An Estimate of End-of-Service Benefit Liabilities in the Gulf Cooperation Council

In countries of the Gulf Cooperation Council (GCC) labour laws mandate that end-of-service benefits (ESB) be paid to employees upon leaving their employer. The rate of compensation varies from nation to nation, with many nuances and exceptions. These benefits continue to accrue as long as an employee remains with the same employer. Many organizations in the GCC do not fund this liability, which puts them at risk when faced with harsh economic conditions and the need to lay off workers. The cash expense associated with terminating a position might be substantial and cause some employers more difficulty if extra finance is hard to find. In this paper we quantify this risk by estimating the size of these benefits in the GCC economies. We present a number of scenarios and some sensitivity analyses to our results. Given the size of the liabilities and their potential growth we conclude that organizations might want to review their existing arrangements and consider alternative ESB designs to ensure the availability of funds when needed