Hay Group releases 2012 UAE compensation and benefits report

Hay Group releases its 2012 UAE compensation and benefits report which finds that the overall outlook is promising for employees in the Emirates who experienced a 4.9% average pay increase this year. However, challenges in retaining UAE nationals in the private sector remain, and turnover is double that of non-nationals.

An average pay rise of 5.5% is forecast for the Emirates in 2013 according to the report which analyses salary data for almost 237,000 employees in the UAE from 532 companies and 16 industries mainly within the private sector. Hay Group's Harish Bhatia, leading the study, says the picture is not the same for all, with marked differences between industries plus Emiratisation in the equation:

"85% of companies in the UAE increased salaries this year which is high and is representative of the positive sentiment here. Unsurprisingly oil and gas and financial services pay the highest salaries and professional qualifications demand highest pay packages."

However, Bhatia also advises caution with fixed pay rises as they have longer term consequences for businesses: "Although fixed pay is an important part of the proposition, employers need to think long term about how factors like end of service benefit will impact the business. Basic pay rises are a short term incentive for employee retention but in isolation do not build loyalty or engagement. A mix of incentives encourages longer term thinking from both the employer and employee."

This is important to consider in a market where some groups of employees are now planning for the longer term says Bhatia: "Our research suggests that more western expatriates are now planning to stay in the UAE for the longer term. They are here for the career experience especially given the bleak outlook of the mature economies in Europe and North America."

Expatriates from other markets are also starting to think differently he says: "Expatriates from emerging markets like China, Korea and India are starting to demand higher packages, particularly for skilled and technical roles. With close to 10% pay increases in their home markets in 2011, and again in 2012, they are weighing up the benefits of staying or going."

Moving from expatriates to nationals, Hay Group's report finds that UAE nationals are paid an average 44% premium above the market. Yet, the turnover of nationals is also higher according to Bhatia: "The turnover of nationals is 14%, which is double the turnover of non-nationals. In the UAE's private sector nationals are much in demand and their mobility can lead them to shop around for jobs meaning they have a wealth of opportunities."

But he again advises caution here: "Increasingly UAE nationals, in particular graduates, are offered attractive packages to enter the private sector and this is something organisations have got a lot better at in recent years. However, national employees witness a diminishing pay premium as they rise through the ranks, and the only way to get the pay rise you are looking for is to move which can have a negative impact on personal development as well as impacting the growth of their organisation."

Bhatia says this turnover often happens at the mid-management level: "Many nationals are prepared to take a sideways move; this could mean changing employers or even sector. We see a trend of nationals moving into the public sector mid-career once they have experience but are not continuing on the trajectory of high pay premiums that they once were. It's not affordable for the private sector at the more senior level, in fact 70% of our clients name pay as the main reason for losing national talent."

Bhatia advises taking a broader look at what companies offer: "In our previous research, a recurring theme was a feeling from UAE nationals that they contribute more to the nation by working in the public sector. Aside from pay, there are things the private sector could do to build this kind of pride in the workplace, starting with gaining a better understanding of the employees they want to retain."

He concluded: "In the UAE 19% of employees were hired in the last two years. The nation has a young and mobile workforce and the challenge is with employers to cultivate an engaged and loyal workforce that can capitalise on what the UAE has to offer."