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Most firms are fail­ing to put aside funds to pay em­ploy­ees’ end of ser­vice pay­ments, a study has found, putting their own fi­nances at risk.

And the situation could lead to staff los­ing out fi­nan­cially in the event of their com­pany’s col­lapse, ex­perts say.

Finance giant Zurich yes­ter­day re­leased the

By Rory Reynolds re­sults of new re­search show­ing 83 per cent have noth­ing set aside for gra­tu­ity pay­ments.

The study was the re­sult of in­ter­views with 106 chief fi­nan­cial of­fi­cers in the Mid­dle East, 90 per cent of which were based in the UAE.

Re­port co-au­thor Nigel Sil­li­toe, CEO of re­searchers In­sight Dis­cov­ery, de­scribed the find­ings as “wor­ry­ing” and urged em­ploy­ers to plan for the fu­ture. More than half of the firms em­ploy more than 1,000 peo­ple each.

Zurich and In­sight Dis­cov­ery found that com­pa­nies are seem­ingly un­aware at their po­ten­tially gra­tu­ity bill.

At present, com­pa­nies are legally obliged to pay out in the event of an em­ployee leav­ing their po­si­tion or los­ing their job – but are not com­pelled to keep the money set aside.

Peter Cox, Head of In­ter­na­tional Pen­sion Plans (Mid­dle East) for Zurich said many em­ploy­ees are un­aware of how the sys­tem works.

“I don’t think em­ploy­ees nec­es­sar­ily un­der­stand that there’s no money set aside for them in their best in­ter­ests,” he told 7DAYS.

“The money - in 83 per cent of cases - is in­vested back into the busi­ness.

“We have seen cases in which com­pa­nies have col­lapsed - the sub­sidiary of an Aus­tralian firm with 250 em­ploy­ees a few years ago was one.

“Money wasn’t set aside, all of the prof­its had gone back to Aus­tralia, and the staff faced a strug­gle to get what was due to them.”

Cox said, in most cases, com­pa­nies are aware of the prob­lem but have not ad­dressed it.

He said: “The as­ton­ish­ing thing is when we asked the ques­tion, ‘if the gov­ern­ment in­tro­duced manda­tory fund­ing re­quire­ments, would this be a good idea’ and 85 per cent said yes.

“So 83 per cent don’t fund end of ser­vice ben­e­fits, and 85 per cent think it would be a good idea if they did – you couldn’t make it up.

“What that tells me per­haps is that at­ti­tudes might not change un­less they are com­pelled to do so.” At present, em­ploy­ees are en­ti­tled to 21 days pay for ev­ery com­pleted year of ser­vice, ris­ing to 30 days af­ter five years.

Along with the fi­nan­cial risk to firms, com­pa­nies are los­ing out on an op­por­tu­nity to give their staff a rea­son to stick with them.

Cox also said that, along with prov­ing to staff that gra­tu­ities are se­cure, firms should be con­sid­er­ing of­fer­ing pen­sion schemes.

He said some larger oil and gas firms, hos­pi­tal­ity groups and com­pa­nies such as Emi­rates have sav­ing schemes, but that most do not.

He said: “The end of ser­vice ben­e­fit was never de­signed for re­tire­ment, it was de­signed to al­low peo­ple to go home, pay for an air­line ticket.

“What’s hap­pen­ing now is peo­ple are stay­ing in the UAE longer, so at­ti­tudes to­wards em­ploy­ees need to change.”

PAY­MENT: Some ex­perts say pen­sion schemes - and not just one-off gra­tu­ity pay­ments - would en­cour­age staff to stay with their firms for longer

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