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Survey Report

End-of-Service Benefits in the Middle East

2022 survey findings

September 6, 2022

Read our report to find out how organisations in the Middle East are structuring ESB, funding their ESB liabilities, and using savings vehicles to provide benefits over statutory ESB requirements.
Retirement|Health and Benefits

WTW Middle East End-of-Service Benefits (ESB) Survey this year determines how organisations in the region:

  • Fund their statutory and enhanced ESB liabilities
  • Structure their enhanced ESB (that is, who are they offered to and under what conditions)
  • Use savings vehicles such as long-term savings or retirement plans to provide benefits over and above statutory ESB requirements.

Most organisations surveyed have business operations in UAE and represent a variety of industries, predominantly oil and gas. Multinationals or global organisations, with operations in multiple regions around the world, form most of our survey data.

Key findings

The majority of organisations provide ESB, which is no surprise given they are mandatory in many countries in the region. Additionally, many indicate that they provide an enhancement to the minimum benefits for employees in the countries in which they operate. “Industry best practice” is the most common reason this year for enhancing the benefits, with “retention of key talent” closely following.

Organisations that enhance their ESB offer these enhancements to all employees. A significant minority only offer them to specific categories of employees. Interestingly, fewer organisations appear to be distinguishing between local employees and international assignees when offering enhanced benefits, a practice that we notice has been in steady decline since 2016. This suggests that the provision of these enhanced benefits is becoming more commonplace locally.

Enhanced ESB

Offering a separate defined contribution (DC) pension or long-term savings plan remains the most popular way of enhancing ESB. Enhanced definition of salary is the second most popular method. Organisations that provide enhanced ESB through the defined benefit (DB) formula most commonly use an employee’s length of service as the principal factor in determining the enhancement.

The survey found that more organisations expect their employees to stay with them longer now than in 2010. The implication of longer expected future service, combined with higher inflation and rising salary costs, is likely to signify a sharp increase in future ESB liabilities.

Structure of enhanced ESB

Of the organisations that provide enhanced ESB, three in four (78%) indicate that length of service is important, while other factors include job grade, equalization of benefits between countries and early retirement.

About three in five organisations continue to account for ESB in local books using local accounting rules, with 17% using international accounting standards (IAS). A minority (7%) use US generally accepted accounting principles (GAAP), and 4% do not account for the liability at all.

Specifically, in the UAE, one of the objectives of the local Employment Law enacted in the Dubai International Financial Centre (DIFC) is to transform the mandatory ESB from the existing unfunded DB design to a funded DC arrangement that is centrally managed. This is known as the DIFC Employee Workplace Savings (DEWS) Plan, which most organisations with a presence in DIFC have chosen as their response. A small number of organisations in DIFC are instead opting for a Qualifying Alternate Scheme (QAS).

Retirement and savings plans

A quarter (24%) of organisations indicate that they offer a DC retirement or long-term savings plan to their employees. Of the organisations offering a supplemental plan, half (48%) offer membership to all employees. The remaining offer membership of such plans to specific categories of employees, including local nationals, local non-nationals, international assignees and top management.

More than half of the organisations have fewer than 500 Middle Eastern employees eligible to participate in their company’s savings/retirement plan(s). Long-term savings or retirement plans are most frequently offered in Egypt, Qatar, Kuwait, UAE and Turkey.

For more detailed findings, please complete the form on the right to access the full 17-page report.

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