Employer subscription cost under the voluntary savings scheme.
Monthly subscription
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Annual subscription
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Equivalent gratuity accrual
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A funded alternative to the old gratuity promise
For decades the UAE’s end-of-service benefit was an unfunded promise: an employer simply owed the leaving employee a gratuity calculated on basic salary, paid out of whatever cash the company had at the time. The voluntary alternative end-of-service savings scheme, introduced through MOHRE, changes the mechanics. Instead of accruing a future liability, the employer pays a monthly subscription into a regulated, invested savings fund in the employee’s name. The money is set aside as it is earned, it is professionally invested, and it is no longer exposed to the risk of an employer running short of cash on the day someone resigns. This calculator works out that monthly subscription from the basic salary and the service tier, and shows how it lines up against the gratuity that would otherwise be building.
Two tiers, set to mirror the gratuity accrual
The subscription is tiered by length of service, and the rates are not arbitrary. For employees with under five years of equivalent service the monthly contribution this tool applies is 5.83 percent of basic salary, and for five years or more it steps up to 8.33 percent. Those two numbers are chosen to track the traditional gratuity, which accrues 21 days of basic pay a year in the first five years and 30 days a year thereafter. Twenty-one days out of a 360-day convention is 5.83 percent, and 30 days is 8.33 percent, so the scheme is engineered to cost the employer roughly what the old liability cost, while the employee gains investment growth on top. The rates here are the figures this calculator models, and you should confirm the current tiers and the list of approved funds with MOHRE, since the scheme is recent and its terms have been refined since launch.
A AED 20,000 basic salary in tier one
Take an employee with a basic salary of AED 20,000 a month, in the first tier of under five years. The monthly subscription is 5.83 percent of basic, and you can see it lands almost exactly on the annual gratuity that would otherwise accrue.
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The annual subscription of AED 13,992 sits within a few dirhams of the AED 14,000 gratuity it replaces, the tiny gap being rounding in the percentage. The chart sets the two side by side so you can see how closely the scheme cost mirrors the old accrual.
What the employee actually gains, and where to look
If the cost matches, why bother switching? The gain sits on the investment side. Under the old system the gratuity was a flat number based on final basic salary, with no growth in between. Under the savings scheme the contributions are invested across risk-rated portfolios, from capital-protected to higher-growth options, and the employee keeps the returns. Over a long tenure that compounding can lift the final pot well above what a flat accrual would have delivered. There are points to watch. Contributions are based on basic salary, so a package heavy on allowances still produces modest contributions, just as the old gratuity did. The employee can usually also make voluntary top-ups for faster growth. Note too that there is no personal income tax in the UAE, so neither the contributions nor the investment growth is taxed at the individual level, unlike pension schemes in many other countries. This tool is built for employers costing the switch and for employees comparing the scheme against the gratuity they would otherwise accrue.
Can I keep my savings-scheme pot if I change jobs?
The invested balance belongs to you, and a key advantage over the old gratuity is that the money is already funded and set aside rather than owed by a former employer. Depending on the scheme rules you can often leave it invested or transfer it, rather than taking an immediate cash settlement, so it can keep compounding between jobs. Confirm the portability terms of your specific plan with the provider.
Does my old gratuity disappear when my employer joins the scheme?
No. The gratuity you accrued up to the date the employer enrols is typically frozen and protected as a separate entitlement, and the savings scheme then runs forward from that point. So you do not lose past service, you simply switch the mechanism for future accrual. Get the protected accrued figure confirmed in writing.