Ex-Pats Drive Western Style Benefits in the Middle East

April 21, 2008 (PLANSPONSOR.com) - A regional survey of current pay and benefits practices and plans within multinational companies recently conducted by Mercer indicates that Western-style pay and benefits are on the increase in the Middle East.

In a press release on the survey results, Mercer said the traditional focus on high basic salaries and cash allowances is shifting towards long-term incentives and benefits such as pensions, medical, life, and disability insurance. Flexible benefits such as company car allowances and leave entitlements are increasingly important, while allowances for housing, transport, and education remain popular, according to the release.


The change in pension practices is driven by workforce mobility as many expatriates are now choosing to stay long-term or permanently relocate, Mercer said. 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, prompting an increase in employer-provided supplementary benefits.

While only 8% of multinational companies surveyed currently provide a supplementary pension plan in the United Arab Emigrates (UAE), 65% said they are 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, according to Mercer.

Yvonne Sonsino, a worldwide partner in Mercer’s international consulting group, said in the release the end-of-service indemnity paid by employers and generally based on a month’s pay for each year of service is increasingly viewed by expatriates as a poor level of benefit compared to a pension plan, so many companies are now looking to provide top-up pension plans to help attract and retain employees.

The majority of multinationals in the UAE (85%) provide a supplementary medical insurance policy, usually through an insured arrangement. Callum Burns-Green, a principal in Mercer's international consulting group, said most companies pay the entire cost of medical insurance but Mercer anticipates an element of employee cost-sharing will be introduced.

In addition, despite mandatory requirements for private health care in Saudi Arabia and Egypt the majority of multinational companies in the Middle East (80%) provide private medical benefits.

The majority of companies in the Middle East provide allowances for housing, schooling, and flights home, the Mercer survey found. In the UAE specifically, 86% of multinationals in the survey provide housing allowances, 90% provide support with schooling, and all provide allowances for return flights to expatriates' home countries.

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

Throughout the region, Mercer said, the most popular fringe benefits are long-service awards, mobile phones, social allowances, and subsidized health club memberships.

A summary survey report is available at www.mercer.com/middleeastbenefits , and further information can be obtained by emailing middleeastsurvey@mercer.com .