Need for Workable Retirement System in GCC for Expats


One of the interesting features of the GCC countries is this: while they are, and will remain, very dependent on expatriates – these countries are lacking in an organised system that can provide adequately for these people’s retirement incomes. Across the region, the most common arrangement is that private sector companies put aside sums equivalent to about 8 percent of their employees’ compensation: the amount accrued is then paid to employees when they leave the company, in the form of an End of Service Benefit (EOSB). However, this system is antiquated and risky. Companies can develop very substantial liabilities on their balance sheets. Employees have an unstable, and often underperforming, asset whose structure does not reflect their long-term needs. If their employer collapses financially, the employees stand to lose their jobs, their right to remain in the GCC and any possibility of recovering the EOSB that is owed to them.


For its part, the government of Dubai is looking to develop a workable pension system that will serve the needs of all stakeholders. Ideally, the pension system will serve as a drawcard that will make it easier for employers in Dubai (and, perhaps, the rest of the United Arab Emirates) to attract the skilled expatriate labor on which they are entirely dependent. Hopefully, it will enable companies to move liabilities off their balance sheets. The new system should also provide far more portability, transparency and – above all – protection of rights for the employees than the current EOSB system.

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