interest rate savings investment inflation
Savings plans can often be the 'silent' partners in employee retention initiatives. Image Credit: Shutterstock

Gulf companies are realizing the importance of offering workplace savings plans to attract or retain top talent. The plans while benefiting employees can also influence company culture.

I have witnessed first-hand the transformative impact of these plans on employers and employees. We will explore the compelling reasons for companies to adopt workplace savings plans, how employees can maximize benefits, and how the plans align with the GCC’s labour laws and cultural aspirations.

Why companies should have workplace savings plans

Top talent will always seek opportunities that provide financial security alongside a promising future. With savings plans, companies send a strong message that they prioritize the financial wellbeing of their workforce. With the introduction of corporate tax and the potential benefits associated with contributing to these plans, companies may expect tangible rewards.

Understand that it is a mutually beneficial arrangement where employees’ financial security directly impacts the company’s overall success.

Benefits for employees

Savings plans offer a multitude of advantages for employees. They act as a silent partner, steadily contributing to employees’ savings without them even noticing.

Numerous studies support the notion that disciplined, consistent contributions yield better long-term results than trying to predict market movements. In fact, research from S&P Dow Jones Indices revealed that no mutual fund consistently outperformed the market benchmark over the past five years. This highlights the effectiveness of steady investment over any attempts to ‘beat the market’.

Influence on company culture

Offering a robust savings plan has a profound impact on company culture. It signals that employers genuinely care about their employees’ present and future financial wellbeing. As Richard Branson said, “Employees come first. If you take care of your employees, they will take care of the clients.”

This prioritization fosters higher engagement, resulting in improved performance and profitability. According to a Gallup report, companies with high employee engagement outperform those with low engagement by an astounding 202 per cent.

Therefore, a workplace savings plan not only benefits employees but also contributes to a thriving company culture.

Maximizing benefits

To make the most of workplace savings plans, employees should focus on consistent contributions, starting early, and making informed investment choices. However, one crucial aspect that many overlook is the impact of fees. Even seemingly small fees can have a substantial long-term effect on savings.

For instance, a 1 per cent fee versus a 2 per cent one can result in a difference of $135,000 over 30 years for an employee contributing $10,000 annually. Therefore, employees must be diligent in selecting plans with low fees to optimize their savings growth.

The UAE and Saudi Arabia have set ambitious goals to attract global talent and increase household savings, respectively. These aspirations are in line with the importance of workplace savings plans. In my experience consulting with government and pension funds across the region, it is evident that supplementary savings plans through the workplace are essential for building a sustainable retirement ecosystem.

This aligns with the recommendations of the World Bank, emphasizing the significance of these plans for employees and the broader economy. By adopting workplace savings plans, the GCC takes a significant step towards achieving its long-term economic and social objectives.

By prioritizing employees’ financial security and providing opportunities for long-term savings, companies send a clear message of support and care. Employees, in turn, benefit from consistent contributions, increased engagement, and the potential for substantial financial growth.

As the region’s ambitions continue to evolve, workplace savings plans align with labour laws and cultural aspirations, playing a pivotal role in building a sustainable retirement ecosystem.