As promised here is the second article in this series for HR and Onboarding Managers but useful for everyone to understand housing allowances.The first article on breaking leases is here
Hiring staff to the UAE is a costly and time-consuming enterprise so it is imperative that companies in the region retain the staff they bring in. Nothing affects staff retention more than unhappy families and the family home is a huge factor in that. As such companies rightly devote time and money to making sure their staff are well housed.
Abu Dhabi is an interesting place and very different from many of the world’s cities in several ways, not least in the real estate sphere. If you are an onboarding manager, in HR, recruitment, or to a certain extent in operations, then you will be involved with housing staff in Abu Dhabi. There are several tactics companies adopt and this is a brief overview of them, the pros, cons and traps to be avoided.
If you are looking at creating or amending the way you pay for staff housing and want to talk to someone from our office about it please call Carine on 050 610 7706.
If you are currently downsizing and reducing staff headcount and want to efficiently reduce your property portfolio in Abu Dhabi please also get in touch, or read my article here.
The Inventory Approach – Some companies (ADIA and Occidental Petroleum are good examples) take properties onto their books and as staff come into Abu Dhabi they offer them a selection of their vacant units. Some companies in the past took whole compounds, particularly as property became scarce and they needed to secure accommodation.
The upsides of this are you can plan ahead for new hires and will never get stuck without property, your staff don’t need to look for new homes and you can save money on putting them up in serviced apartments whilst they have their visa processed (you cannot rent property in your name without a visa now). It also avoids the need for a housing allowance.
The downsides are very clearly the fact that companies will be paying rent on empty properties, and also that new joiner will only have a limited pool of property to pick from. You also cannot turn water and electricity on unless the tenant has their visa (even if the tenancy agreement is in the company’s name. Some companies use current staff names to turn on the power and then transfer the account to the new tenant once they have their visa).
Company Housing Allowance – A lot of companies give their employees a housing allowance which the company will pay directly to the landlord of the property. These housing allowances come in two types “use it or lose it” or “keep what you don’t spend”. The trend is migrating now towards allowing staff to keep the housing allowance they don’t spend but a lot of companies still offer a single bullet payment. There is no real advantage to a company of either type (they cost the same) but employees may prefer the flexibility of the “keep what you don’t spend”.
Companies may decide to take the tenancy contract into their own name, they may even pay the bills for the tenanted unit. In the past, this was seen as beneficial to employees as the company was the tenant, and so could exert more influence over landlords. This has become less popular the bigger Abu Dhabi has got as landlords are a little more sophisticated – and companies have cut back on paying staff utilities (which have increased dramatically).
The cons of this are it will often take the company a long time to approve and write the deposit and rent cheques. In a fast moving market desirable property will be gone before this can be done. Companies may also require offer letters before issuing cheques, currently in the market even Khidmah doesn’t issue offer letters – putting quite a lot of property out of the reach of such employees.
Individual Housing Allowance – This approach is becoming more and more popular. Companies are simply paying their employees a lump sum housing allowance and washing their hands of the matter. The lease is put in the tenant’s name (meaning they can only take a place when they have their visa) and all the bills go to the tenant.
This is the low maintenance option for the employer as they don’t have to keep track of properties in their name, pay bills or liaise with landlords. It allows the tenant to be fast and flexible when looking for a property and putting down deposit and rent cheques too.
The downside is it leaves tenants less well protected in terms of being sent out by themselves to negotiate the complexities of agents and landlords. As the market has become more sophisticated (and Abu Dhabi has become less of a hardship posting) companies have felt more comfortable leaving tenants to fend for themselves. Staff often also don’t like this as if the company makes them redundant they can be left with a lease contract they don’t want and if they wish to be repatriated they may lose their rent entirely.
Companies opting for this approach should make sure their staff are well educated and well prepared. Setting them up with a trusted real estate agent such as Crompton Partners would be of great assistance in this regard. Well settled staff prevent high turnover.
No Housing Allowance – In expats’ home countries they do not receive housing allowances. In Abu Dhabi, housing allowances are common (call me a cynic) as they reduce the end of service benefit a company has to pay. Despite this, some companies don’t offer a housing allowance (or it is minimal) at all and the employee just uses their wages.
The big downside of this is employees get paid their wage monthly but often have to pay rent every six months (two cheques). This means the company has to offer the employee a loan of the employee must borrow money from a bank (often difficult unless the employee has been in the country at least three months). How then will this be recouped when and employee changes jobs or leaves the country.
Redundancy – Something which is very important in the current climate is how companies deal with employee housing when that employee becomes redundant. Dealing with those units will depend very much on what housing allowance system the terminated employee is renting his unit. Please contact us here at Crompton Partners to discuss your options.
Call – +971 50 6145199