UAE workers facing retirement time bomb

I have grave concerns about reliance on, and lack of knowledge about, end of service gratuities. Workers across the Middle East are potentially sleepwalking into poverty in their retirement because they are too reliant on the lump sum payment they will receive when they leave their employer.

The end of service gratuity for non-UAE nationals applies to those who have one year or more in continuous employment. If the role lasts for less than one year, the person is entitled to nothing. Two to five years – one and a half month’s salary for every year for the first five years of employment. It rises to two months’ salary for the next five years and then to three months for every year after that. Anyone who has worked continuously for a company for more than five years is entitled to a full gratuity of 30 days’ salary for each year of work following the first five years.

Smaller payments than expected

But research from Old Mutual International and Quilter Cheviot has found that around 59% of respondents are either fully or partly relying on their payment for retirement. Of the 130 people living in the UAE who were surveyed, 84% said they will receive a gratuity when they leave their company. Most (62%) expect a gratuity in excess of AED20,000 ($5,445) from their current employer.

However, there are some instances when the gratuity could be withheld, with the most common reason being some form of breach of contract. Additionally, if the employee is sacked the payment is nullified. The survey said this reliance on a gratuity could be cause for concern, as the research shows that on average, they are relatively small payments.

Lack of knowledge

Greg Pogonowski, Senior Associate at Lime Financial, spoke about the survey: “From my work in the GCC, I continue to be surprised by the widespread lack of knowledge on the level of a person’s gratuity entitlement, with an often held view that it will see them through their golden years. Coupled with general inaction surrounding people’s retirement planning, many GCC workers are facing a ticking time bomb.

With non-national employees generally staying longer in the region, we are starting to see more forward-looking employers recognising this potential deficit, and firms looking to provide a more western-style scope of employee benefits – including company Pension schemes and/or employee savings plans. This can only bode well for the region’s employers and employees as the take-up increases.”


The end-of-service gratuity offering in the Middle East has become an important aspect to the financial advisory market – and some jurisdictions have introduced international savings plans (ISP) to help combat the issues surrounding the scheme.

Introduced on 1 January 2019, Jersey’s ISP scheme enables multinational and international companies to set up savings plans in Jersey for non-resident employees in a bid to appeal to the Gulf region.

Greg added: “It’s clear that there is both a real need and a real demand amongst multinational firms in the UAE for appropriate plans that can support their internationally-mobile employees in the long-run, to enable them to save for their retirement and plan for their future flexibly and through robust structures.”

Also, Guernsey unveiled a tax exemption for ISPs, where the beneficiaries are non-resident on the island and none of the income is sourced from Guernsey. “The role of end-of-service gratuity benefit schemes for today’s international workers is increasing in importance, as this UAE survey indicates. The increasing dependence upon end-of-service gratuity benefits for employees retiring in the UAE is focusing new attention on the funding of such benefit promises.”

The UAE’s Federal Authority of Human Resources (FAHR) is even running a conference in February on this topic, as the country looks to improve communication surrounding the scheme.

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