Introduction: The Significance of End of Service Gratuity in the DIFC

The Dubai International Financial Centre (DIFC) is a premier global financial hub within the United Arab Emirates, operating under its own independent legal framework distinct from onshore UAE law. One of the key employment considerations for businesses and professionals in the DIFC is the regime governing end-of-service benefits. Employers and employees alike must navigate a regulatory landscape shaped by recent transformations, including the introduction of the DIFC Employee Workplace Savings Plan (DEWS) and amendments to traditional gratuity structures. By 2025, the compliance and implementation of these end-of-service obligations have become even more critical, both from a legal and business risk perspective.

This expert analysis examines the governing regulations, methods of calculation, and practical implications of end-of-service gratuity in the DIFC. We contrast these with the wider UAE Federal Law framework while addressing compliance strategies to mitigate risks. The article provides actionable insights and calculation examples to support HR and corporate decision-makers as they adapt to evolving legal requirements. Staying compliant is not only a legal imperative but a driver of business reputation, talent retention, and sustainable operations within a competitive regional market.

Table of Contents

Overview of DIFC Employment Law and Regulatory Landscape

The Legal Framework: DIFC Employment Law and Federal Context

The DIFC operates under its own specific set of employment laws codified in the DIFC Employment Law, Law No. 2 of 2019, as subsequently amended. The authority responsible for oversight is the DIFC Authority, which periodically issues related regulations and clarifications.

Most recently, the DIFC Employment Law Amendment Law No. 4 of 2020 introduced pivotal changes regarding employee end-of-service benefits, aligning DIFC with international best practices and replacing the historical end-of-service gratuity framework. This sits alongside the UAE’s wider labor regime, particularly Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (the “New UAE Labour Law”), effective from 2 February 2022, which governs gratuity rights for non-DIFC employees in mainland UAE.

Employers within the DIFC must recognize the clear legal distinction between DIFC-specific regulations and UAE Federal Law, both in their substance and application. Non-compliance exposes firms to legal risk, regulatory intervention, and liabilities under either or both frameworks.

How the DIFC Employee Workplace Savings Plan (DEWS) Replaced the Traditional Gratuity Regime

Transformation of Gratuity Entitlements in DIFC

Until early 2020, employment contracts in the DIFC entitled employees to a traditional end-of-service gratuity (EOSG) similar to the approach in the wider UAE. However, to modernize and enhance the security of employee savings, the DIFC Employee Workplace Savings Plan (DEWS) was established on 1 February 2020.

Key elements of this regime include:

  • A compulsory contribution scheme whereby employers pay monthly contributions into a trust-managed fund for eligible employees.
  • The plan is governed by an independent supervisory board and managed by internationally recognized providers.
  • The DEWS plan replaces the previous lump-sum gratuity model and allows for the accrual of investment returns in addition to employer contributions.
  • Employees are able to make voluntary contributions on top of the mandatory employer payments, providing flexibility and fostering a culture of savings.

Legal basis: The implementation of DEWS and its framework is set out within DIFC Law No. 2 of 2019 as amended by Law No. 4 of 2020 and supporting DEWS Rules and Guidelines, officially issued and updated by the DIFC Authority.

Who is Affected?

The DEWS obligation applies to:

  • All employers licensed in the DIFC, for their eligible employees (except a handful of categories: government, DFSA and the Dubai Financial Services Authority staff, and certain short-term secondees or those with specific alternative arrangements approved by the DIFC Authority).
  • All employees working primarily in the DIFC unless otherwise excepted by law.

End-of-Service Gratuity: Detailed Calculation Methods in DIFC

Monthly DEWS Contributions: How the Calculation Works

Under the DEWS regime, the traditional end-of-service lump-sum is replaced by mandatory monthly employer contributions into the employee’s DEWS account throughout the period of qualifying service.

Statutory Contribution Rates

Employee Type Required Employer Contribution (% of basic salary)
0–5 years 5.83%
More than 5 years 8.33%

These reflect the previous gratuity accrual rates under legacy schemes but are now contributed monthly, not as a terminal lump-sum.

Which Elements of Salary Are Included?

Crucially, only the “Basic Salary” is considered for statutory DEWS contributions, excluding fixed or variable allowances, bonuses, commissions, etc., unless expressly defined in contract. Mis-categorization of salary components to avoid contributions is prohibited and constitutes a breach of DIFC Employment Law.

Voluntary Employee Contributions

Employees are permitted to make additional voluntary contributions to their DEWS account (directly from net salary), which are not mandated by law but can form part of the employee’s long-term financial planning.

Handling of Pre-DEWS Accrued Gratuity (Transitional Rules)

For employees with service preceding 1 February 2020, employers must calculate and ring-fence the total accrued gratuity entitlement up to the transition date, in accordance with the pre-DEWS EOSG formula. This sum must be maintained and paid when the employee leaves, separate from DEWS contributions.

DEWS Payout: Conditions and Processes

  • On termination of employment, the employee receives the invested value of all employer (and own) contributions plus or minus any gains or losses from the DEWS fund’s investments.
  • Any pre-DEWS gratuity (if relevant) is paid as a separate lump sum in accordance with legacy rules.

Comparison: DIFC vs. UAE Federal Decree Law on End-of-Service Benefits

Structural and Procedural Differences

There are critical differences between DIFC and onshore UAE in both the structure and calculation of end-of-service benefits. It is essential that multinationals and HR managers with employees in both regimes ensure correct application and compliance.

Feature DIFC (DEWS Regime) Wider UAE (Federal Decree Law No. 33 of 2021)
Legislation DIFC Employment Law No. 2/2019 as amended by No. 4/2020 Federal Decree Law No. 33/2021
Applicability All DIFC-licensed employers and eligible employees All onshore UAE employers and employees (outside financial free zones)
Calculation Basis Monthly % (5.83%/8.33%) of basic salary, contributed to DEWS fund Lump-sum at termination: 21 days’ wage for first 5 years, 30 days’ wage thereafter, per year of service
Payout Timing Ongoing accrual in DEWS, paid out on termination or exit Paid in lump-sum upon end of employment
Voluntary Employee Contributions Permitted Generally not part of statutory framework
Investment Returns Yes, via fund (may increase or decrease) No (gratuity does not accrue investment returns)
Risk of Employer Default Mitigated (contributions paid monthly into trust) Higher (employer pays at end, funds may not be provisioned)

Visual Suggestion: Feature comparison chart summarizing the above.

Comparing Gratuity Calculations: Example Scenario

Scenario DIFC (DEWS) Wider UAE
5 years’ service, AED 20,000 basic salary DEWS: AED 1,166/month (5.83%) × 60 months = AED 69,960 + investment gains/losses 21 days x AED 20,000 ÷ 30 = AED 14,000/year × 5 = AED 70,000 (no investment gain)
6 years’ service, AED 25,000 basic salary First 5 years: AED 1,458/month × 60 = AED 87,480; 6th year: AED 2,082/month × 12 = AED 24,984; Total = AED 112,464 + gains/losses First 5 years: 21 days x AED 25,000 ÷ 30 = AED 17,500 × 5 = AED 87,500; 6th year: 30 days x AED 25,000 ÷ 30 = AED 25,000; Total = AED 112,500

Practical Calculation Examples and Case Studies

Example 1: Employee Entirely Under DEWS

John, employed by a DIFC firm from 1 March 2021 to 29 February 2024, with a basic monthly salary of AED 18,000:

  • Service: 3 years (36 months)
  • Employer DEWS contribution: 5.83% of 18,000 = AED 1,049.40/month
  • Total contributions: AED 1,049.40 × 36 = AED 37,778.40 (plus investment gains/losses)

On termination, John receives the DEWS account balance (contributions plus/minus investment results).

Example 2: Employee with Pre-DEWS Service

Sara began working in DIFC on 1 December 2017 with a basic salary of AED 16,000, still employed as of 1 March 2024.

  • Pre-DEWS (1 Dec 2017 – 31 Jan 2020): 26 months
  • Gratuity accrual for pre-DEWS period: 21 days x AED 16,000 ÷ 30 = AED 11,200/year x (26/12 = 2.167 years) = AED 24,270.40
  • Post-DEWS (1 Feb 2020 – 1 Mar 2024): 49 months, AED 16,000 basic
  • Employer DEWS contribution: 5.83% × AED 16,000 = AED 932.80/month
  • Total DEWS contributions: AED 932.80 × 49 = AED 45,707.20 (plus investment gains/losses)

Sara would receive her pre-DEWS accrued gratuity plus her DEWS fund value on end of employment.

Example 3: Longer Service, Transition from 5.83% to 8.33%

Mohammed, employed since 1 January 2017 at a basic salary of AED 22,000, leaves on 31 March 2025.

  • Pre-DEWS: (1 Jan 2017 – 31 Jan 2020) = 37 months = 3.08 years
  • Pre-DEWS Gratuity: 21 days x 22,000 ÷ 30 = AED 15,400/year × 3.08 yrs = AED 47,432
  • Post-DEWS: (1 Feb 2020 – 31 Mar 2025) = 62 months (5 years, 2 months)
Period BOS Rate Months Monthly Contribution Total
1 Feb 2020 – 31 Jan 2025 (first 5 years) 22,000 5.83% 60 1,282.60 76,956
Feb & Mar 2025 (6th year+) 22,000 8.33% 2 1,832.60 3,665.20

Total DEWS contributions: AED 76,956 + AED 3,665.20 = AED 80,621.20 (plus fund performance)

At termination, Mohammed receives:

  • Pre-DEWS lump-sum: AED 47,432
  • DEWS account balance (AED 80,621.20 plus/minus returns)

Hypothetical Case Study: Non-Compliance Scenario

ABC LLC, a DIFC employer, fails to register employees for DEWS and withholds or delays monthly contributions for 12 months. On investigation, the DIFC Authority or employee claims the employer is liable for:

  • Back-payment of all missed contributions
  • Interest on missed contributions
  • Potential fines and regulatory sanctions

If discovered during an audit or upon employee grievance, the company could face reputational harm and management liability. This reinforces the importance of robust internal compliance monitoring.

Risks and Consequences of Non-Compliance

Potential Liabilities

  • Regulatory Fines: The DIFC Employment Law empowers the DIFC Authority to impose substantial fines for failure to comply with DEWS obligations or miscategorizing employees/salary components.
  • Back-payments with Penalties: Employers are compelled to pay all outstanding DEWS contributions, plus potential late payment penalties and interest on arrears.
  • Employee Claims: Staff may bring claims for breach of obligation, wrongful deduction, or constructive dismissal if gratuity obligations are not met. The DIFC Courts have a track record of robustly enforcing employee rights in such cases.
  • Loss of Reputation: Non-compliance can harm the firm’s standing within the DIFC community and with global investors.

Enforcement and Audit Mechanisms

The DIFC Authority and the DEWS Supervisory Board maintain active monitoring powers and may conduct periodic compliance reviews and require submission of payroll and contribution records. Failure to comply may also result in suspension or withdrawal of DIFC operating licenses.

Proactive Compliance Strategies for Employers

Essential Best Practices for DIFC Employers

  • Review of Employment Contracts: Ensure that all employment contracts are updated for post-DEWS requirements and clarify the definition of “basic salary.”
  • Payroll Systems Automation: Integrate payroll software to segregate basic salary and automate correct DEWS contributions for every payroll cycle.
  • Regular Internal Audits: Establish periodic checks to confirm all contributions are accurate, timely, and in line with DEWS and DIFC Law requirements.
  • Clear Communication with Employees: Educate staff about their entitlements, DEWS processes, and optional voluntary contributions.
  • Coordination with DEWS Plan Administrator: Appoint a dedicated HR or compliance lead to interface with the DEWS administrator and handle queries or issues promptly.
  • Swift Remediation: Where errors are identified, voluntarily inform the DEWS authority and make good on all obligations without delay.
  • Legal and Regulatory Updates Monitoring: Stay abreast of changes published by the DIFC Authority’s Legal Database and UAE Government Portal.

Visual Suggestion: Compliance checklist with action items (as above).

The Outlook: Shaping Employment Relations and the UAE Legal Landscape

The establishment of DEWS within the DIFC has signaled a shift in the UAE towards internationally compliant, employee-protective workplace savings mechanisms. The mandatory monthly funding model and independent fund structure protect employees against the risk of employer default and support financial well-being, aligning DIFC with global talent mobility trends.

Elsewhere in the UAE, evolving legislation—such as Federal Decree Law No. 33/2021—has begun to reference the possibility of similar savings schemes in the wider Emirates, though lump-sum gratuity remains the norm. It is anticipated that the success and efficiency of the DEWS model will shape future federal labor reforms, including the potential rollout of similar savings schemes.

For businesses, regulatory compliance is more than an obligation. It is a pillar of responsible corporate governance, vital for attracting and retaining global talent. Legal counsel and HR leaders must plan for ongoing training, compliance reviews, and monitoring of regulatory updates to ensure robust risk management and sustained business success.

Frequently Asked Questions

Do expatriates and UAE nationals both qualify for DEWS?

DEWS applies to all eligible employees in the DIFC, regardless of nationality, unless explicitly excluded by law or alternative arrangement.

What happens if the investment fund underperforms?

The value of DEWS balances may increase or decrease based on investment returns. The employer’s legal obligation is only in respect of the required contributions; investment performance risk is shared and made transparent to all employees.

How does DEWS affect severance payments?

DEWS replaces the statutory gratuity element; however, contractual or other severance payments may apply if stipulated in the employment agreement.

Can employers offer more generous benefits than the minimum?

Yes. Employers may contribute above the statutory rates, or structure supplementary benefit plans, so long as minimum DEWS contributions are met.

Where to find the authoritative legal sources?

Conclusion: Navigating End-of-Service Gratuity in DIFC—Strategic Implications and Best Practices

The transition from a conventional end-of-service gratuity regime to the forward-thinking DEWS savings plan has set a benchmark in the UAE’s approach to employee benefits, risk mitigation, and corporate governance. For DIFC employers, full legal compliance is a business imperative—failure exposes organizations to financial, reputational, and operational risks. HR leaders and executives must institute proactive measures, leverage technology, and educate staff, underpinned by regular legal review and risk assessment.

Looking ahead, the DIFC DEWS model is likely to influence broader federal reforms, setting the stage for more robust employee protections and financial planning solutions. The best practice for any UAE employer is to remain vigilant, invest in compliance expertise, and foster open communication to attract and retain the best talent in a globally competitive landscape.