The EoSG model contains a number of systemic disadvantages affecting both businesses and those it employs. For this reason, global bodies such as the World Bank and International Labour Organization (ILO) have been critical of the existing EoSG systems, arguing that they offer an inferior form of social protection. These schemes lack comprehensive benefits, fail to provide predictable payments, and are ineffective at risk pooling and financial safeguarding. All these shortcomings contravene core principles enshrined in international social security norms.

For employers, the current EoSG model presents a range of disadvantages that impact financial health and operational stability. The system imposes uneven cashflow requirements to meet EoSG liabilities, thereby creating financial strain and liquidity issues, particularly in times of economic uncertainty. The risk of underfunding these liabilities looms large, often necessitating rapid financial adjustments that could adversely affect operational budgets. Furthermore, the complex accounting associated with the accrual of EoSG liabilities can introduce additional operational challenges.

For employees, the existing system lacks transparency; the value of their accrued gratuity is often opaque, leaving them in the dark about their post-employment financial health. Moreover, the system does not permit employees to invest their gratuities in pursuit of capital growth or in bespoke funds tailored to their preferences, such as sharia-compliant options. This limits the potential for financial growth and personalisation of retirement savings. Adding to this, in cases where employers become insolvent, employees’ hard-earned gratuities are at significant risk.

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