The New Rules of Employee Benefits: What UAE Companies Are Getting Wrong

In the UAE, offering legally compliant employee benefits is no longer enough. Companies that stop at minimum standards risk losing top talent to global competitors offering more strategic, personalised, and performance-aligned compensation and benefits packages.

The pain point is clear: rising living costs, changing employee expectations, and increasing competition for skilled labour mean the old approach to employee benefits simply won’t cut it anymore. A study commissioned by Zurich International Life shows that while 60% of UAE employees cite competitive benefits as a key retention factor, many employers still rely on outdated, one-size-fits-all models. This blog unpacks what’s going wrong, and how companies can get it right.

Rethinking the Foundation: Compliance is Just the Starting Line

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Meeting UAE labour law requirements is essential, but it’s just the beginning of an effective benefits strategy.

The UAE mandates several core benefits:

• Health insurance (mandatory in Dubai and Abu Dhabi)
• 30 days annual leave after 3 months of service
• Paid sick leave (up to 90 days with tiered payment)
• Maternity and paternity leave provisions
• End-of-service gratuity

While compliant, these statutory benefits don’t address the broader wellbeing, loyalty, or motivation of your workforce. That’s where the gap begins.

Compensation & Benefits: Misaligned with Market Expectations

Salaries are stagnating while living costs are climbing, creating a significant disconnect for UAE employees.

In 2024, UAE salaries rose by 5–7% on average (Khaleej Times), as Business Insider reported, rents in cities like Dubai surged over 16%. School fees and insurance premiums also increased, compressing disposable income for mid-tier professionals.

Employees increasingly view compensation and benefits as a bundled value proposition, and many feel shortchanged:

• Only 41% believe their benefits reflect their performance
• 47% of UAE nationals received a raise, but without benefits to match
• Over 60% of employees say better benefits would increase loyalty

Fringe Benefits: More Than Perks, They’re Performance Drivers

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Strategic fringe benefits are proven to increase motivation and productivity, especially in performance-driven environments.

Fringe benefits extend beyond the basics to include:

• Enhanced health coverage (mental health, dependants)
• Retirement plans
• Education or skills development funding
• Flexible work arrangements
• Travel, entertainment, or gym reimbursements

A 2025 ComFin Research study revealed that UAE employees who received at least two non-mandatory fringe benefits reported:

• 18% higher job satisfaction
• 21% improvement in productivity
• 25% lower turnover rates

In practice, fringe benefits can be tailored to employee segments. For example:

• Junior staff: transport support, mobile phone bills
• Mid-career talent: children’s tuition, flexible work
• Leadership: performance-linked stock options, sabbaticals

Where UAE Companies Are Falling Behind

Most UAE firms still treat benefits as a static cost centre rather than a dynamic investment in culture and performance.

Common pitfalls include:

• Standardised packages for all levels and roles
• No link between benefits and performance metrics
• Poor internal communication of benefit value
• Failing to benchmark against regional or global best practices

Companies that get it wrong often:

• Suffer higher turnover, particularly among nationals
• Struggle to hire skilled expats due to cost-of-living concerns
• Miss opportunities to drive engagement through recognition-based perks

Global Trends, Local Implications: Benchmarking Smarter

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Multinationals in the UAE are raising the bar on employee benefits, putting pressure on local companies to adapt.

Examples:

• Deutsche Bank UAE: 26 weeks paid parental leave + miscarriage leave
• Google MENA: flexible benefits wallet system
• HSBC: annual wellbeing allowance, eldercare leave

These innovations signal a shift from “policy-based” to “people-based” design—and employees notice. In an open market, the best talent will gravitate towards workplaces that acknowledge and adapt to their real-life needs.

The Communication Gap

Even the best benefits packages won’t get traction if employees don’t know about them. This is where a lot of companies drop the ball—they simply don’t communicate effectively.

What’s worked for us:

• Hosting benefits workshops where employees can ask questions and learn how to maximize their options.
• Using digital platforms that make it easy to access and customize benefits.
• Highlighting the monetary value of benefits so employees understand the full picture of their compensation.

Are Your Benefits Working?

If you’re not tracking the ROI of your benefits, how do you know if they’re actually effective? Here’s what we recommend measuring:

• Usage rates. Are employees taking advantage of the benefits you’re offering?
• Employee feedback. Are they satisfied with what’s available?
• Retention rates. Is there a clear link between benefits and reduced turnover?
• Cost per employee. Are you getting the best value for what you’re spending?

By keeping a close eye on these metrics, you can refine your strategy over time and make sure you’re putting resources in the right places.

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How to Get It Right: Building a Future-Fit Benefits Strategy

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Smart companies design benefits strategies that evolve with the workforce and create measurable ROI.

Here’s how:

1. Audit Your Current Offering
   
   • Compare against UAE law and competitors
   • Survey employees for perceived value
2. Segment Benefits by Workforce Tier
   
   • Junior, mid-level, and senior tiers have different needs
3. Link Benefits to Performance & Culture
   
   • Offer perks that reward innovation, learning, or tenure
4. Optimise for Cost & Impact
   
   • Leverage group health schemes, digital benefit platforms
5. Communicate Transparently
   
   • Explain total rewards, not just salary

A thoughtful benefits strategy isn’t about spending more, it’s about spending smarter to retain and inspire your people.

Benefits as a Strategic Differentiator

UAE companies that want to thrive in 2025 must redefine employee benefits from a cost of compliance to a lever of competitiveness. That means aligning compensation and benefits with both employee expectations and business goals.

The most successful companies will:

• Treat benefits as a dynamic tool, not a fixed cost
• Use data to personalise offerings
• Integrate benefits into performance, culture, and EVP (Employer Value Proposition)

Ready to future-proof your employee benefits strategy?

Talk to our UAE-based HR experts today. They help SMEs build smarter, compliant, and culture-enhancing benefits packages that attract and retain top talent.

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