MIDDLE EAST - An increase in multi-national companies in the Middle East is driving demand for Western-style pay and benefit practices, according to Mercer.
Along with a continuing increase in multinational companies based in the region, the change is being driven by an expansion of the expatriate workforce, and greater mobility of expatriates between jobs.
Workforce mobility, in particular, is having an impact on pension practices, as many expatriates are now choosing to stay long term or permanently relocate to the region.
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.
Yvonne Sonsino, a worldwide partner in Mercer's international consulting group, said: "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% multinational companies surveyed currently provide a supplementary pension plan in the UAE, 65% said they wee 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."
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