How can mergers and acquisitions impact employees’ benefit plans in the UAE?

Mergers and acquisitions (M&As) in the UAE are becoming increasingly commonplace. One recent example was the high-profile acquisition of Souq.com by Amazon. But whether it be a merger, acquisition or move to a common holding company, employee benefits are one area that will be directly affected.

It can be an unsettling time, and your employees may be concerned about how their benefits plans will be affected. As an HR manager, it is your job to both streamline the changes and alleviate employees’ concerns.

To help with this, let’s look at three key factors most likely to affect employees.

1. Cultural and regional differences

With mergers, one key factor that can cause issues is cultural variations. For example, if one of the firms offers more in terms of benefits such as health and life insurance, and the other only offers health, there can be friction as clearly one side will want to keep the increased benefits package. This is going to be of particular importance with cross-border mergers such as those from the UK.

The Willis Towers Watson 2017 Middle East Benefits Trends survey gives some indication of what’s important to employees here, with 89 per cent citing healthcare benefits as their biggest priority. For HR managers, finding a perfect blend between cultures is going to be key, and may involve giving more to one side when new plans are being drawn.

How can HR mitigate these changes?

With that in mind, ongoing communication between HR and employees is vital and must remain a focus when the merger takes place. Also, due to regional differences in regulations when a company’s workforce moves to another country, existing benefit plans may not always be compliant. For HR managers this has to be identified and monitored, so that the right plans are offered, legally.

2. Demographics and employee differences

Demographics will also play a big part in how benefits are delivered. If one company has a younger workforce then benefits can often be offered through packages in which leave will include holiday, sickness and others as a single block, with the assumption that the majority of the leave will be taken as holiday. On the other hand, if the other company has an older workforce, or more staff with children, they are likely to take more sick leave and therefore having separate time for holiday and sick leave will be a bigger priority for them.

There is always the possibility that key staff may want to leave during this transitional time, which can directly contribute to the post-merger organisation failing. But there are methods to counteract this, such as profit sharing to help retain the best staff, or by offering cash for staying another year with the company.

After all, according to a recent survey of UAE companies, one of the major strategic objectives for compensation is attracting and retaining employees – cited as the number one or number two priority for just over 80 per cent of firms. This indicates that it’s worth putting in the time to make sure all employees are happy with their benefits package.

How to approach problems of integration

Be patient. Most of the time staff do not like rapid changes, and therefore waiting to implement them can be a good thing. For example, if a health plan runs until the end of the year, look to implement changes from January 1st. Staff may have scheduled holidays, and will want to keep their existing benefit plans until that elapses. By implementing gradual changes, staff may feel safer in their jobs, and you will have the time required to assess what type of benefits plans will be best.

And remember that all employees have slightly different needs. Identifying high-risk staff or those working in high-risk areas is important and will need to be addressed early. As a newly merged entity, you may be eligible for captive or pooling arrangements, involving identifying those with similar risks and then using a common underwriting methodology to set up a pool. (This will also bring tax benefits as risk is distributed.)

3. Retirement options

Retirement plans vary widely, with some firms providing profit sharing, some double matching and others not matching savings at all. And the global trend now is for governments to encourage people to save for their own retirement rather than providing benefits – hence the significance of this issue for an aging population.

For example, during an M&A if staff are used to a 3 per cent match and this is halved, understandably they are not going to be happy. So it’s a delicate matter. If the merger involves employees being relocated to the UAE it can get even more complex: according to the 2017 Willis Towers Watson report End of Service Benefits in the Middle East, 54 per cent of respondents who had ‘international assignees’ drew a distinction between locals and international assignees as far as providing end-of-service benefits (ESBs) was concerned.

How should HR deal with retirement questions?

Again, this is where a positive HR strategy comes in. Staying flexible and talking to both new and old staff about their priorities is going to be key when it comes to delivering the right retirement plans. After all, it is the employees themselves who will know what they want and need.

Getting it right

Retaining the vital talent that brought both companies to this point is tricky, but delivering the right kinds of benefits can do this. Keep communication pathways open, try to be flexible when different cultures merge, and look at how regional regulations will affect packages.

If staff are happy, the new firm is far more likely to succeed.

Rajendran M is the deputy managing director, Middle East and CEO of UAE at Al Futtaim Willis