45 percent of organizations are enhancing their End of Service Benefits in the region
Dubai, United Arab Emirates – 18 November 2015 – Almost half of companies in the Middle East offer an enhanced End of Service Benefit (ESB) to their employees, according to Towers Watson’s 6th “Middle East End of Service Benefits Survey Report”. Virtually all respondents confirmed that they provide ESBs, with 45% indicating that they offer enhancements to mandatory benefits for employees.
Michael Brough, Director and International Benefits Specialist at Towers Watson in the Middle East, said: “The number of companies providing an enhanced benefit has remained stable and the reasons for offering an enhanced ESB are broadly unchanged from the 2014 survey, with organizations offering enhanced ESBs in order to comply with local or industry best practice or perhaps more importantly to retain key talent within the organization. This latter reason was cited in 2015 as the most common reason for providing enhanced ESBs and the prevalence has increased since 2014”.
Out of the companies that enhance the ESB in some way, 59% responded that they offer a supplemental Defined Contribution (DC) plan to employees which shows that a separate DC arrangement continues to be the most popular way to provide benefits above and beyond the mandatory end of service benefit. Long term savings or retirement plans were most commonly offered in the UAE, Egypt, Saudi Arabia and Turkey.
Employers indicated an expectation that their employees intended to stay at their organizations based in the Middle East for 5 to 10 years, as people are spending longer and longer periods in the Middle East region. Therefore, the importance of Long term savings and pension arrangements in the region is expected to increase.
Furthermore, nearly 60% of companies providing enhanced ESB do so to all employees, contrasting with the organizations that do so to specific employee categories only such as non-nationals or top management. Over 70% of the respondents indicated that the length of service is the most important factor to consider when providing an enhanced ESB to an employee, followed by grade, key talent and intra-company transfers.
The 2015 report also showed that most companies have currently relatively small ESB liabilities – the largest number of companies (39%) indicated that their ESB liability is between US$ 1 million and US$ 5 million followed by 23% having liabilities below US$ 1 million.
This largely explains why the majority (83%) of organisations continue to settle employees’ benefits as they become due from company assets rather than pre-funding the liability.
Note to editors
The Towers Watson Middle East End of Service Benefits 2015 survey includes responses from almost 200 companies, with operations in one or more of the Gulf Cooperation Council (GCC) countries and elsewhere across the wider Middle East region. The study covered over 25 industries, while the most prevalent industries represented were in the Banking and Finance and Oil and Gas. The majority of the respondents were multinationals or global companies, with operations in multiple regions around the world.
ESBs are payments due to employees upon leaving their employers. In Gulf Cooperation Council countries (GCC) these are legislated by labour law and are defined benefit in nature. ESB grow over time and are calculated based on the length of service of an employee and often their final wages at the time of their leaving. The statutory amount of ESB differs from country to country in the GCC, with a minority of countries having a cap applying.
About Towers Watson
Towers Watson (NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. With 16,000 associates around the world, the company offers consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management. Learn more at towerswatson.com.