Companies in the UAE have traditionally lacked one of the crucial tools for recruiting expatriate staff: bragging rights that their pension plan is better than their rivals' version. That's because all employers generally offer the same benefit for expatriates - a lump sum known as a gratuity that is paid at the end of a service contract and determined by an employee's length of service.
However, in the last few years, some UAE businesses have found a way to stand out by establishing American-style, individually managed retirement accounts.
These typically operate by companies setting up personal accounts for their employees, with one or both parties contributing the money to fund them. The accounts are then gathered into a single-asset pool, one per employer, managed by well-known banks, mutual fund firms, and insurance companies. The employees then choose their own investments from a list determined by the management firm.
Although the UAE Government is considering instituting a new federal pension plan, these corporate trendsetters are not waiting.
Leading the charge is the Jumeirah Group, a Dubai-based company with luxury hotels and resorts from New York to Shanghai, that created its own retirement plan for senior executives in 2007 after its employees told the company that long-range financial planning "was important to them".
"We wanted to provide market-competitive remuneration packages to attract and retain management [staff]," says Julia Miller, the director of remuneration for Jumeirah Group. "Retirement benefits are common for international assignees within our hotel industry competition."
While Jumeirah was a pioneer, experts say plenty of other Emirates companies have followed its lead over the last five years. According to a recent annual survey of more than 300 businesses in the Middle East by the New York-based consulting firm Towers Watson, 35 per cent of companies now offer a supplementary retirement plan, in addition to the traditional gratuity. In the report, published in November, the UAE led the pack, followed by Saudi Arabia, Egypt, and Bahrain.
Nobody tracks the total amount of assets in these arrangements and although Michael Brough, the London-based director of Towers Watson's international consulting group, knows of one US$1 billion (Dh3.67bn) giant, he says the pools are usually "much smaller" than global operations.
To reach a practical size and garner economies of scale, the pools will usually combine the Emirates' assets with those of employees in neighbouring countries, such as Bahrain, Jordan, Oman, Qatar and Saudi Arabia. Or, if the corporation already has such a cross-border plan for its European operations, it might add the UAE staff to that, "for convenience," Mr Brough says, adding that at least four European pools already do that.
Within the UAE, the pension plans are most often found at pharmaceutical, financial services and other companies with generous benefits, says Mr Brough.
And there's no doubt a corporate pension plan makes sense for employees. The existing gratuity equates to 21 days' pay for every year completed for the first five years of work and 30 days' pay after that - an amount that generally falls short of what a typical pension plan would be worth.
While the government provides pensions for Emiratis, expatriates who account for the bulk of the population are missed out unless their company chooses to introduce its own corporate scheme - something that could make a business particularly attractive to job hunters.
For those seeking this kind of benefit, the best advice is to work for a company headquartered in the United States. "They have offered 401(k) plans for a long time, and they see the advantages," says Richard Lawrey, a London-based principal at the consulting firm Aon Hewitt.
The 401(k) plans are named after the section of the US tax law authorising them. They are also often known as defined contribution plans, because only the amount of money contributed - not the amount that is paid out at retirement - is specifically defined.
The company usually contributes a certain percentage of salary - often 10 to 14 per cent. This amount might be the same for everyone or it might be "tiered," based on factors such as age, number of years at the company and job title.
Jumeirah uses a similar scale, putting in 7.5 per cent to 12.5 per cent of pay, says Ms Picard, depending on the person's length of service and geographic location.
In some plans the employee might also contribute, and if so, Mr Lawrey says the company is likely to "match" approximately one-fourth of that amount.
With so much money going into the funds, what are employees choosing to do with it?
According to a Towers Watson survey, which looks at the entire international retirement market, 60 per cent of plans offer more than 10 investment options. Therefore employees can choose among virtually every type of investment imaginable from global and regional stock funds to corporate bonds, commercial real estate, cash and index funds as well as Sharia-compliant funds.
Jumeirah's retirement plan has 11 such funds plus three "lifestyle" options, which design an investment mix based on the investor's age and level of risk-taking.
However, not all employees may be allowed, or even want, to join such a pension scheme. Just 30 per cent of the companies in the Towers Watson survey opened their plan to the entire work force and at Jumeirah, only the 1,300 people at managerial level and above are eligible, out of a total 9,300 employees in the UAE.
Of those, 300 did not sign up for the scheme so the hotelier has gone a step further, implementing a tactic called "automatic enrolment" that has become widespread in the US in the last few years with eligible employees who do not sign up automatically being enrolled after one year.
To actually invest and oversee all this money, employers turn to the same large-money management firms that probably handle their other corporate cash or their pension plans in other countries such as Fidelity Investments - one of the biggest money management firms in this line of business - which handles $1.65bn worth of retirement assets for 65 companies worldwide.
Setting up these accounts is not the only action that companies in the UAE are taking to burnish their employee benefits. Some multinationals are also looking at the administrative side, seeking to coordinate their operations in the Emirates with programmes they offer elsewhere. This could involve hiring the same legal and accounting firms, creating one communications portal for all locations, or, as much as possible, offering a standard set of benefits.
Meanwhile, the Dubai Department of Economic Development has proposed a controversial private pension system to replace the end-of-service benefit. The basic idea would be similar to a traditional pension, with money specifically set aside in advance to fund the payouts.
No final decisions have been made, including the crucial one as to whether the corporate involvement would be mandatory. But whether such a government programme might squeeze out the new individual accounts is unclear.
As Chris McNickle, the London-based head of Fidelity's global institutional business, points out, these asset pools are typically established specifically "to support employees in locations without meaningful pension regulations." And if the federal contributions are mandatory, a company might not want to contribute twice.
But for now, at least, Mr Lawrey says that the efforts to create individual retirement accounts are likely to continue. In particular, he expects more European-headquartered businesses to join the trend. "If you look at the way things are going in Europe, there's a lot of groundswell toward defined contributions," he says. "I expect it to grow in the Emirates because there's a focus on wealth accumulation and giving more flexibility."
Employers need to do this, says Mr Brough, because their workforces are demanding it. "There is pressure from employees who are financially aware. The employees say, 'I've left my pension plan in the United Kingdom to come to work here, and the end-of-service gratuity is very small compared to my [UK] benefit.' Any Middle East multinational that wants to compete will have to listen."