International human resources consultancy highlights trend for long-term employee stays
Dubai, UAE: Companies in the GCC region will have to formulate effective retirement plans if they are to remain competitive in the market place, so says Mercer. The International human resources consultancy has highlighted the trend for expatriates to extend their stay in GCC countries to call for a greater emphasis to be given to planning for life after work for employees.
"The GCC region - particularly the UAE - is being viewed more and more as a long-term career destination for expatriates. However, this trend for extended stays is not being matched with a concomitant enhancement of end-of-service benefits from employers," said Mazen Abukhater, principal at Mercer Middle East. "Retirement plans are set to become more and more important for people considering their career options in this part of the world and will have to become a priority for companies when they are structuring benefits packages if they wish to remain competitive," he added.
Mercer says that there are several benefits for employers in the formulation of retirement plans for their workforce, with outcomes from a human resource perspective including the positioning of a company as an employer of choice amongst competitors, the attraction of international expertise and the retention of key talent; particularly long-servers who are looking ahead to their retirement years. Mercer also draws attention to enhanced employee engagement as being another key benefit.
"One particular advantage from an employer's perspective is that plans can be designed to increase employee engagement by showing them on a regular basis how their longer service and loyalty is being rewarded. This distinguishes a retirement savings plan from an end of service benefit, where the latter is often only realised when the employee has left or is starting to think about leaving. A retirement savings plan can provide a regular statement showing how much has been accumulated and what the company has contributed to the overall value. From an engagement perspective, a retirement savings plan is much more effective than a statutory end of service sum," added Mazen Abukhater.
Mercer says that employees can benefit from a retirement savings plan with their employer matching their own contributions. This form of 'deferred income' would increase with the right investment choices. In a predominantly tax-free region that has a relatively high level of disposable income, such plans, Mercer believes, would commit the member to setting money aside in the form of pay deductions, something that would likely be viewed favourably. The factoring in of additional matching amounts paid by the employer would be a further incentive.
"When you take into account compound interest to the amounts being paid into a retirement scheme by both the employee and the employer, the end figures are impressive. Consider for example a 35 year old employee who joins his company's savings plan and pays four percent of his salary, receiving another four percent from his employer as contribution. With the power of compounding return at say five percent, the value of the benefit after 15 years would be equivalent to 14 times their monthly salary. But if the same employee stays for another 10 years, then their account balance would be equivalent to 23 times their monthly salary. These numbers are in addition to the end-of-service benefit they would receive. Assuming one monthly salary per year of service, the numbers would be doubled. That is a significant financial bonus," added Mazen Abukhater.
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About Mercer
Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset - their people. Mercer's more than 20,000 employees are based in more than 40 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With 57,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.
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