Introduction
Remuneration is one of the key factors that determine the motivation and performance of employees. Apart from the basic salary, employers provide their employees with additional benefits. These include pension programs, paid leave, employee assistance programs, and health insurance (HSBC, 2014). The aim of these benefits is to improve the welfare of employees. The resulting improvement in morale and staff commitment leads to high organizational performance. This paper will discuss the legal and discretionary benefits that are used in the United Arab Emirates. It will also discuss the differences between the benefits that the nationals of the UAE are entitled to and those that their foreign counterparts receive.
Types of Employee Benefits
Legal Benefits in the UAE
Legal benefits are mandatory compensations or rewards that employers must provide to their employees. In the UAE, labor laws require employers to provide the following benefits. First, employees in the UAE are entitled to several prescribed leaves. These include annual leave, sick leave, maternity leave, and Mecca pilgrimage or religious leave (HSBC, 2014). Employees who have been in service for more than one year are entitled to an annual leave of 30 days (Latham & Watkins LLP, 2009). The employees receive their full pay while on leave so that they can maintain their purchasing power. The long annual leave is justified by the fact that the ex-pats who dominate the job market have to travel back to their countries at least once a year to visit their families. During sick leave, employees are entitled to their full pay for the first fifteen days. In the subsequent thirty days, employees are entitled to only half of their pay (HSBC, 2014). However, after thirty days employees do not receive any pay. Female employees enjoy maternity leave, which lasts for forty-five days. Moreover, employees “are entitled to an unpaid leave of not more than thirty days to make a pilgrimage to Mecca” (HSBC, 2014, pp. 4-44).
Second, employees are entitled to social security benefits. The labor law requires employers in the private sector to contribute at least 12.5% of an employee’s monthly pay to the General Pension and Social Security Authority. In the public sector, the employer contributes up to 15% of the employee’s salary. Social security benefits enable employees to access a modest income after retirement (Lusardi, 2010). Third, employees in the UAE are entitled to end of service gratuity. Employees are required to be in service for at least one year to qualify for the end of service gratuity (Latham & Watkins LLP, 2009, pp. 1-6). Employees whose employment contracts are terminated because of misconduct often forfeit their end of service gratuity. Providing end of service gratuity is an important strategy for retaining employees in the private sector where ex-pats are employed for a limited period. Generally, end of service gratuity is provided by employers to enable their employees to survive after the end of their contracts.
Discretionary Benefits
Discretionary benefits are optional compensations or rewards that are provided by employers. The discretionary benefits that are provided in the UAE include paid time-off, services, and protection programs. Protection benefits are meant to cushion employees and their families from the negative effects of loss of income that might arise due to illness, unemployment, or disability (Lusardi, 2010). The main types of protection benefits that are provided in the UAE include insurance cover and pension programs. Insurance provides protection to employees and their families against the adverse effects of a disease, disability, and loss of life (Lusardi, 2010). Pension programs, on the other hand, enable employees to access income after retirement. The business case for providing protection benefits is based on the fact that employees who feel financially and socially secure tend to have high motivation and commitment (Otoum & Sulieman, 2012). This enables them to create value for their employers. Protection benefits are important in the UAE because they help in attracting talent in the private sector where the nationals of the UAE are reluctant to work.
Paid time-off benefits are payments made to employees while they are on leave or routine breaks such as lunchtime. The paid-time-off benefits motivate employees to take a break from their work and attend to their personal needs. This enables employees to achieve the desired work-life balance, which in turn improves their productivity (Golden, 2012). Employers in the UAE provide several services to their employees. These include wellness programs, stress management, employee assistance, education programs, and day-care programs. The main objective of these services is to enable employees to cope with the challenges of life that are likely to have adverse effects on their performance at the workplace (Golden, 2012). For instance, wellness programs improve the health status of employees by promoting healthy lifestyles. Undoubtedly, improved health leads to high performance.
Difference between the Benefits Provided to Expats and the Nationals of the UAE
There are several differences between the benefits that ex-pats and the nationals of the UAE are entitled to. To begin with, social security benefits must be provided to the nationals of the UAE. By contrast, employers have the option of not providing social security benefits to ex-pats. This difference is explained by the government’s commitment to implement the Emiratization policy, which aims at increasing the employment of the nationals of the UAE in the private sector (Latham & Watkins LLP, 2009). Specifically, mandatory provision of social security benefits motivates the nationals of the UAE to work in the private sector where wages are often lower than in the public sector. Employers are also allowed to provide social security payments as a discretionary benefit because of the difficulties they face in harmonizing their payrolls (HSBC, 2014). For instance, employees from high-income countries such as the US are likely to suffer losses if their social security contributions are made in the UAE where wages are relatively lower. In this regard, multinational companies are allowed to make social security contributions in their employees’ countries of origin (HSBC, 2014).
Second, ex-pats in the UAE are often entitled to a wide range of fringe benefits, which include house allowance, child education expenses, airline tickets, and relocation allowance (Otoum & Sulieman, 2012). By contrast, the nationals of the UAE are often not entitled to the aforementioned benefits in most companies. One of the factors that explain this difference is that ex-pats and the nationals of the UAE usually have different employment contracts. The expats are entitled to additional benefits such as payment of child education and accommodation expenses to enable them to settle and work comfortably in the UAE. In addition, most multinational companies provide extra discretionary benefits to expats to motivate them to relocate to the UAE. This compensation strategy is usually considered to be unfair to the nationals of the UAE since they perform the same tasks as their colleagues from foreign countries (Otoum & Sulieman, 2012). However, companies that provide extra benefits to expats justify their decision by the fact that the nationals of the UAE have access to stable social safety nets such as free healthcare, which expats do not enjoy.
Finally, health insurance programs vary in the UAE. The government and most private companies provide health insurance to employees and all members of their families (HSBC, 2014). However, expats are sometimes entitled to limited health insurance benefits. For instance, an expat who is hired on a ‘single status’ employment contract is required to provide health insurance to any person under his or her sponsorship in the country. By contrast, the nationals of the UAE do not face restrictions concerning the members of their families who can receive health insurance from their employers.
Conclusion
The labor laws in the UAE require employers to provide several benefits to their employees. These include end of service gratuity, social security benefits, and annual leave. Employers are not obliged by the law to provide social security benefits such as pension contributions to expats in the UAE. The labor laws also allow employers to provide various discretionary benefits. These include paid time-off, life insurance, and services that improve the wellbeing of employees. Generally, the benefits are provided to improve employees’ standard of living, which in turn improves their productivity.
References
Golden, L. (2012). The effects of working time on productivity and firm performance: A research synthesis paper. Geneva, Switzerland: International Labor Organization.
HSBC. (2014). Doing business in the UAE. Dubai, United Arab Emirates: HSBC Commercial Bank.
Latham & Watkins LLP. (2009). Employment issues in the United Arab Emirates. Los Angeles, CA: Latham & Watkins LLP.
Lusardi, A. (2010). Planning for retirement: The importance of financial literacy. Public Policy and Aging, 19(3), 7-11.
Otoum, M., & Sulieman, H. (2012). Comparison job satisfaction perceptions among Emiratis and expatriates in information technology management in Emirate of Dubai in United Arab Emirates. Sharjah: University of Sharjah.