Employee savings schemes are less risky for participants than end-of-service gratuities and could be used to attract and retain talent, insurance industry experts said at a webinar on Thursday.
A majority of employers both in the UAE and the wider Middle East currently pay for their end-of-service liabilities to outgoing employees from working capital, according to participants in The changing retirement and end-of-service gratuity landscape in the UAE online event organised by Axa Green Crescent Insurance Company.
“Companies have no separate assets to pay outgoing employees. They are instead using working capital to settle dues of outgoing employees,” Fareed Lutfi, secretary general of the Emirates Insurance Association and Gulf Insurance Federation, said.
“If the employer becomes insolvent, benefits are at risk, with no back-up funds to pay even partial benefits. Strict employer liability should be measured and disclosed in line with international accounting standards for employee benefits.”
The Dubai International Finance Centre was the first body in the UAE to overhaul the gratuity system – a defined, end-of-service benefit that all expatriate employees are entitled to after completing at least one year of service – when it introduced the DIFC Employee Workplace Savings (Dews) plan in February 2020.
Employers in the free zone are required to contribute an amount equal to 5.83 per cent or 8.33 per cent of an employee’s wage, depending on their length of service, on a monthly basis to a fund administered by a trust. Employees can also choose to make additional voluntary contributions to the Dews plan.
Seventy-eight per cent of companies in the Middle East do not fund end-of-service gratuity at all. Instead, they pay it out of company cash when the benefits fall due, according to the 2020 Middle East End-of-Service Benefit Willis Towers Watson Survey, which covers more than 300 organisations.
“The minority of companies that are funding it are just doing so by putting money aside into a cash account,” Ashika Tailor, director of global services solutions at Willis Towers Watson, said.
“Most companies have reported that their end-of-service liabilities are between $1 million and $5m. There are bigger employers with larger liabilities,” Ms Tailor said. “Moving to a defined contribution model will help reduce this liability on their balance sheets.”
Adopting a more structured payment plan means there is an opportunity for employers to benefit from higher investment growth.
“To retain the UAE’s appeal as an attractive destination for top talent, companies will need to step up and align with other developed economies. Employers who make that move first will be seen as employers of choice. Savings vehicles like this could be a powerful employee retention tool,” Ms Tailor added.
Employees in the Middle East are generally staying longer with their employers. The Willis Towers Watson survey found that 43 per cent of employers expect to retain staff for periods of between five and 10 years, while 13 per cent expect the average tenure to be even longer, ranging between 10 to 20 years.
There is a growing trend among multinational corporations [MNCs] in the Middle East to provide benefit enhancements that are over and above the mandatory requirements. About 39 per cent of companies offer this, the survey revealed.
“This could be a higher accrual rate or more generous pensionable salary definition,” Ms Tailor said. “Forward-thinking MNCs in the region have also introduced a global minimum standard of employee benefits, which includes retirement benefits.”
Although a lot more needs to be done, the DIFC’s Dews scheme has accelerated thoughts towards a more robust savings environment and greater awareness that the end-of-service gratuity is not sufficient to act as retirement income anymore, she added.
The specs
Engine: 2.0-litre 4-cyl turbo
Power: 201hp at 5,200rpm
Torque: 320Nm at 1,750-4,000rpm
Transmission: 6-speed auto
Fuel consumption: 8.7L/100km
Price: Dh133,900
On sale: now
Juliot Vinolia’s checklist for adopting alternate-day fasting
- Don’t do it more than once in three days
- Don’t go under 700 calories on fasting days
- Ensure there is sufficient water intake, as the body can go in dehydration mode
- Ensure there is enough roughage (fibre) in the food on fasting days as well
- Do not binge on processed or fatty foods on non-fasting days
- Complement fasting with plant-based foods, fruits, vegetables, seafood. Cut out processed meats and processed carbohydrates
- Manage your sleep
- People with existing gastric or mental health issues should avoid fasting
- Do not fast for prolonged periods without supervision by a qualified expert
More on Quran memorisation:
Napoleon
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Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
UAE Rugby finals day
Games being played at The Sevens, Dubai
2pm, UAE Conference final
Dubai Tigers v Al Ain Amblers
4pm, UAE Premiership final
Abu Dhabi Harlequins v Jebel Ali Dragons
LEADERBOARD
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New UK refugee system
- A new “core protection” for refugees moving from permanent to a more basic, temporary protection
- Shortened leave to remain - refugees will receive 30 months instead of five years
- A longer path to settlement with no indefinite settled status until a refugee has spent 20 years in Britain
- To encourage refugees to integrate the government will encourage them to out of the core protection route wherever possible.
- Under core protection there will be no automatic right to family reunion
- Refugees will have a reduced right to public funds
White hydrogen: Naturally occurring hydrogen
Chromite: Hard, metallic mineral containing iron oxide and chromium oxide
Ultramafic rocks: Dark-coloured rocks rich in magnesium or iron with very low silica content
Ophiolite: A section of the earth’s crust, which is oceanic in nature that has since been uplifted and exposed on land
Olivine: A commonly occurring magnesium iron silicate mineral that derives its name for its olive-green yellow-green colour
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
SPEC%20SHEET%3A%20SAMSUNG%20GALAXY%20Z%20FOLD%204
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Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
