How Gratuity is Calculated in the DIFC Today: From Lump-Sum Payouts to Workplace Savings

The Dubai International Financial Centre (DIFC) operates under its own employment framework, separate from the UAE’s federal labour system. Its current end-of-service regime is aligned with international best-practice models followed in major global financial hubs. Under this framework, end-of-service benefits are provided through a defined employer workplace savings arrangement known as a Qualifying Scheme.

A significant change took effect on February 1, 2020, when the DIFC replaced the traditional gratuity model with the Qualifying Scheme. DIFC employees who have completed at least one year of continuous service are entitled to end-of-service benefits calculated solely on their basic salary. Instead of a lump-sum payment at the end of employment, employers are required to make monthly contributions into a Qualifying Scheme that complies with the requirements of the DIFC Employment Law and the DIFC Employment Regulations.

The DIFC has introduced the DIFC Employee Workplace Savings Plan (DEWS Plan) as the default Qualifying Scheme. Employers may choose an alternative savings plan, provided it first obtains a Certificate of Compliance from the DIFC Authority (DIFCA), confirming that all regulatory conditions are met. Without this certification, a scheme cannot be used to satisfy an employer’s statutory obligations.

Employer contributions are set at 5.83 per cent of an employee’s monthly basic salary for the first five years of service, increasing to 8.33 per cent thereafter. This structure enables employees to build predictable, ongoing savings within professionally managed investment funds, offering greater transparency and financial planning certainty than the previous system. DIFC employees may also make voluntary contributions to the DEWS Plan by notifying their employer.

Employees who were already employed in the DIFC before February 2020 may have service covered under both systems. Any gratuity accrued before the transition remains payable unless the employer and employee expressly agree in writing to transfer that amount into the DEWS Plan. Such transfers are optional and require the employee’s written consent. Where employment terminates part-way through a year of service, the gratuity payable for that period is calculated on a pro rata basis.

Under the DIFC’s earlier framework, end-of-service benefits were paid as a single lump-sum gratuity, calculated solely on basic salary. Employees received 21 days’ basic wage for each of the first five years of service and 30 days for each additional year, subject to a cap of two years’ salary. Allowances were excluded from the calculation. Compared with this legacy model, the DEWS Plan represents a modern, contribution-based approach that improves transparency, ensures regular funding, and provides employees with portable, investment-backed savings rather than a deferred end-of-service payout.

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