Source: ILOSTAT, Labour force participation rate by sex and age, ILO modelled estimates, Nov. 2023 (%) annual, https://rshiny.ilo.org/dataexplorer57/?region=ROAS&lang=en&segment=indicator&id=EAP_2WAP_SEX_AGE_RT_A (accessed on 30.09.2024)

In many of the countries, sizeable public sectors provide access to extensive social security benefits, particularly pensions (ILO 2021a, p. 15). In comparison, social insurance schemes for private-sector workers often provide lower benefits and cover a limited set of risks, usually focusing on long-term risks (i.e., old age, disability, and survivorship) (ILO, 2021a). In 2022, prior to the reforms described below, there were only two countries in the region that did not provide periodic old-age benefits to private sector workers. (Lebanon provides lump sum benefits at separation/retirement only and the State of Palestine has no statutory scheme; see Figure 2). For migrant workers, separate systems often exist that comprise benefits provided by employers (including lump-sum end-of-service indemnities), rather than pensions.

Figure 2: Old-age benefits by type of schemes in Arab countries (2022), n=12

Source: ILO and ISSA, Social Protection Platform (social-protection.org) (accessed 30.09.2024).

Short-term benefits, such as sickness and maternity benefits, are mostly provided outside the social security system, by employers (see Figures 3 and 4), often through mandatory employer liability arrangements. Until very recently, Jordan was the only country in the region that financed maternity benefits through social insurance.  

Figure 3: Sickness benefit systems in Arab countries by type (2022), n=12

Source: ILO and ISSA, Social Protection Platform (social-protection.org) (accessed 30.09.2024).

Figure 4: Maternity benefits systems in Arab countries by type (2022), n=12

Source: ILO and ISSA, Social Protection Platform (social-protection.org) (accessed 30.09.2024).

As reflected in effective coverage rates, tax-financed social protection programmes have not been sufficient to fill the protection gaps. Traditionally, Arab countries have provided universal price subsidies on food, electricity, and fuel. Despite recent reforms in the region phasing out certain subsidies, the countries still spend twice as much on energy subsidies as on social assistance – much more than any other region (World Bank, 2023, p. 49).

According to the 2023 ILO World Social Protection Report, 30.0 per cent of the population in Arab countries are covered by at least one social protection benefit (excluding health protection), marking only a slight increase from 28.1 per cent in 2015 (ILO, 2024a). Of this, 13.8 per cent receive income support through tax-financed social protection schemes, while contributory programmes account for 16.2 per cent of the population covered (ILO, 2024a).

Migrant workers and displaced persons, who have a significant presence throughout the region, are often not covered by statutory contributory or non-contributory social protection programmes. In the Gulf Cooperation Council (GCC) countries, migrant workers make up a high proportion of the population and private-sector employees. In 2021, they accounted for 88.1 per cent of the population in the United Arab Emirates; 72.8 per cent in Kuwait; 77.3 per cent in Qatar; 55.0 per cent in Bahrain; 46.5 per cent in Oman; and 38.6 per cent in Saudi Arabia (IOM, 2024).

The experiences of several countries – including Oman, Iraq and Lebanon – demonstrate that significant reform can pave the way for enhanced social protection systems in the region.

Country reforms

Oman: Expanded coverage and unified social protection

In July 2023, the Omani government adopted a new Social Protection Law (Royal Decree No. 52/2023), which fundamentally reshaped the national social protection system. The reform came in the context of the 2040 Vision Oman (Government of the Sultanate of Oman, n.d.), which sets well-being and social protection as national priorities. It also responded to urgent sustainability concerns of the pension system, as well as concerns about potential negative socio-economic consequences of anticipated fiscal reforms and coverage gaps at a system-wide level (ILO and ISSA, 2024; ILO, 2023a; Social Protection Fund and ILO, forthcoming).

In 2023, 21.8 per cent of Oman’s population was covered by at least one social protection benefit, the bulk of which represented social insurance (19 per cent) (ILO, 2024b). These coverage levels reflect the large presence of migrants in the country – traditionally excluded from the statutory social protection programmes – who accounted for 45.6 per cent of the total population in 2021(IOM, 2024).

Overall, the extent of social protection coverage of women (19.3 per cent) is lower than that of men (23.5 per cent) (ILO, 2024b), with women much less likely to be employed than men. In 2023, 32.0 per cent of women were in the labour force, compared to 88.4 per cent for men (ILO, 2024b). Although working women are historically concentrated in public-sector employment (SPF and ILO, forthcoming) – which generally offers more generous social security benefits – they have often faced difficulties reaching the minimum contribution requirement for an old-age pension (see ILO 2024, Annex 5.3).

To address coverage gaps and create a more integrated and sustainable social protection system, the 2023 reform unified the social insurance system. Eleven public- and private-sector pension funds operating under different rules were merged into a single national programme, and a set of tax-financed social protection benefits to ensure universal coverage for key risks was introduced. The reform also established a new institutional and organizational framework for the management and administration of social protection. Finally, it set out to transform sickness and maternity benefits into a social insurance model, introduced paternity benefits, and will gradually extend social insurance coverage to migrant workers.

The new law is being phased in over a three-year period, following its enactment in January 2024. However, new tax-financed benefits and certain provisions related to contributory old-age pension and early retirement already entered into force in July 2023 (U.S. Social Security Administration, 2023; Social Protection Fund and ILO, forthcoming).

Key features of the reform:

1. Unifying the pension system: The 11 existing social insurance funds have been merged into a single national programme that covers all Omani workers, including the self-employed and public-sector employees. (Previously, self-employed workers were covered on a voluntary basis and public-sector employees under special systems.) The reform also harmonized pension eligibility conditions and benefit formulas.
2. Introducing a new administrative framework: The new, single Social Protection Fund (created under Royal Decree No. 50/2023 of 17 July) administers the unified social insurance programme – including pension insurance – as well as non-contributory cash benefits. The agency is overseen by a tripartite board of directors, with representatives from government, employers, and workers.
3. Adjusting pension rules: With a view to enhancing sustainability, old-age pensions will be based on the insured’s average lifetime earnings (instead of the last salary in the previous public sector scheme or average salary in the last five years before retirement under the private-sector scheme) and qualifying conditions for early retirement have been made more restrictive. Gradual increases in pensionable ages have also been scheduled.
4. Ensuring minimum income security: The reform introduced universal old-age pensions, disability pensions and child benefits, as well as government-financed, pension-tested orphan and widow’s benefits, for Omani citizens. Furthermore, a reconfigured means-tested family income support has been made available.
5. Launching maternity/paternity, sickness, and employment injury insurance: As of July 2024, maternity benefits have been extended from 50 to 98 calendar days and converted from an employer-liability model into a social insurance one. A seven-day social insurance paternity leave was also introduced. Employer-provided sick leave will also be transformed into sickness insurance as of July 2025. Notably, the reform allows for special paid leave in cases of marriage, bereavement and family medical reasons. The reform also introduces uniform mandatory employment injury insurance, and folds unemployment benefits into the unified law, building on an unemployment insurance scheme launched in 2020.
6. Extending coverage to migrant workers: Access to sickness, maternity, paternity, and work injury insurance is being gradually extended to all workers, including non-Omanis. In 2023, the government also adopted regulations for the establishment of a new national provident fund that will be responsible for administering the end-of-service benefits to migrant workers (payable upon retirement, disability, death, or returning to their home countries).

Iraq: Private-sector pension reform, and introduction of maternity and unemployment insurance

In December 2023, after years of negotiations between government, employer, and worker representatives, Iraq's government enacted a new social security law that reforms the country's social insurance programme for private-sector workers (Retirement and Social Security Law for Workers No. 18 of 17 May). The new law reflects the ambition to extend social insurance coverage in the private sector and expand the range of available benefits. Under the previous law (Law No. 39 on Pensions and Social Security for Private Sector Workers of 1979) coverage remained minimal, due to a combination of limited legal coverage and low overall employer compliance.

An estimated 300,000 to 500,000 workers are currently contributing under the private-sector programme (IMF, ILO and World Bank 2024, p. 6), vis-à-vis some 5.3 million employees working in the private sector in 2021 (ILO, 2022). In its current form – that is, prior to the implementation of the new law – the programme offers a limited range of benefits, leaving protection against sickness and maternity to the employer. Unemployment protection is provided only in the form of severance pay. By comparison, the public-sector programme, which covers 70.5 per cent of working women’s jobs, offers more comprehensive protection. But benefit levels are set very high and widely considered to be financially unsustainable (IMF, ILO and World Bank 2024, p. 6; ILO, 2021b).

Under the 2023 social security reform, several features are being introduced that should make the private-sector programme more attractive to workers, extend protection and improve its financial outlook. The changes include opening coverage to new groups, adjustments to eligibility and benefit calculation rules, and the introduction of contribution subsidies. Finally, maternity and unemployment benefits will be added to the benefit package. While some details of the reforms are still being determined, including their implementation dates (U.S. Social Security Administration, 2024a), its main elements are as follows.

Key features of the reform:

1. Extending coverage through a voluntary system: The law introduces the option of voluntary enrolment for self-employed persons, informal-sector workers and other groups. (Previously, coverage was limited to mandatory insurance for private-sector employees in the formal sector.)
2. Introducing maternity and unemployment insurance: For the first time, the law also introduces paid maternity leave and unemployment insurance, covering Iraqis and non-Iraqi citizens. To qualify for benefits under the programmes, workers must have six months and two years of contributions, respectively.
3. Changes to qualifying conditions and benefit calculation for pension and survivor benefits:
   • The standard retirement age will increase from age 60 to 63 for men, and from 55 to 58 for women, and minimum and maximum pensions will be introduced.
   • The reference earnings used to calculate benefits, previously aligned with the public-sector scheme, are now calculated based on the last five years before retirement (previously the last three years).
   • The division of survivor benefits among the surviving spouse and dependents has been revised to align with those under the public-sector scheme.
4. Increasing contribution rates and introducing contribution subsidies:
   • The law introduces an increased contribution rate, which is offset for Iraqi formal workers (excluding workers in the oil sector) through a government contribution subsidy of 8 per cent of covered earnings. (For non-Iraqi employees, the additional contribution is covered by the employer).

Lebanon: Old-age pension reform and revamp of the National Social Security Fund

On 28 December 2023, over 20 years after discussions were first initiated, the Lebanese government adopted Pension Law No. 319. It will convert the social insurance lump-sum end-of-service indemnity (EOSI) paid at retirement into a lifelong pension based on a notional defined contribution (NDC) system and reshapes the governance of the National Social Security Fund (NSSF) fundamentally. First introduced in 1963, the EOSI was envisioned to be temporary.

The reform comes in the context of a severe economic and financial crisis since 2019. ESCWA (2021) estimates that the multidimensional poverty rate in Lebanon doubled from 42 per cent in 2019 to 82 per cent of the total population in 2021. The value of the Lebanese pound also lost 98 per cent of its value since 2019.

Elderly persons have been severely affected by this crisis. In 2023, 90 per cent of elderly persons were not receiving an old-age pension and only 4.7 per cent of the working age population were contributing to a public pension scheme (ILO, 2024b). For those covered, EOSI benefits are too low to ensure old-age income security. (For example, for a person with 45 years of employment the average EOSI is equal to three years of the insured’s salary, see Sayed, Robalino and Muhanna, 2024). Furthermore, because of the collapse of the Lebanese pound, the value of these indemnities has plummeted.

The 2023 reform aims to put in place a pension system that can ensure a decent retirement income and improve the sustainability and functioning of the entire social security system (ILO, 2023b; Pellerano, Eghnatios and Picard, 2024). As of today, the EOSI system has become largely unfunded (Arab Reform Initiative, 2024). Also in 2023, Lebanon introduced a non-statutory national disability allowance, contributing to the country’s rights-based social protection approach.

Despite the significant achievement that these reforms represent, the ongoing political and humanitarian crisis that Lebanon currently is facing poses a challenge to their implementation and impact.

Key features of the reform:

• Programme coverage: Participation in the new programme will be mandatory for all private-sector employees aged up to 48 years, while older employees may opt in or remain under the EOSI programme. Lebanese citizens who are self-employed persons, domestic workers, non-permanent agricultural workers, employers, and individuals working abroad are also eligible for voluntary coverage.
• Determining qualifying conditions and benefit rules for pensions: A notional individual account will be created for each participant. At retirement (or upon disability or survivorship), the account balance will be converted into a monthly pension based on factors that include life expectancy, interest rates, cost-of-living adjustments, and potential survivors (see US Social Security Administration, 2024c).
• Programme administration and governance reforms: A smaller, tripartite board of directors and an independent investment committee will be established under the NSSF, which will administer the new programme. To ensure sound oversight and financial management, composition and minimum qualifying requirements have been defined for both these groups. The fund will also be subject to an independent actuarial review every three years.

Other reforms

Bahrain: End-of-service indemnity through mandated regular employer contributions

Effective from March 2024, Bahrain established a new provident fund for migrant workers that will finance end-of-service indemnities (EOSI), that is, severance pay paid to employees at separation. The fund is managed by the Social Insurance Organization (SIO). Under the reform, employers are mandated to make monthly contributions to the new fund of 4.2 per cent of earnings for employees for the first three years of service, and 8.4 per cent thereafter. This reform aims to address the common issue of non-payment of EOSI benefits to workers upon termination by securing pre-financing and thus allows for prompt benefit delivery.

The new system is expected to enhance compliance and strengthen transparency as it will allow the SIO to monitor the payment of contributions. Employers who do not make due payments will be subject to penalties, based on the Social Insurance Law (ILO,  2024c).

Saudi Arabia: Harmonized social insurance pensions, and extended maternity benefits

In July 2024, Saudi Arabia introduced significant reforms to its social insurance programme for citizens. The reforms are designed to enhance the flexibility and sustainability of Saudi Arabia's social insurance programme, and harmonize the rules for public- and private-sector workers to facilitate job transitions and encourage more employment in the private sector (U.S. Social Security Administration, 2024b).

Contribution rates for both employees and employers will each gradually increase from 9 per cent to 11 per cent by 2027, the standard retirement age will gradually increase to 65, (depending on the individual’s age) and the minimum contribution period for early retirement will increase from 300 to 360 months by 2029. In addition, the pension benefit accrual rate will decrease from 2.5 per cent to 2.25 per cent of average monthly earnings per year of contributions. (These new rules apply to individuals who enter the labour market for the first time on or after 3 July 2024. Retirement age and early retirement changes will also apply to Saudi citizens who were younger than 50 Hijri years (or 48.5 Gregorian years) or had less than 240 months of contributions on that date, see GOSI (2024).)

The reform also introduces a new social insurance-based maternity benefit for all workers, Saudi and non-Saudi, replacing the previous employer-liability maternity benefit. Furthermore, it lengthens maternity leave from 10 weeks to three months, requiring a minimum contribution of at least 12 months in the 36 months before childbirth.

Qatar: Private-sector pension reform, and extends coverage to self-employed

On 19 April 2024, Qatar's emir ratified a comprehensive social insurance reform law that expands coverage to all Qatari private-sector workers and offers voluntary coverage for the self-employed. It raises contribution rates for both employers and employees and sets a ceiling on maximum covered earnings. The reform also raises the early retirement age from 40 to 50 years and the minimum contribution period from 15 to 25 years, with increased penalties for early retirement. Additionally, it establishes a minimum monthly pension of 15,000 riyals (4,120 United States dollars (USD)), introduces bonuses for those with over 30 years of contributions, and provides a housing supplement for those on lower pensions.

The reform allows pensioners to work in the private sector without penalties and introduces an early retirement option for women caring for disabled children after 20 years of contributions. These changes are part of Qatar’s strategy to strengthen the sustainability of its social insurance system while maintaining protections for citizens and incentivizing longer working careers.

United Arab Emirates: Unemployment insurance and enhanced End-of-Service Indemnities

Effective from 1 November 2023, the United Arab Emirates (UAE) introduced a voluntary savings programme to replace the existing, mandatory employer-liability End-of-Service Indemnities (EOSI) for private-sector and free zone employees, including migrant workers. Employers who choose to participate in the programme must make monthly contributions to a savings and investment fund, with employees receiving accrued savings and returns upon termination. Those who do not opt into the voluntary programme will remain liable for EOSI payments. The new system allows for benefit transfers between jobs and includes options for voluntary contributions that are also open to the self-employed.

The reform aims to modernize labour protection in the UAE by offering better financial security and reducing the risks tied to the old employer-funded EOSI system. With the reform, the UAE joins other GCC countries in taking steps to reform end-of-service benefits for migrant workers and shifting away from benefits financed by individual employers (ILO, 2024d).

Previously, in January 2023, the country had introduced mandatory unemployment insurance for Emirati nationals and expatriate employees. Under the programme, at least 12 consecutive months of contributions are required to qualify for an unemployment benefit of up to three months.

Final remarks

Several Arab countries in the Middle East have recently initiated significant reforms aimed at harmonizing social security systems, improving sustainability, and extending coverage to broader populations and risks.

Countries such as Oman and Saudi Arabia have led the way in integrating pension schemes that previously operated under different rules and benefits, with the aim of making the social security system more equitable and enhancing labour mobility across sectors. Lebanon's efforts to replace its end-of-service compensation system with a notional defined contribution (NDC) pension system reflect a key step towards ensuring a dignified retirement in a difficult economic context.

Jordan's introduction of social insurance-based maternity leave in 2011 marked an important milestone. Oman, Saudi Arabia and Iraq – with their recent reforms – are now following suit, expanding maternity (and in Oman, paternity) insurance across the region. In addition, the introduction of unemployment insurance in Iraq, Oman and the UAE signals a broadening of the social protection umbrella.

Several reforms (in Oman, Iraq, Lebanon and Qatar) aimed to extend social security coverage to previously excluded groups, such as the self-employed. Migrant workers, who form the backbone of the private sector workforce in many GCC countries, are also set to have better access to benefits across the region, ranging from lump-sum separation payments (Bahrain, Oman, UAE) to maternity (Saudi Arabia, Iraq, Oman) and unemployment insurance (Iraq, UAE).

The success of these social security reforms hinges to a large extent on the institutional capacity of the entities responsible for their design, management and implementation. For instance, Oman’s creation of a unified Social Protection Fund governed by a tripartite board illustrates how robust institutions can facilitate effective implementation. Similarly, the governance reform of the Lebanese National Social Security Fund (NSSF) aims to bolster its capacity to implement upcoming reforms.

The International Social Security Association (ISSA) supports member institutions in the Arab countries region who are implementing social security programmes and ambitious reforms by providing technical Guidelines, knowledge sharing, and supporting innovation. The ISSA Liaison Office for Arab Countries, based at the Public Institution for Social Security in Kuwait, facilitates cooperation and networking in the region. In turn, ISSA events, such as the Regional Social Security Forums for Asia and the Pacific, bring together member institutions to address critical issues, emphasizing evolving management and service delivery and the role of social security in promoting resilience and sustainability. In addition, the ILO-ISSA webinar series on integrated approaches to universal social protection in the Arab region and North Africa addresses these issues, discussing for example, the comprehensive reforms in Oman and Morocco, and shared best practices for extending protection to migrant workers. Furthermore, a 2023 article in the International Social Security Review explores the key factors influencing social protection for migrant workers in the GCC. Alongside the ILO, ISSA has also developed detailed guidelines for extending social protection to migrant workers, refugees and their families.

These collaborative efforts underscore a strong commitment to enhancing social protection in the region, addressing existing gaps, and promoting equity across populations.

References

Laws