End-of-service gratuity is one of those topics that sits quietly in the background until a senior hire leaves and the unfunded liability lands all at once. For financial services firms in the UAE, the options for managing the obligation have expanded significantly, and the right choice meaningfully affects both employee retention and the firm's balance sheet exposure.
The Federal Default
Under the federal Labour Law, an employee with at least one year of service is entitled to gratuity on termination — 21 days of basic salary per year for the first five years, then 30 days per year thereafter, capped at two years of basic salary. The obligation accrues on each employer's books and is paid out at termination. Most firms outside the free zones still operate on this default.
DIFC: The DEWS Scheme
DIFC introduced the DIFC Employee Workplace Savings (DEWS) scheme in 2020, replacing the gratuity obligation with a funded workplace savings plan. Employers contribute monthly (8.33% for under-five-year tenure, 8.33% for over-five — the rate effectively matches the historical accrual), and the contributions are invested with the employee retaining ownership. The advantage is that the liability is funded as it accrues rather than building up on the balance sheet.
ADGM: A Similar Move
ADGM followed with its own workplace savings framework, mandatory for employers within its jurisdiction. The mechanics differ in detail but the principle is the same: contributions are funded as they accrue, and employees gain portable retirement-style savings.
Why This Matters for Senior Hires
For a financial services firm hiring at the AED 1.5 million to AED 4 million package level, the difference between a funded DEWS contribution and an accruing gratuity is significant in two ways. The funded contribution is visible to the employee monthly, which improves retention messaging. The unfunded accrual sits as a balance sheet liability that some private firms find difficult to plan for at the point of senior departure.
Voluntary Plans Beyond the Minimum
Several DIFC and ADGM employers now offer employer-matched additional contributions on top of the statutory rate, particularly for retention of senior compliance and risk professionals where the market is competitive. The cost is modest relative to recruitment fees for replacements.
What Mainland Firms Are Doing
A small number of mainland financial firms have begun voluntarily setting up funded gratuity arrangements with insurance providers, recognising that the unfunded model is becoming less defensible as the financial sector matures. This is not yet common, but it is a useful signal for firms designing benefit structures.
How Arabia Markets Helps
We model end-of-service liabilities as part of the workforce planning conversation rather than treating it as a back-office line item. For senior hire packages, the gratuity treatment is often the small detail that wins or loses the candidate.