Effect of Absence of Pension in UAE (Part 1)

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 UAE people are highly satisfied with the salaries but they are also the least loyal in the region, the rationalization is that loyalty in UAE is less connected with the salary level but more connected with the long-term career opportunities. Consequently, increasing the salaries in UAE may fail to keep expats in the country for long term, 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.