Employers across the wider Gulf area face the mounting risk of unfunded retirement benefits according to a new survey from consultancy WTW.
It found that 85 per cent of organisation in the region, as covered by the Gulf Cooperation Council (GCC) still operate end-of-service benefits (ESBs) on an unfunded basis, leaving liabilities to be paid directly from company assets.
These contracts typically pay a lump sum or gratuity benefit to employees when they leave an organisation. Although not structured as a pension, or savings schemes they act as a de factor retirement savings mechanism, particularly for many expatriate workers, in the absence of state pension coverage.
They are mandated under labour law in most Gulf Cooperation Council (GCC) states, with some variations by country.
WTW’s report — which covered 80 employers — warned that these liabilities are potentially rising sharply and could pose a significant threat to corporate balance sheets, and ultimately impact employee outcomes, in terms of retirement income and job security.
The report found that the proportion of organisations with ESB liability exceeding $50m (US dollars) has more than tripled over the past decade, rising from 6 per cent to 20 per cent.
These increased liabilities have being driven by a number of factors including expanding workforces, longer employee tenure and rising reference salaries.
Given these problems that the report found that only one in six employers believe current ESB arrangements are highly effective in delivering adequate retirement benefits.
WTW said the region is at a “critical inflection point” as governments increasingly push employers towards funded, transparent savings arrangements.
Michael Brough, senior director of integrated and global solutions at WTW, said ESBs can no longer be viewed as a “compliance exercise”, warning that unfunded liabilities represent a growing risk to cash flow, resilience and talent retention.
Regulatory reform is already under way across the region. The UAE has led the shift with initiatives such as the Dubai International Financial Centre’s Employee Workplace Savings (DEWS) Plan and the federal Voluntary Alternative Scheme (VAS). Bahrain introduced mandatory employer contributions to its Social Insurance Organization in 2024, while Oman plans to launch a contributory savings system by 2027. Saudi Arabia and Qatar are also exploring reforms.
However, the transition to funded models remains slow. While awareness of VAS is high among UAE employers, take-up is limited, with the voluntary nature of the scheme and uncertainty around implementation cited as key barriers. Fewer than one in five organisations with unfunded ESBs expect to move to a funded arrangement within the next three years.
Despite this, many employers said they recognise the strategic value of enhanced benefits.
More than a third have improved ESBs beyond statutory minimums, primarily to attract and retain talent and align with international best practice. Looking ahead, employers are increasingly considering voluntary employee contributions, employer matching, broader investment choice and improved digital access as part of a more employee-centric approach.
WTW said employers that act early to adopt funded, well-governed ESB arrangements will be better positioned to manage long-term risk, support financial wellbeing and differentiate themselves in an increasingly competitive labour market.
