GCC & StatutoryIAS 19 · EOSB SAVINGS SCHEMES · UAE LABOUR LAW

UAE Cabinet Resolution 96 of 2023 and the End of the EOSB Liability

Moving from unfunded gratuity to funded monthly contributions does not automatically make the arrangement a defined contribution plan under IAS 19 — the presence of return guarantees or employer underwriting determines whether the defined benefit obligation truly leaves the balance sheet.

Soham ShahFellow Actuary (FIAI · IFoA UK) · IBBI Registered Valuer
3 min read
01

The voluntary alternative to traditional EOSB

UAE Cabinet Resolution No. 96 of 2023 introduced an optional alternative system for end of service benefits, allowing private-sector employers to register in licensed investment funds and pay monthly contributions on behalf of participating employees.

For companies operating in the UAE, the promise of the scheme is significant: converting an uncertain, back-loaded statutory liability calculated on final salary into predictable monthly cash outflows that do not accumulate on the balance sheet.

02

Defined benefit or defined contribution: who decides?

Under IAS 19, the accounting classification does not depend on local statutory labels. It depends on substance: does the employer retain any legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits?

If the employer promises a minimum return, underwrites capital protection, or agrees to top up shortfalls upon employee departure, the plan remains a defined benefit arrangement under IAS 19, requiring ongoing actuarial valuation.

03

Measuring entitlement accrued before transition

For employees already in service prior to joining the alternative scheme, accrued gratuity entitlements up to the transition date must be preserved. Employers have the option to calculate and freeze this amount, or transfer the accrued cash into the fund.

Freezing the entitlement without transferring funds leaves an existing liability on the books that continues to require discounting and derecognition accounting until the employee leaves.

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Institutional Standards · India & the GCC

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RELATED GUIDANCE

Further Technical Analysis

AS 15AS 15 · ICAI · COMPANIES ACT, 2013

What is AS 15?

AS 15 (Employee Benefits) is the Indian accounting standard that explains how companies should account for employee benefits such as gratuity, leave encashment, pension and other long-term employee benefits. In simple terms, AS 15 ensures that a company's financial statements reflect not only the benefits it has already paid to employees, but also the obligations that are building up over time. This gives management, auditors and investors a more accurate picture of the company's financial position.

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Ind AS 19IND AS 19 · MCA · IFRS CONVERGENCE

What is Ind AS 19?

Ind AS 19 (Employee Benefits) is the Indian Accounting Standard governing how companies measure and recognise the cost of employee benefits such as gratuity, pension, leave encashment and other post-employment obligations. It sits within the Ind AS framework, India's convergence with IFRS, and mirrors IAS 19 issued by the International Accounting Standards Board.

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DIRECT ACTUARIAL ADVISORY

Need this assessed against your balance sheet?

Technical guidance is a starting point. For an audit-ready view of how this obligation lands in your statutory accounts across India or the GCC, speak directly with our signatory actuary.

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