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How alternative EoSB schemes can redefine end-of-service benefits and empower employers and employees across the UAE.
As the UAE continues to cement its position as a global business and financial hub, employees and employers are looking at end-of-service benefits in a new light, particularly in terms of financial security and growth opportunities.
A shift in mindset
There has been a notable shift in UAE residents’ expectations. Expats no longer see the country as a place for a short stint; instead, many people now look at the United Arab Emirates as a destination for long-term living and career growth. Spurred on by reforms, such as golden visas, that make it easier to establish a longer-term presence in the Emirates, people are staying longer than ever before in the UAE.
Recognising this shift in mindset, the Ministry of Human Resources & Emiratisation (MOHRE) launched a transformative new scheme that allows individuals working in the UAE to secure their long-term financial future, partially addressing some of the potential shortfalls from not receiving a state pension from their country of origin. The alternative end-of-service benefits (EoSB) scheme enables employers to outsource the management of EoSB to professionally managed providers that are regulated by the Securities and Commodities Authority (SCA) and provide employees with smart and flexible financial options.
How does the traditional UAE gratuity scheme work?
Under the traditional UAE gratuity scheme, a lump-sum payment is made to employees at the end of their service, calculated on an employee’s basic salary and the duration of service.
While the traditional system can compensate for inflation if salaries rise accordingly, it does not offer a dedicated mechanism for employees to grow the value of their EoSB throughout their service. Consequently, employees risk sacrificing potential investment gains on their EoSB, making it more challenging to secure their financial future and achieve their life goals.
Administrative burden and inefficiencies
Traditional gratuity places the responsibility of managing employee end-of-service benefits on the employer, contributing to a significant administrative cost and pressure on the company’s cash management, given the requirement for lump-sum payments and the unpredictability of the timing of employee resignations and terminations.
Meanwhile, employees are exposed to risks related to the solvency of their employer, which could, in certain circumstances, lead to delayed payments or even loss of their EoSB.
Why choose an alternative end-of-service benefits scheme?
An alternative EoSB scheme, such as the Ghaf Benefits enhanced alternative EoSB plan, addresses many of the shortcomings of traditional end-of-service gratuity, marking a transformational shift in the UAE. By allowing employers to transfer employee entitlements to professionally managed, SCA-regulated funds, the scheme enables employees to earn potential investment returns from their EoSB entitlement throughout their service period.
Employees benefit from higher potential payouts, as their end-of-service gratuity is invested in funds that align with their risk profiles and preferences, helping to offset inflation and create opportunities for meaningful financial growth. The new scheme is familiar to many expats who are aware of popular and similar pension models in other countries.
Employers benefit too, as the alternative EoSB plan reduces administrative burden and provides more predictable and manageable cash flows, all outsourced to a MOHRE-approved, SCA-regulated fund manager. An employer transfers employee entitlements to the manager of the plan on a monthly basis, providing employees with security from insolvency risks and eliminating the need for large, unexpected lump-sum payments.
Ghaf Benefits’ enhanced alternative end-of-service benefits plan gives employees unmatched control and flexibility over their EoSB, offering the choice of a range of investment funds that cater to every individual’s circumstances, risk profile and financial goals. With a range of conventional and shariah-compliant funds to choose from, Ghaf Benefits puts employees in control of their financial future.
The secure and user-friendly online portal makes it easy for employers to enrol employees in the enhanced alternative EoSB plan and gives employees the ability to take charge of their finances. Employees can select an investment strategy suited to their preferences and allocate entitlements to different funds based on their risk/return profile. The platform also enables employees to make additional contributions to enhance returns and potentially accelerate the realisation of their goals.
With Ghaf Benefits, employees no longer have to rely on finding an online gratuity calculator via Google to figure out their end-of-service entitlement. The portal provides real-time portfolio tracking, allowing employees to monitor their investments, review performance and reallocate funds at any time – giving them confidence to make informed decisions about their financial future.
To learn more about how you can use Ghaf Benefits as a powerful tool for your financial wellbeing, please contact our client services team at +800-0-444-5068 or email eosbenquiries@ghafbenefits.com.
Disclaimer
The Lunate End of Service Benefits Fund (“Lunate EoSB”), known as the Ghaf Benefits plan, is managed by Lunate Capital LLC and its affiliates. The material provided is for informational and educational purposes only, not investment, legal, tax, accounting, or professional advice, nor an offer to buy or sell any securities or products. Recipients should seek independent professional advice before making decisions. Past performance or historical data are illustrative only and not indicative of future results, and forward-looking statements involve risks and uncertainties. Lunate does not guarantee the accuracy, completeness, or reliability of the material and disclaims liability for any losses, damages, or errors arising from its use. Redistribution is prohibited without prior written consent. While the Lunate EoSB is authorised by the UAE Securities and Commodities Authority (SCA), such authorisation does not represent endorsement or guarantee.
