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Mercer's survey, which was carried out in the UAE and the other GCC countries in July and August of 2009, shows that medical plans have not only become more prevalent but also include richer benefits, with far more companies including cover for dental and maternity cover, both of which are up around 20% on 2007 levels. However, the increase in benefits provisions within plans coupled with increased claims is fuelling high medical plan premium inflation across the region - in the range of 10% to 15% per annum for many employers.
Callum Burns-Green, head of Mercer's benefits consulting team in the Middle East, said,
"The type of medical cost management that has become common in other markets such as the US, where employers take an active role in wellness initiatives to educate employees on the risks of certain lifestyle choices and facilitate access to health initiatives, should be considered from the longer term perspective of reducing medical insurance claims and resulting premiums. Employers and their advisers will also need to get underneath claims data to be able to structure discussions with providers around whether certain levels of premium increases are justified for their employee groups. In short, employers will need to consider proactive measures to address premium inflation if costs are to be controlled."
Another area that can potentially reduce employer costs is flexible benefits, a plan that a number of employers are expressing interest in.
"We would expect to start to see employers offer a core, compliant level of medical insurance with the facility for employees to top this up with higher levels of cover at their own cost. This type of employee choice can be applied across a range of benefits and is recognised in other markets as a tool for employers to control spend on rewards," said Mr Burns-Green.
Also highlighted in Mercer's UAE benefits survey was that 65% of companies offer protection benefits for employees that cover death and long-term disability for all illnesses and injuries, regardless whether it was work-related or not. Approximately 80% of plans provide a multiple of salary benefit, usually as a lump sum benefit and based on basic salary alone.
End of service benefits, otherwise known as termination indemnities or end of service gratuities, are usually payable to all employees at termination, but only after the employee has achieved one year of service. In the UAE 30% of participants offer enhanced end of service benefits above the statutory minimum.
Mazen Abukhater, an actuary in Mercer's benefits team commented that "the end of service benefit is not often a well communicated, well understood or well valued benefit by employees, especially expatriates, so enhancing it may not always be the most effective way for employers to direct Dirhams on employee rewards".
In terms of Mercer's survey, 30% of companies across the GCC now say they offer some form of retirement benefit. In 2007, the prevalence of supplemental retirement plans was less than 10%. "Retirement Savings Plans offer employees access to group investment funds at a far reduced cost than is typically possible for individual investors.
In terms of the prevalence of other benefits, the most popular are annual airfares, settling in allowance, mobile phones and company cars. "It is not uncommon for employee benefits to represent over 10% of total employer expenditure on rewards" commented Mr Burns-Green. "It is important that employers review this to ensure that they are spending this money in ways that are understood and valued by employees".
Posted by Rima Ali Al Mashni
