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19 March 2026By Ruan van Rensburg
As businesses across the United Arab Emirates evaluate the transition from the traditional End of Service Gratuity Benefit (EOSGB) to the alternative End of Service Savings (EoSS) scheme under Cabinet Resolution 96 of 2023, the financial implications must be carefully measured. From an actuarial perspective, one of the most compelling reasons to transition to the EoSS is the immediate and compounding reduction in Profit & Loss (P&L) expense, which our independent and original research and now also client studies have shown can comfortably exceed 3% of the total salary roll over time. It is also clear that the historically free working capital inadvertently provided by employees to their employer, is no longer free - there is an opportunity cost to the company in not switching - and arguably a fiduciary duty on management, to shareholders, to make the cost-saving switch. The figures below are from an actual Lux study and the savings continue beyond 7 years.
Cost of EOSB versus Cost of End of Service Savings over the next 7 years
| Cost Savings | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 |
|---|---|---|---|---|---|---|---|
| P&L Exp: EOSB less EoSS | Redact | Redact | Redact | Redact | Redact | Redact | Redact |
| Savings % of Liability (cost of working capital) | 4.4% | 4.7% | 4.9% | 4.0% | 5.1% | 5.3% | 5.4% |
| Savings % of Payroll | 1.4% | 1.9% | 2.4% | 2.3% | 2.9% | 4.0% | 4.6% |
Under the legacy EOSGB framework — which is effectively an unfunded defined benefit plan — companies must recognize the expense of expected future salary increases applied to historically accrued service. This means every time an employee receives a promotion or an inflationary salary increase, the employer’s liability for all past years of service increases proportionally. Conversely, the new EoSS framework is a defined contribution scheme. Contributions are based strictly on current monthly scheme salaries, eliminating the need to expense the cost of future salary escalation on historical service.
Actuarial projections based on long-term UAE economic assumptions demonstrate the magnitude of this structural shift. Assuming realistic long-term salary escalation outpaces risk-free discount rates (positive real salary growth), the financial savings of transitioning scale rapidly. Over a standard seven-year projection cohort, P&L expense savings can grow from approximately 1.4% of payroll in year one to 4.6% of payroll by year seven. Averaged over the medium term, businesses can realize sustainable cost savings of more than 3% of their salary roll, capital that can be redirected into business growth, operations, or employee retention initiatives.
For financial and HR executives wishing to quantify the precise expense reduction for their specific demographic profile, please contact Ruan van Rensburg at Lux Actuaries.
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To quantify these savings for your workforce, use our Alternative Savings Scheme consultancy for independent liability modelling, cash-flow projections, fund manager comparison, and implementation support.
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