What does “utilities at cost” reimbursement cover ?

What does “utilities at cost” reimbursement cover
Nadim, one of my readers asks :

“In our company for certain senior grades we do pay Utilities at actual cost which is the DEWA bill (Dubai Electricity and Water Authority). In my opinion utilities should cover the water and electricity, however I got employees who are claiming also for the household gas, or even the chillers charges. My question to you, do you see it all falling under utilities and we should pay the same these chiller and/or gas bills, or you see a different market trend for the same ?”

Here is my reply to him.

“That is an interesting question and I guess that every company may have a different answer.

I am making the assumption that the people for whom you pay the DEWA bill in full are the most senior managers in your company, so not many of them (maybe 5 to 10% maximum of your total headcount). And I am also making the assumption that your HR policy does not describe “utilities”… otherwise you would not be asking the question.

My view on that topic is very simple : it is up to you (as company) to decide if you should reimburse gas and chiller fees or not… but I do have a preference for one of the approaches.

First, let’s go back to the spirit of the utilities allowance.

It was created to cover expenses related to, well, living in a house. This usually means water, electricity and gas.

Why gas ? Because it just another means of allowing people to cook, have hot water and sometimes even light in a house. In the UAE, some houses also have a separate chiller fee because of the way the building was set up.

On a personal level, living in apartments since 2007, I have never had to pay a separate chiller fee so my air conditioner costs were always included in the electricity bill and reimbursed by my employers. And I never had gas cookers so my bills for cooking were also covered by my employers, through the electricity bill by DEWA.

So you can go in the spirit of the allowance and decide to include chiller and gas reimbursement, and swallow the cost.

Deciding not to include the gas and chiller reimbursement

You can also go very “strict” and say “utilities mean DEWA only”. Simple… in appearance.

…Until these senior employees tell you : “It’s not fair ! the person who lives in an apartment, not a villa, probably has centralised A/C and therefore not separate from the regular electricity bill… and if their kitchen cooker is electric not by gas, you also reimburse to them their whole expenses. So in effect you are discriminating against me”.

And what do you respond to these people ? “Sorry… not my problem !” or “Then I suggest you move out of your villa and choose a home with no separate chiller fee and electric oven and cooker” ?

So you need to take into account the reactions of these senior managers.

Also, make an estimate of how much it costs the company per year to reimburse the chiller fees and gas of these few employees.

How much does it represent as a % of the overall utilities reimbursements / allowances that you pay annually ? Is it worth it for your company to risk getting senior managers angry, complaining or worse, disengaged, for this amount?

You will be hitting senior people in the wallet, and even if the amount is not that large compared to their overall pay, they won’t like it. You can also anticipate that these senior people will expect for a compensation on their basic pay.So now you end up having to either manage some exceptions (because, you know it, they will happen), or to integrate these costs into basic pay, thereby raising permanent costs as well as End Of Service liabilities.

And your senior employees are still going to be at least mildly upset about “HR”, which they will perceive as not supportive, and focused on “small topics” compared to the big amounts of revenues and expenses that these senior leaders manage on a daily basis.

Obviously, it is up to you to decide the risks vs the benefits of each decision (to reimburse or not to reimburse). But I’d be inclined to say “yes, cover the gas and chiller fees” – it’s usually not worth the hassle and potential negative morale impact on your senior employees.

If you decide to STOP reimbursing the chiller and gas bills, and you were reimbursing them before, I suggest putting in place a good communication plan, with enough time in advance and some individual simulations if you can.

Don’t go “all employees communication” – get individually to each of the senior mangers who will be affected by your decision. Spend the time and effort to explain the rationale for your decision.

This small time investment will create some goodwill towards you in the future : these senior managers may not like your new policy, but they will appreciate your customer service approach and in the future, their reaction towards HR will not be as negative as if the new approach was implemented brutally and without communication effort.

I hope it will help you think about your upcoming decision for your company.”

So what do you say ? Does your company reimburse utilities at full cost for senior managers, and if so, did you specify “water and electricity only” or not ? Please share your experience in the Speak your Mind section !

In case you are interested by information related to cost of living elements such as accommodation, household goods, utilities, etc, as well as some salary information, I’d like to refer you to Cost of Living Reports – a good value-for-money investment for the UAE, KSA, Qatar and GCC at only a few thousand Dirhams per report.

If you would like to know more,  and learn about my free ebook gift if you purchase any Cost of Living report (the offer is valid until February 28, 2014 so hurry up if you want to benefit from it !), please read my previous article Do you have questions about the Cost of Living reports ? which will give you all the background you need.

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  1. John Nichols says

    It seems to me that if you do not define utilities then all elements covering heating/cooling, cooking and washing should be included no matter the means of delivery.

    You may decide to exclude pool maintenance when in the property. You may also decide to cap the reimbursement at a level you could find as “normal” for one of the COL data providers. I have come across cases in the UK when central heating and pool temperatures have been excessive but I guess in your area the cooler could be on 24/7.

    • Sandrine Bardot says

      Hi John,

      Good comment !

      Just to clarify, in most cases in the UAE, not all companies provide a utities allowance. All employees get housing in one form or another (allowance or company-provided accomodation), many get a transportation allowance (or company transportation for labour and more junior staff). Utilities is the third most-frequent allowance, provided by many of the larger organisations.

      Employees who are eligible to a utilities allowance usually receive either a fixed monthly payment, or a reimbursement based on actual bill, with a cap. But senior managers are often eligible to a full reimbursement, uncapped.

  2. Beautiful Subject as usual ,

    I think companies should not pay utilities to their employees , living in villa will have a huge different than living in a apartment , and will make employees think of each others utilities reimbursements how big is yours and how small in mine !!

    we are paying housing , why should we pay more ? either to be fixed to salary or to find some others motivations to retain employees.

    I liked your answer to the question and I liked the most the way we should communicate the change and how managers will perceive the HR in case they have done the changes without giving advance or discussing individually with the Managers.

    Great Post , Thank you for Sharing

    • Sandrine Bardot says

      Thanks for your feedback Ihab.
      I can see your point about utilities, but isn’t it the same for all allowances ? The amount varies based on grade, sometimes even based on family size.

      Personally I always prided myself in having as little electricity spend as possible – I was born in the 70s and in Europe, due to the high price of oil and gas at the time, our parents taught to save electricity and water – switch off the lights when you leave the room, switch off the tap while you brush your teeth, take showers not baths etc… So for me comparing to other people’s spending would be more like ” are they more environment-conscious than I am ?” rather than “is their reimbursement bigger than mine ?”.

      I think that utilities allowance or reimbursement is a legacy, back from the time when there were few expats in the country and they were “real” international assignees coming from the UK and USA. Still, as I was mentioning in my previous comment, it is the third most-used allowance in the UAE so as HR professionals we will probably have to deal with it for a little longer 🙂

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