DEWS and Free Zone End of Service Schemes in UAE: Employer Guide 2026
End of service benefits in UAE free zones have been evolving significantly since DIFC introduced the DEWS (DIFC Employee Workplace Savings) scheme in 2020. For employers operating in DIFC, DEWS is now mandatory. For employers in other free zones — including ADGM, JAFZA, and DMCC — alternative funded schemes are available, and some are becoming mandatory on their own timelines. For mainland employers, the traditional gratuity model still applies under Federal Decree-Law No. 33 of 2021.
Understanding which regime applies to your workforce — and the compliance obligations that come with it — is essential for accurate employment cost modelling and avoiding penalties.
The Traditional UAE Gratuity Model: A Summary
Under the UAE Labour Law (Federal Decree-Law No. 33 of 2021), mainland private sector employees are entitled to a gratuity payment at the end of employment. The calculation:
- Employees with 1–5 years of service: 21 days of basic salary per year
- Employees with more than 5 years: 30 days of basic salary per year (for years beyond 5)
- Maximum total gratuity: 2 years' basic salary
Gratuity is calculated on the final basic salary at the time of departure. The employer pays it from operating cash at the point of departure — there is no mandatory funding requirement. This creates a contingent liability on the employer's balance sheet that grows as employees approach longer tenures.
The traditional model has two well-known employer weaknesses: the liability is unfunded (creating cash flow risk at exit), and the calculation basis (final basic salary) means gratuity exposure increases whenever salaries increase.
DIFC DEWS: The Mandatory Funded Alternative
DEWS (DIFC Employee Workplace Savings) replaced the traditional gratuity model for DIFC-registered employers from 1 February 2020. DEWS is mandatory for all employees of DIFC-registered entities.
How it works:
- Employers contribute a fixed percentage of the employee's monthly basic salary into a DEWS investment account in the employee's name
- The contribution rate is 5.83% of basic salary for employees with fewer than 5 years of service, and 8.33% for those with 5 or more years
- Contributions are invested and grow within the scheme — the employee receives the accumulated fund on departure
- Monthly contributions replace the end-of-service liability — there is no lump-sum payment due at the end
Employer advantages:
- Liability is funded monthly rather than accruing unfunded
- Balance sheet exposure is predictable and capped at the contribution rate
- No cash flow shock at departure — the payment comes from the accumulated fund, not operating cash
DEWS providers include Zurich International Life, Equiom, and others approved by DIFC. Employers select a provider and enrol all eligible employees at joining.
Non-compliance penalties in DIFC: Failure to enrol an employee or make required contributions is a violation of DIFC employment law and subject to fines by the DIFC Registrar of Companies.
ADGM EOSB Alternative Scheme
The Abu Dhabi Global Market (ADGM) introduced an optional end-of-service savings scheme from 1 April 2025, enabling ADGM-registered employers and employees to voluntarily adopt a funded alternative to the traditional gratuity model. Participation is discretionary for both the employer and the employee — it is not mandatory.
Under ADGM's default rules, end-of-service benefits for employees of ADGM-registered entities remain governed by traditional gratuity calculation (as under UAE Federal Law No. 33 of 2021), unless employer and employee mutually elect to participate in the optional savings scheme. This is a key distinction from DIFC, where DEWS is mandatory.
ADGM employers exploring the optional scheme should consult the ADGM Registrar and an approved scheme provider for current participation terms and approved fund managers.
Other UAE Free Zones: Voluntary Adoption
For free zones other than DIFC and ADGM — including JAFZA, DMCC, Dubai Airport Free Zone, Sharjah Airport International Free Zone, and others — there is no mandatory funded scheme as of August 2026. Employers in these zones may:
- Continue with the traditional gratuity model (accruing liability, paid at departure)
- Voluntarily adopt a funded alternative scheme
Some multinational employers operating across multiple UAE free zones are adopting funded schemes voluntarily across all entities for consistency and balance sheet management, even where not yet mandated.
Monitor MOHRE and individual free zone authority announcements — the trend toward mandatory funded schemes is likely to continue across additional zones.
Mainland UAE: No Funded Scheme Yet
Mainland private sector employers are still subject to the traditional gratuity model under Federal Decree-Law No. 33 of 2021. There is no mandatory funded scheme for mainland employers as of August 2026. Legislative discussion of a mainland funded scheme has occurred, but no implementation timeline has been confirmed.
Comparing the Models: Key Questions for Employers
Cash flow impact: Traditional gratuity creates a lump-sum liability at departure. Funded schemes spread the cost monthly. For employers with high turnover, the funded model is often more cash-flow predictable.
Balance sheet impact: Traditional gratuity is an accrued liability on the balance sheet. Monthly funded contributions are an expense — the funded pot belongs to the employee, reducing the employer's balance sheet liability to near zero after transition.
Employee perception: Funded schemes are generally perceived positively by employees — they can see their balance growing, they retain it on departure regardless of resignation or termination, and it is portable.
Cost comparison: The contribution rates (5.83% / 8.33% of basic salary) are broadly comparable to the traditional gratuity accrual rate for most tenures. The cost is similar; the structure is fundamentally different.
Mai HRMS tracks gratuity accrual for mainland employees and supports DEWS and ADGM scheme contribution calculation, helping employers manage end-of-service obligations accurately across multiple entities and regimes.
Start Free Trial or Book a Demo and see end-of-service management in Mai HRMS. 30-day free trial, no credit card required.
Frequently Asked Questions
Is DEWS mandatory for all DIFC employers?
Yes. DEWS has been mandatory for all DIFC-registered employers since 1 February 2020. All eligible employees must be enrolled from their first day of employment. There is no opt-out for individual employees or employers.
Is ADGM's end-of-service savings scheme mandatory?
No. ADGM's scheme (introduced April 2025) is voluntary — both employer and employee must elect to participate. Unlike DIFC's mandatory DEWS, ADGM-registered employers who do not participate continue to provide end-of-service benefits under the traditional gratuity model.
What happens to DEWS contributions if an employee is terminated for misconduct?
Under DEWS rules, employer contributions belong to the employee regardless of the reason for termination — even gross misconduct. This is a key difference from the traditional UAE gratuity model, where an employee who resigns in the first year or is terminated for misconduct may receive a reduced or no gratuity payment.
Can mainland UAE employers voluntarily adopt a DEWS-style scheme?
Yes. Mainland employers can voluntarily establish a funded savings scheme and contribute to it on behalf of employees. If the scheme value at departure meets or exceeds the statutory gratuity entitlement, this discharges the gratuity obligation. Legal structuring should be confirmed with a UAE employment lawyer.
For informational purposes only, reflecting DIFC Employment Law Amendment No. 4 of 2020, ADGM Employment Regulations, and UAE Federal Decree-Law No. 33 of 2021 as of August 2026. Consult a qualified UAE employment lawyer for business-specific advice. The ADGM optional scheme's exact launch date and current approved provider list should be confirmed directly with the ADGM Registrar before relying on this guide for a specific compliance decision.
Last updated: August 2026 by the Mai HRMS editorial team.
