* Below is a detailed research study on pension issues in the UAE where expats come in large numbers for work throughout the year, but often feel discouraged due to absence of solid pension plans. However, in recent few months, the gulf states have started considering coming up with pension plans for expats
Chapter 1: Introduction
The United Arab Emirates, according to the World Economic Forum (WEF), is the 12th most competitive nation globally for 2014-2015, which puts the country ahead of all the Middle East and North African (MENA) countries (Wilson, 2014).
The UAE is a popular destination for expats and has become an “expats paradise” due to the high salary levels and the zero tax policy. According to the UAE National Bureau of Statistics, UAE’s population has reached 8.2 million in 2011 and the expats account for 88.5% of it. However, the UAE does not offer to its expatriate population any federal pension scheme or retirement plan, this is unlike the other job markets around the world (WEF, 2014).
The 2014 MENA salary survey has demonstrated that people working in the UAE are highly satisfied with the salaries but they are also the least loyal in the region. The lack loyalty in UAE-based workers has more to do with little long-term career opportunities than salary packages. Given this aspect, increasing the salaries in UAE may fail to keep expats in the country on a long-term basis, but this can be better accomplished with the introduction of a federal pension scheme (Bayt & YouGov, 2013). The majority of companies in the UAE are offering high salaries and attractive packages but they are still having trouble with the foreign employees’ retention and loyalty. Due to this transitory expat culture, many companies are hesitant to implement a private pension schemes for their foreign employees with the absence of a federal one (Wilson, 2014).
The purpose of this research is to study the impact of the absence of federal pension scheme in the UAE on expats’ retention and loyalty in “BTN”, a private company based in Ras Al Khaimah.
This research also intends to focus on the influence of the loyalty and motivation of BTN foreign employees on the long term success of the company. BTN Company therefore presents an ideal example of a UAE firm that is suffering from the lack of a federal pension system in UAE especially for expats as they are the ones who are working in the economy of the country. The private sector already has lower salaries than the public sector and it becomes difficult to keep the employees interested and at a single organization for a longer time period in the absence of very high annual salary rise.
1.1. About BTN Company
BTN is a private company providing management consultancy services and located in Ras Al Khaimah, the fourth largest of the seven Emirates forming the United Arab Emirates. The company was founded in 2003 with a vision to help local organizations improve their performance by providing solutions, new strategies and best practices.
The Company has over 40 qualified employees belonging to 10 different nationalities. The company is spending around 10% of its annual expenditure on recruitment and development of its human resources.
The company believes that its long term success is depending on the loyalty and quality of its human resources and also that loyal employees can create loyal customers (McCarthy, 1997). This is significant because there is a lack of employee retention in UAE and good employees can quickly move to other companies to look for better opportunities. The employee retention in the company has the same behaviour as in the region as 4 employees have left in the previous year while 2 have joined up. Although the company spends good budget on employee development but still it is not enough to turn the tides in the face of moving employees. The company has the usual policy of giving away gratuity at the end of employment which depends upon the number of years of service and it is a onetime payment given at the close of service period. This payment is never invested anywhere by the company and it simply depends on the current position of an employee. There are no additional benefits that are offered at the company although the employees are free to contact any individual financial advisor who can devise them a personal saving plan for future pensions. Such plans are not present at the organizational level and mid level organizations such as BTN Company are suffering from the loss of important talent that would otherwise stay in a place for longer period and therefore produce better and long time results for the organization (WEF, 2014).
1.2. Research Significance
The topic of this research was chosen due to the importance of pension scheme and retirement plan for any employee anywhere. The absence of such plans in the UAE affects the long term domicile decision of expatriates and makes the country a transient place to work for 5 to 10 years maximum, but not to live permanently.
The researcher is an employee of BTN and aware of the serious impact of the absence of a federal pension scheme on the loyalty & motivation of the staff and on the long term success of the company. The researcher is aware that the “end of service gratuity policy” is not encouraging staff to stay in the company for a long term as they will be always looking for another company offering a high salary to make their end of service higher. The company is spending significant funds on recruitment and staff development but if its staff can’t be loyal also its customer won’t be too.
Since the establishment of the company, 44 employees have left the company: 75% of them have resigned and the other 25% were terminated. The researcher has learned through discussions with the previous staff that one of the common reasons was the instability and insecurity caused by the absence of a federal pension and retirement plans in the country.
1.3. Research Objectives
This research intends to focus on the importance of a federal pension scheme and its influence on the loyalty and motivation of BTN foreign employees and on the long term success of the company. Motivation is a very important factor in increasing the productivity of the workforce and also to increase the loyalty of employees. Motivation is created through the creation of positive steps of the management of a firm which gives confidence to employees that there work and time spent in the company would be compensated in the most ideal way and their resources will be well developed in the current organization.
The main objectives of this study are:
· To identify the impact of the absence of a federal pension scheme in the UAE on the loyalty and retention of BTN employees.
· To identify the influence of the staff loyalty and motivation on the long term success of BTN company.
· To give suggestions to improve employees loyalty, retention and motivation.
· To draw conclusions about the applicability of a pension scheme in UAE.