Multinationals spread Western ‘lifestyle’ to UAE

Western-style pay and benefit practices are on the increase in the Middle East, according to survey by Mercer.

The survey 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, said the research.

According to Mercer, 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 % 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.

Retirement benefits

According to Mercer, 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. As expatriates in most of the Gulf States have no statutory entitlement to local state pensions, this has prompted an increase in employer-provided supplementary benefits.

Commenting on particular developments in the UAE, Yvonne Sonsino, a worldwide partner in Mercer's international consulting group, said: ‘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."

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, said Mercer.

A proposed new pension savings law in the UAE could have an important impact on expatriate pension provision, said Sonsino. "Such a scheme would particularly benefit unskilled members of the UAE's expatriate workforce who may not fall under multinationals' supplementary pension plans.

“There is still some uncertainty about further expected legislative change that could have an impact on medical benefits in the UAE.

Callum Burns-Green, a principal in Mercer's international consulting group

Medical benefits

The majority of multinationals in the UAE (85 %) provide a supplementary medical insurance policy, usually through an insured arrangement, said the research.

Callum Burns-Green, a principal in Mercer's international consulting group, commented: "There is still some uncertainty about further expected legislative change that could have an impact on medical benefits in the UAE. Most companies pay the entire cost of medical insurance but we anticipate this will change with an element of employee cost-sharing being introduced."

There are also mandatory requirements for private healthcare in Saudi Arabia and Egypt but the majority of multinational companies in the Middle East (80 %) provide private medical benefits irrespective of these requirements, according to the study.

Other benefits

Almost all companies in the Middle East provide additional perks and allowances to their expatriates. In the UAE specifically, 86 % of multinationals in the survey provide housing allowances, while 90 % provide support with schooling. All participants, without exception, provide allowances for return flights to expatriates' home country.

A company car benefit is also commonly provided (60 % of survey participants across the Middle East), while there has been an increase in demand for protection benefits such as death and disability.