Average UAE salaries increase above inflation

In more positive news for the region, Mercer reports that most firms (90%) say they will be raising salaries in 2010.

The Total Remuneration Survey (United Arab Emirates) of more than 100 firms with close to 23,000 employees tips base salaries will increase by between 7% and 7.5% in 2010.

The survey findings also highlight the unpredictability of the past 12 months. In mid-2008, firms were forecasting 2009 salaries of close to 10%. Yet in fact, firms reported that base pay across the UAE rose by an average 3.4% - 5.2% during the year.

"Although the rises reported in 2009 were less than expected, the fact that many companies are planning to increase salaries by over seven per cent during 2010 is extremely promising for the region,"

commented Bassam Gazal, Head of Mercer's survey practice in the Middle East.

Among other highlights from the UAE survey:

- Abu Dhabi's housing allowances were significantly higher during 2009 compared to Dubai
- Executive remuneration packages tend to be higher in local firms than in multinationals with the reverse at the professional level
- Total remuneration packages were higher across all levels in Abu Dhabi in 2009 compared to Dubai
- Demand for UAE nationals continues to outstrip supply and employers continue to pay a market premium for their services.

The survey also provides further evidence of a trend of companies moving to increase the variable component of salary packages, with increases in the target bonus and maximum bonus as a proportion of the remuneration mix.

"Our clients want to link reward to performance more closely than in the past, and that means changing the way bonuses are issued," continued Bassam Gazal. "This is reflected in the percentage increase in the target and maximum bonuses being allocated by the companies where a greater proportion of the total package is now increasingly being linked to performance."

Mercer's results also reinforced earlier indicators that a mood of 'cautious optimism' continues to gain momentum as employers plan for 2010. Close to two-thirds of survey respondents said they were planning to lift headcount during 2010, while the remainder (39%) said headcount levels would stay as is.

Mr Gazal said the optimistic expectations for 2010 remain strong, "We're seeing firms with increased budgets; increased headcount plans and a higher forecast for salary increase than in 2009."