Education
The way most employers and employees think about end-of-service benefits was shaped by a system built for simplicity. Traditional UAE gratuity was straightforward by design. A calculation, a lump sum, a transaction at the end of employment. It answered the question it was built to answer, and for a long time, that was enough. The Alternative End-of-Service Benefits (EoSB) Scheme goes further. It gives employees visibility over how their money grows and gives employers a structure that replaces liability with certainty.
However, where there are choices, there are often myths. Some for employers, some for employees, and most were formed long before an alternative existed.
For Employers:
Myth 1: “Moving to an alternative EoSB scheme ties up capital we might need elsewhere.”
This assumption mistakes structure for restriction. Under the traditional model, capital is not sitting freely available. It is quietly accumulating as a liability on your balance sheet that will eventually require a lump-sum payout, at a time and in an amount the business cannot fully anticipate or adequately prepare for. The Alternative EoSB Scheme does not lock capital away. It replaces an unpredictable future obligation with a predictable monthly contribution that goes directly into a fund in the employee’s name, producing a cash flow that is easier to plan around, not harder.
Myth 2: “Managing end-of-service benefits internally gives us more control over our obligations.”
It feels like control. The liability sits on the books, the calculation is familiar, and nothing changes hands until an employee leaves. But feeling in control of an obligation is not the same as managing it well. Internal management means the full liability remains with the business, unprotected and unfunded, or at best partially funded, entirely dependent on the company's financial position at the moment of payout. Economic pressure, geopolitical shifts, or workforce reductions can force the obligation into the open at the worst possible moment, and without pre-funded capital, the business absorbs the full impact. A structured alternative EoSB scheme moves monthly contributions into independently held, regulated funds on behalf of employees, removing the obligation from the balance sheet and transferring it to regulated alternative EoSB service providers where it can be professionally managed and generate returns.
Myth 3: “Switching to an alternative EoSB scheme means more work for my HR and Finance teams.”
The transition requires an initial setup, and that is where the additional effort ends. Under the traditional UAE gratuity model, HR and Finance teams carry the ongoing responsibility of calculating accruals, monitoring exposure and managing the timing of payments that fluctuate with every resignation or termination. An alternative EoSB scheme replaces this with a fixed monthly contribution rate administered by the plan provider. Rather than increasing workload, it shifts responsibilities to your service provider, reducing long-term burden.
Familiar is Not the Same as Safe
Each of these assumptions shares a common root. The traditional model was not just a gratuity payment system. It was a set of defaults that employers accepted because nothing else existed at that time. The Alternative EoSB Scheme does not challenge those defaults out of principle. It offers something the old model never could. A way to meet the same obligation with less exposure, less administrative complexity, and more financial predictability. The assumptions were reasonable once, but the world has changed and advanced. The traditional end-of-service approach was good at that time, but it is now behind the standard for today. In other words, it may have worked in the past, but it is simply not the right fit for our current time where employers need better risk control, clearer planning, and more sustainable cost structures.
For Employees:
Myth 1: “Investing my end-of-service benefits means taking on high risk.”
The Ghaf Benefits enhanced alternative EoSB plan offers a range of investment choices. At one end sit the Capital Protection funds, invested in UAE bank deposits and short-term government bonds, designed for employees who prioritise capital preservation above all else. At the other end sit the Global Balanced investment funds, which introduce broader market exposure for those with a longer horizon and an appetite for moderate growth while managing risk. The full spectrum in between exists precisely because different people have different needs. Choosing not to take on risk is itself a choice the scheme accommodates.
Myth 2: “I need investment expertise to manage my end-of-service benefits.”
An alternative EoSB plan is not a trading account. Employees are not expected to actively manage investments or make complex market decisions. Professional investment managers handle all day-to-day portfolio management, rebalancing and investment decisions on behalf of members. The employee's role is simply to select the fund option that best matches their risk tolerance and time horizon and then allow the professionals to manage the investments. If circumstances or preferences change, members can switch to a different fund option, but there is no expectation that they monitor markets, execute trades, or possess advanced investment knowledge. Fees are typically all-inclusive, and fund switching is generally available without additional charges. The scheme is designed to do the heavy lifting, allowing employees to benefit from professional investment management without needing investment expertise themselves.
Myth 3: “Pensions replace the need for an alternative EoSB plan.”
A common misconception is that an alternative EoSB plan is a pension. While both involve long-term savings and investment, they are fundamentally different. Under the Alternative EoSB Scheme, all contributions come from the employer, not from the employee’s salary or personal funds. The employer makes monthly contributions on the employee’s behalf, just as they do under the current gratuity system. This is an employer responsibility and a legal obligation built into the employment contract. A pension, by contrast, is a retirement savings programme that typically requires personal contributions deducted from the employee’s own salary. They invest their own money for long-term retirement income. If they stop contributing to their pension regularly in the early years, employees may receive no, or significantly less, pension than they would have expected. However, under the Alternative EoSB Scheme, employees continue to receive their full gratuity entitlement right up to the last date of employment, regardless of when they joined or how long they have been contributing. Understanding this distinction is important. Under the Alternative EoSB Scheme, employees are not making a retirement investment from their own pocket. They are receiving employer-funded benefits that now have the added advantage of professional investment management.
A Different Model, A Different Reality
What connects these assumptions is not ignorance. It is inheritance. Employees absorbed a set of beliefs about EoSB that the traditional system actively reinforced: that risk was inherent, that security depended on the employer, that continuity was impossible. The Alternative EoSB Scheme was built to address each of those conditions with something more dependable. The beliefs were logical given they reflected the norm for a long time. The facts now reflect the new standards that the Alternative EoSB Scheme has set.
Giving Your Business The Ghaf Benefits Advantage
These myths share a common thread. Each one dissolves the moment the structure of an alternative EoSB scheme becomes clear. Ghaf Benefits is that structure in practice. A MOHRE-approved, CMA-regulated enhanced alternative end-of-service benefits plan powered by Lunate, Ghaf Benefits enables employers to make monthly contributions to professionally managed conventional and shariah-compliant investment funds on behalf of their employees. These contributions are invested and can grow over time, giving employees a financial asset with the potential to build throughout their career. Through a secure online portal, employees always have full visibility and control over their entitlement, with the option to make voluntary contributions of up to 25% of their annual gross salary to grow it further.
To learn more about how Ghaf Benefits can empower your organisation and your employees for what comes next, please contact our client experience team at 6005 44 232 or email ghafenquiries@lunate.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 Capital Market Authority (CMA), such authorisation does not represent endorsement or guarantee.
