Saturday 23 June 2018

Western style benefits for Gulf staff on the rise

Dubai, April 21, 2008

Western-style pay and benefit practices are on the increase in the Middle East, according to a regional survey of current practices and plans within multinational companies.

The survey, conducted by Mercer, showed the traditional focus on high basic salaries and cash allowances is shifting towards long-term incentives and ‘protection’ benefits like pensions and medical, life and disability insurance.

Additionally, lifestyle benefits such as company car allowances and leave entitlements are increasingly important, while allowances for housing, transport and education remain popular.

The changes in benefit practices are being driven by the continuing increase in multinational companies based in the region, an expansion of the expatriate workforce (some 85 percent of Dubai’s population is now expatriate), and greater mobility of expatriates between jobs.  In the United Arab Emirates (UAE), changes in legislation have also strongly contributed to the trend, said the survey.

Retirement benefits

The change in pension practices, in particular, is driven by workforce mobility as many expatriates are now choosing to stay long-term or permanently relocate. Expatriates in most of the Gulf states have no statutory entitlement to local state pensions, and local job moves generally result in the loss of membership of their home country pension plan. This has prompted an increase in employer-provided supplementary benefits, it said.

Commenting on particular developments in the UAE, Yvonne Sonsino, a worldwide partner in Mercer’s international consulting group, said: “The recent relaxation of UAE employment law has made it easier for expatriates to move jobs in the local market. In the past, expatriates would commonly stay for three-year assignments and then return home. Many are now choosing to move on more quickly to other positions in the region.”

She added: “In terms of retirement savings provision, expatriates are only entitled to an end-of-service indemnity that is paid by their employer, and this is generally based on a month’s pay for each year of service. Increasingly, this is viewed by expatriates as a poor level of benefit compared to a pension plan. With the current intense competition for local talent, many companies are now looking to provide top-up pension plans to help attract and retain employees.”

While only 8 percent of multinational companies surveyed currently provide a supplementary pension plan in the UAE, 65 percent said they are looking to change their benefit provision - including setting up supplementary plans. These plans are generally established on a defined contribution basis through offshore investment funds that are often associated with international pension plans.

Sonsino added: “The UAE does not impose salary caps or tax restrictions to act as restraints on the design of local pension plans. This effectively gives us a blank sheet of paper for introducing new plans, and a lot of flexibility to be creative in meeting the needs of particular clients and sections of their workforce.”

The provision of supplementary pension plans across the Middle East varies by country, but the majority of multinationals in these countries confirmed they are planning changes in benefit provision.

A proposed new pension savings law in the UAE could have an important impact on expatriate pension provision. According to recent reports, the General Authority for Pensions and Social Insurance is studying options to bring expatriates in the public and private sectors under the national pension scheme, the report said.

Sonsino commented: “Such a scheme would particularly benefit unskilled members of the UAE’s expatriate workforce who may not fall under multinationals’ supplementary pension plans.

“An enormous challenge will be to make the administration of this plan workable. This includes keeping track of the country’s<

Tags: Mercer | Staff | benefit | enployees |

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