The survey, based on the views of chief financial officers, found that although 83% of companies do not fund their EOSB liabilities, an equally significant 85% feel it would be a good idea if they did.
These findings in the ‘Exploring the end of service benefit dilemma’ report formed the basis of a thought leadership roundtable organised by consultancy firm Insight Discovery.
Peter Cox, head of international pension plans for Zurich in the Middle East, said the “end of service benefit liabilities are getting bigger which is a problem”.
He said not many financial advisers in the region had engaged with this issue on behalf of their clients, and suggested they should be “skilling themselves up”.
An ever growing financial issue
He pointed to estimates that the payments to expat workers when they leave an employer have risen on average by 140% over the last six years, due to the typical length of service rising from just under five years to nearly seven years.
“Companies in the Middle East struggle to see the prudence of de-risking an ever growing financial issue”, he said.
He added that “a lot of the companies are not reporting the liabilities right, to international accounting standards, and instead take a simplistic approach”.
Case study work by accountancy group EY shows that these firms are not factoring in such variables as future salary increases.
“Not only are they not funding it correctly but they are not valuing it right either.”
Cox said the Department of Economic Development in Dubai had received the report and he was hopeful that action would be taken at some stage to encourage companies to take the right steps.