Expats point out flaws in severance pay amid greater focus on retirement
Six in 10 expatriate employees in Qatar, Saudi Arabia, and the United Arab Emirates have expressed dissatisfaction over the Gulf region's one-off severance payments when it comes to meeting retirement needs.
The one-off payments, called the End of Service Gratuity (EoSG), are granted by organisations in the Gulf region to departing employees instead of offering the traditional form of pension savings.
But a survey by global retirement platform Smart on 1,504 expat workers found that 60% said the EoSG system fails to fully meet their needs, particularly for retirement.
According to Smart, a "recurring gripe" with the system is its lack of transparency, as only one in four respondents felt they understood the EoSG system before moving to the region.
Others have called out the lack of information about how the system works and what percentage of their salaries goes to retirement.
"It is crucial to have a transparent system that clearly explains how gratuity is calculated," one Qatar-based expat said as quoted by Smart.
Another flaw in the EoSG system pointed out in the findings is the absence of employee contribution.
One respondent from Saudi Arabia said it would be "very helpful" if employees could deduct a small amount from their monthly salary to add to their end of service gratuities.
Some expats in Qatar are also calling on their government to make it mandatory for both employers and employees to contribute to their retirement funds.
Tim Phillips, Managing Director of Smart Middle East & Asia, said the findings show "significant opportunities for change" in the current workplace savings system in the Gulf region.
"Reform is needed to improve transparency and introduce employee investment options across the region to help workers better plan for retirement," Phillips said in a media release published on Zawya.
The criticism about the EoSG system comes amid expats' greater focus on their retirement, according to the poll.
More than eight in 10 expats said they are actively prioritising retirement savings over other expenses (88%), noting that having enough money for retirement is "very important" to them (82%).
In fact, more than nine out of 10 expats polled said governments, employers, or both should have a role in implementing and regulating pensions.
According to Smart, 84% of expats who move to the Gulf are strongly driven by the benefits offered by their employers.
"Implementing these reforms will not only secure the financial futures of our workforce but also bolster the GCC’s reputation as one of the world's leading destinations for global workers and savers," Phillips said.