much as the fund selection, because the administration is what the employer and its employees interact with most, every month.

How does the voluntary scheme change the employer conversation?

The voluntary scheme converts gratuity from a back-of-book liability into a funded, visible workplace savings arrangement. That change has three consequences an employer should understand before deciding.

First, the balance sheet treatment changes. A funded scheme moves the accrual off the balance sheet as contributions are paid, subject to the specific accounting treatment agreed with auditors. Second, employees gain visibility of their end-of-service entitlement as an accumulating account rather than a promise. Third, the employer takes on an operational cadence: monthly contribution files, reconciliation with the administrator, joiner and leaver processing, and periodic reporting.

For employers weighing participation, the question is not whether the scheme is better than the statutory model in the abstract. It is whether the employer's specific workforce, retention picture, and finance function benefit from a funded structure at this stage.

What UAE labour law does not cover, and where employers get this wrong

UAE labour law does not require employers to fund gratuity. It does not require participation in the voluntary savings scheme. And it does not extend statutory gratuity protections to employees on categories of contract outside the scope of Federal Decree-Law No. 33 of 2021, which is a common misreading.

Where platforms and infrastructure providers fit

Behind every scheme sits an administrative platform. Some fund managers build this capability internally. Others work with specialist infrastructure providers. Cohlay is one such provider. Employers evaluating a scheme should consider their own experience as users of it, and ask their prospective provider what platform sits underneath, who runs it, and where the data is held.