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New generation of international talent in UAE drives EoSB evolution

7 October 2021

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Employees in the UAE are looking for attractive executive compensation and incentives including secure end of service benefits to persuade them to stay, say Intertrust Group’s Charlie Germain, Client Director, Executive Compensation Services, and Melissa McConnell, Client Director, Head of Pension and Savings

The UAE attracts an increasingly dynamic and international workforce – with increasing expectations of employers.

With mandatory end of service benefits (EoSBs) recently introduced in the Dubai International Finance Centre (DIFC), employers in the other emirates are paying close attention. Attracting and retaining the best talent means keeping up with the changing landscape of executive compensation.

Many are asking whether a one-size-fits-all approach to EoSBs will work for their ever-changing talent base. And they are looking for expert external support and provision as they approach this challenge.

Employers and employees in the UAE, as elsewhere, have come to realise the need to expect the unexpected. We have seen the global financial crisis, the Covid-19 pandemic. We do not know when the next crisis will arise or what it will comprise.

Such uncertainty underlines the importance of EoSB protections for companies, their senior management and employees, as well as for the countries in which they operate. It means provision must be expertly planned.

Having a plan in which assets are secured off the balance sheet gives companies and their employees one less thing to worry about in tough economic times or when an acquisition is in the mix.

Will the UAE’s EoSBs keep pace with the demands of its dynamic talent base?

Multi-generational talent from around the world is drawn to the UAE’s expat and international communities, lifestyle, education and proximity to other markets, such as Europe and Asia. Yet, according to advisory firm Wilson Towers Watson, three-in-five expats have concerns about financial security when their careers end – and they expect employers to provide a means of saving.

While employers in Dubai, for example, are obliged to pay an end of service gratuity, most are not legally required to provide it as a pension or workplace savings scheme. The only free zone to adopt a mandatory off-the-balance sheet end of service benefit scheme is the Dubai International Finance Centre (DIFC), with its DIFC Employee Workplace Savings Plan (DEWS).

This lack of ring-fencing could worry expats in senior positions on the mainland or outside the DIFC free zone if they are used to company savings and pension plans in separate protected funds off the company balance sheet.

UAE fintech boom drives executive compensation expectations

Younger generations in the UAE, including expats, are also increasingly demanding when it comes to starting packages. This is particularly the case among those with in-demand skills and experience who are considering working for fintech start-ups. Over the past five years, the UAE has established itself as the largest fintech hub for startups in MENA, accounting for 46% of companies in the region.

Young executives and software developers in this sector have come to expect more bespoke executive compensation. It is generally accepted that younger generations need greater incentives to stay with a company beyond the 2.8 year mark (the median tenure for employees aged 25-35 years). Benefits including stock options, deferred bonuses and equity plans are among the offerings that can incentivise talent retention.

Above all, younger generations want freedom of choice. That can only be realised if there is a competitive marketplace for investment of their pension and other benefits. Employees have come to learn that no company alone is too big to fail. A competitive marketplace will call for a variety of service providers and fund managers.

We expect that these underlying conditions will lead more EoSB fund and service providers to start scoping out the region. This could also be driven by regulators outside the DIFC wanting to open up the market to see how it reacts and how products are refined. Competition can also serve as a protection mechanism to spread end of service gratuity and asset risk should a dominant fund provider come into financial difficulty.

UAE must prepare for a talent retention drive

More than 15 million US workers – and counting – have quit their jobs since April 2021, disrupting businesses everywhere, according to consultants McKinsey.

In their report, Great Attrition or Great Attraction: The choice is yours, the authors highlighted that companies are struggling to address the problem. They will, the report added, continue to do so for one simple reason: they don’t understand why their employees are leaving in the first place.

Rather than taking time to investigate the true causes of attrition, many company managers have jumped to well-intentioned quick fixes that fall flat, indicates the report. Offers including increased pay or “thank you” bonuses are often less effective in chiming with employee career goals than stronger connections with senior management, for example, or a bigger say in the direction of the company.

Without a doubt, the UAE and MENA region are beginning to witness a revolution in end of service benefits and gratuities. These markets would be wise to take a cue from their dynamic and multi-generational workforce when it comes to shaping off-balance-sheet strategies that will not only entice talent to come in the first place, but also to call the UAE their home for years.

Why Intertrust Group?

  • Local presence in GCC for two decades, with a DIFC office and an Abu Dhabi Trust Company to handle executive compensation services across the UAE, including trustee services, plan administration and portal solutions.
  • We can look after every aspect of your executive compensation and savings plan in-house, from advisers’ brief to implementation, project management and reporting.
  • Our specialist team of accountants, lawyers, company secretaries, trust practitioners and ICSA/STEP students and graduates can ensure your plan is legal, compliant and best in class.
  • We know reward and incentive schemes are key to retaining talent, so participants can deal directly with our experts.
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