In accordance with local labour laws, employees are entitled to receive an ‘end of service’ payment upon resignation or termination from their employer. The level of payment due is determined by length of service and final salary, so the employer’s final liability is unknown.
Unfortunately, with no legal requirement to physically fund or ring fence this liability, many companies in the region retain a growing exposure on the balance sheet, with the hope and expectation that general cash flow will always make these funds available. Concerns around this approach include:
• Ever increasing liabilities
• No segregation of assets
• Employee insecurity
• Exposing employee funds to risk as working capital
• Future company valuations / IPO
• Future cash flow uncertain
We offer innovative and cost effective structures/funding solutions to ring fence ‘end of service’ liabilities and help your organisation create an asset.